Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
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BASIS OF MEASUREMENT
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The Group consolidated financial statements have been prepared under the historical cost basis except for
the following:
Derivative financial instruments are measured at fair value;
Financial instruments classified as trading and at fair value through profit or loss (FVTPL) are measured
at fair value;
Financial assets at fair value through other comprehensive income are measured at fair value; and
Recognised assets and liabilities that are hedged are measured at fair value in respect of the risk that is
hedged.
The preparation of consolidated financial statements in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise judgment in the process of applying
the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas
where assumptions and estimates are significant to the Group consolidated financial statements are
disclosed in Note 5.
USE OF JUDGEMENTS AND ESTIMATES
The preparation of the Group consolidated financial statements requires management to make certain
estimates and assumptions that affect the reported amount of financial assets and liabilities and the
resultant allowances for impairment and fair values. In particular, considerable judgement by management
is required in the estimation of the amount and timing of future cash flows when determining the level of
allowances required for impaired loans and receivables as well as allowances for impairment provision
for unquoted investment securities. Estimates and judgements are continually evaluated and are based
on historical experience and other factors including expectations of future events that are believed to be
reasonable under the circumstances.
Significant items where the use of estimates and judgements are required are outlined below:
(i) Financial Instruments
Judgements made in applying accounting policies that have most significant effects on the amounts
recognised in the consolidated financial statements for the year ended 31 December 2021 pertain to:
Classification of financial assets: assessment of business model within which the assets are held and
assessment of whether the contractual terms of the financial assets are solely payment of principal and
interest of the principal amount outstanding.
Calculation of expected credit loss (ECL): Assumptions and estimation uncertainties that have a
significant impact on ECL for the year ended 31 December 2021. The impact is mainly driven by inputs,
assumptions and techniques used for ECL calculation under IFRS 9 methodology.
Inputs, assumptions and techniques used for ECL calculation
Key concepts that have the most significant impact and require a high level of judgement, as considered by
the Group while determining the ECL, are:
Assessment of Significant Increase in Credit Risk ("SICR")
The assessment of a significant increase in credit risk is done on a relative basis. To assess whether the
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USE OF JUDGEMENTS AND ESTIMATES (CONTINUED)
(i) Financial Instruments (continued)
Inputs, assumptions and techniques used for ECL calculation (continued)
Assessment of Significant Increase in Credit Risk (continued)
credit risk on a financial asset has increased significantly since origination, the Group compares the risk of
default occurring over the expected life of the financial asset at the reporting date to the corresponding
risk of default at origination, using key risk indicators that are used in the Group's existing risk management
processes.
The Group's assessment of significant increases in credit risk is being performed at least quarterly for
each individual exposure based on three factors. If any of the following factors indicates that a significant
increase in credit risk has occurred, the instrument will be moved from Stage 1 to Stage 2:
1. The Group has established thresholds for significant increase in credit risk based on movement in
Probability of Default relative to initial recognition.
2. Additional qualitative reviews have been performed to assess the staging results and make adjustments,
as necessary, to better reflect the positions which have significantly increased in risk.
3. IFRS 9 contains a rebuttable presumption that instruments which are 30 days past due have experienced
a significant increase in credit risk.
Movements between Stage 2 and Stage 3 are based on whether financial assets are credit-impaired as at
the reporting date. The determination of credit-impairment is based on individual assessment of financial
assets for objective evidence of impairment.
The Group reviews its loans and receivables portfolio and Islamic financing receivables to assess impairment
on a regular basis. In determining whether an impairment loss should be recorded in the consolidated
income statement, the Group makes judgements as to whether there is any observable data indicating
that there is a measurable decrease in the contractual future cash flows from a loan or homogenous group
of loans and receivables or Islamic financing receivables. The methodology and assumptions used for
estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences
between loss estimates and actual loss.
Assessment of Significant Increase in Credit Risk (Covid-19)
The Group continues to assess borrowers for other indicators of unlikeliness to pay, taking into consideration
the underlying cause of any financial difficulty and whether it is likely to be temporary as a result of Covid-19
or long term.
The Group continues to support its impacted customers through a program of payment relief that was
initiated in 2020 by deferring interest/principal due. These payment reliefs are considered as short-term
liquidity support to address borrower cash flow issues. The Group believes that the extension of payment
reliefs does not automatically trigger SICR where the impact on customer's business is expected to be short
term. For all other customers, the Group continues to consider severity and extent of potential Covid-19
impact on economic sector and future outlook, cash flow and financial strength, agility and change in risk
profile along with the past track record in determining SICR.
As per the disclosure requirements of the Central Bank of UAE (CBUAE) in the context of Covid-19, for the
UAE operations, the Group has divided its customers benefitting from payment deferrals into two groups
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EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
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