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ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Shah Investors Home Ltd.
Material accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a
revision to the existing accounting standard requires a change in the accounting policy hitherto in use.
(i) Compliance with Ind AS
The financial statements of the Company comply in all material aspects with Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act,2013 ("the Act") read with Companies (Indian Accounting Standards) Rules, 2015 as
amended and other relevant provisions of the Act.
Accounting policies have been applied consistently over all the periods presented in these financial statements, except
where the Company has applied certain accounting policies and exemptions.
(ii) Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following:
t> Financial instruments are measured at fair value through Profit and Loss or Other Comprehensive Income,
t> Defined benefit plans - plan assets measured at fair value; and
(iii) Preparation of financial statements
The Company is covered in the definition of Non-Banking Financial Company as defined in Companies (Indian Accounting
Standards) (Amendment) Rules, 2016. As per the format prescribed under Division III of Schedule III to the Companies Act,
2013 on 11 October 2018 (as amended), the Company presents the Balance Sheet, the Statement of Profit and Loss and the
Statement of Changes in Equity in the order of liquidity. A maturity analysis of recovery or settlement of assets and liabilities
within 12 months after the reporting date and more than 12 months after the reporting date is presented in note 44.
(iv) Use of estimates and judgments
The preparation of financial statements in conformity with Ind AS requires management to make estimates, judgments,
and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities
(including contingent liabilities) and disclosures as of the date of financial statements and the reported amounts of
revenue and expenses for the reporting period. Actual results could differ from these estimates. Accounting estimates and
underlying assumptions are reviewed on an ongoing basis and could change from period to period. Appropriate changes in
estimates are recognized in the period in which the Company becomes aware of the changes in circumstances surrounding
the estimates. Any revisions to accounting estimates are recognized prospectively in the period in which the estimate is
revised and future periods.
(v) Determining whether an arrangement contains a lease
The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a
lease requires significant judgment. The Company uses significant judgment in assessing the lease term (including
anticipated renewals) and the applicable discount rate. The Company determines the lease term as the non-cancellable
period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain
to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to
exercise that option.
The Company recognizes revenue from contracts with customers based on a five step model as set out in Ind AS 115,
Revenue from Contracts with Customers, to determine when to recognize revenue and at what amount. Revenue is
measured based on the consideration specified in the contract with a customer. Revenue from contracts with customers is
recognised when services are provided and it is highly probable that a significant reversal of revenue is not expected to
occur.
Revenue is measured at fair value of the consideration received or receivable. Revenue is recognised when (or as) the
Company satisfies a performance obligation by transferring a promised service (i.e. an asset) to a customer. An asset is
transferred when (or as) the customer obtains control of that asset.
When (or as) a performance obligation is satisfied, the Company recognizes as revenue the amount of the transaction price
(excluding estimates of variable consideration) that is allocated to that performance obligation.
The Company applies the five-step approach for recognition of revenue:
t> Identification of contract(s) with customers; A contract is defined as an agreement between two or more parties that
creates enforceable rights and obligations and sets out the criteria for every contract that must be met.
t> Identification of the separate performance obligations in the contract; A performance obligation is a promise in a
contract with a customer to transfer a good or service to the customer.
t> Determination of transaction price; The transaction price is the amount of consideration to which the Company expects
to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on
behalf of third parties.
t> Allocation of transaction price to the separate performance obligations: For a contract that has more than one
performance obligation, the Company allocates the transaction price to each performance obligation in an amount
that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each
performance obligation.; and
t> Recognition of revenue when (or as) each performance obligation is satisfied.
It is recognised on trade date basis in accordance with the terms of contract and is exclusive of goods and service tax and
securities transaction tax (STT) wherever applicable.
Interest income is recognized on accrual basis in statement of profit and loss for all financial instruments measured at
amortized cost.
Dividend income is recognized in the statement of profit and loss on the date that the Company''s right to receive payment is
established, it is probable that the economic benefits associated with the dividend will flow to the entity and the amount of
dividend can be reliably measured. This is generally when the shareholders approve the dividend.
(iv) Net gain on fair value changes
The Company designates certain financial assets for subsequent measurement at fair value through profit or loss (FVTPL) or
fair value through other comprehensive income (FVOCI). The Company recognizes gains on fair value change of financial
assets measured at FVTPL and realized gains on de-recognition of financial asset measured at FVTPL and FVOCI on net basis
in profit or loss.
(v) Depository services income
Revenue from depository services on account of annual maintenance charges have been accounted over the period of the
performance obligation.
Revenue from depository services on account of transaction charges is recognized point in time when the performance
obligation is satisfied.
Interest is earned on delayed payments from customers and is recognised on a time proportion basis taking into account
the amount outstanding from customers and the rates applicable.
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the
applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and
to unused tax losses. Current and deferred tax is recognized in statement of profit and loss, except to the extent that it relates
to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other
comprehensive income or directly in equity, respectively
Current tax is measured at the amount of tax expected to be payable on the taxable income for the year as determined in
accordance with the provisions of the Income Tax Act, 1961. Current tax assets and current tax liabilities are off set when there
is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a
net basis.
Deferred Tax
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognized if
they arise from the initial recognition of goodwill. Deferred tax is also not accounted for, if it arises from initial recognition of
an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting profit nor taxable profit (tax loss). Deferred tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax
asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of
investments in subsidiaries and associates where the Company is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority.
1.4 Leases
For any new contracts entered into on or after 1 April 2023, the Company considers whether a contract is, or contains a lease.
A lease is defined as ''a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period
of time in exchange for consideration''. The Company assess whether it has the right to direct ''how and for what purpose'' the
asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
The Company has adopted Ind AS 116 "Leases" using the cumulative catch-up approach. Company has recognised Right of
Use assets as at 1 April 2023 for leases previously classified as operating leases and measured at an amount equal to lease
liability (adjusted for related prepayments/ accruals). The Company has discounted lease payments using the incremental
borrowing rate for measuring the lease liability.
The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any re-measurement of lease liabilities .
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use
asset for impairment when such indicators exist.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is re¬
measured to reflect any reassessment or modification, or if there are changes in in substance fixed payments.
When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients.
Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense
in profit or loss on a straight-line basis over the lease term.
When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect
the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease
liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised,
except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying
amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in statement of profit and loss.
For contracts that both convey a right to the Company to use an identified asset and require services to be provided to the
Company by the lessor, the Company has elected to account for the entire contract as a lease, i.e. it does not allocate any
amount of the contractual payments to, and account separately for, any services provided by the supplier as part of the
contract.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Outstanding bank overdrafts are not considered integral part of the Company''s cash management.
Initial recognition and measurement:
Financial assets and financial liabilities are recognized when the entity becomes a party to the contractual provisions of the
instrument. Regular way purchases and sales of financial assets are recognized on trade date, the date on which the
Company commits to purchase or sell the asset.
At initial recognition, the Company except for trade receivables, measures the financial asset or financial liability at its fair
value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss , transaction
costs that are directly attributable to the acquisition or issue of the financial asset or financial liability, transaction costs that
are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and
commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are
expensed in Statement of profit and loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is
recognized for financial assets measured at amortized cost.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity
recognizes the difference as follows:
a) When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input)
or based on a valuation technique that uses only data from observable markets, the difference is recognized as a gain or
loss.
b) In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined
individually. It is either amortized over the life of the instrument, deferred until the instrument''s fair value can be
determined using market observable inputs, or realized through settlement .
When the Company revises the estimates of future cash flows, the carrying amount of the respective financial assets or
financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any
changes are recognized in Statement of profit and loss.
Fair value of financial instruments:
the Company''s assets and liabilities are measured at fair value for financial reporting purpose. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date regardless of whether that price is directly observable or estimated using another valuation
technique.
Fair value measurements under Ind AS are categorized into Level 1, 2, or 3 based on the degree to which the inputs to the
fair value measurement are observable and the significance of the inputs to the fair value measurement in its entirety,
which are described as follows:
l> Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access
at measurement date
> Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly; and
> Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) that the
Company can access at measurement date.
Information about the valuation techniques and inputs used in determining the fair value of various assets and
liabilities are disclosed in note 41.
(i) Classification and subsequent measurement:
The Company has applied Ind AS 109 and classifies its financial assets in the following measurement categories:
> Fair value through profit or loss (FVTPL)
> Fair value through other comprehensive income (FVOCI); or
> Amortised cost.
Classification and subsequent measurement of financial assets depends on:
> The Company''s business model for managing the asset; and
> The cash flow characteristics of the asset.
1. Financial assets carried at:
(A) Amortised cost
Financial assets at amortized cost are subsequently measured at amortized cost using effective interest method.
The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and
impairment are recognized in profit or loss. Any gain and loss on de-recognition are recognized in profit or loss.
(B) Fair value through other comprehensive income
Financial assets that are held within a business model whose objective is achieved by both, selling financial assets
and collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured
at fair value through other comprehensive income. Fair value movements are recognized in the other
comprehensive income (OCI). Interest income measured using the EIR method and impairment losses, if any are
recognised in the Statement of Profit and Loss. On derecognition, cumulative gain or loss previously recognised in
OCI is reclassified from the equity to ''other income'' in the Statement of Profit and Loss.
(C) Fair value through profit or loss
A financial asset not classified as either amortised cost or FVOCI, is classified as FVTPL. Such financial assets are
measured at fair value with all changes in fair value, including interest income and dividend income if any,
recognised as ''other income'' in the Statement of Profit and Loss.
Equity instruments are instruments that meet the definition of equity from the issuer''s perspective; that is, instruments
that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer''s net assets.
All investments in equity instruments classified under financial assets are initially measured at fair value, the Company
may, on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL. The Company makes such
election on an instrument-by-instrument basis. Fair value changes on an equity instrument is recognised as revenue
from operations in the Statement of Profit and Loss unless the Company has elected to measure such instrument at
FVOCI. Fair value changes excluding dividends, on an equity instrument measured at FVOCI are recognized in OCI.
Amounts recognised in OCI are not subsequently reclassified to the Statement of Profit and Loss. Dividend income on
the investments in equity instruments are recognised as ''Revenue from operations'' in the statement of Profit and Loss.
3. Investments in mutual funds
Investments in mutual funds are measured at fair value through profit and loss (FVTPL).
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and
the cash flow characteristics of the asset. There are three measurement categories into which the Company has
classified its debt instruments:
- Amortised cost: Assets that are held for collection of contractual cash flows and where the contractual terms give rise
on specified dates to cash flows that represent solely payments of principal and interest, are measured at amortised
cost. A gain or loss on a debt investment that is subsequently measured at amortised cost is recognised in profit or loss
when the asset is derecognized or impaired.
- Fair value through other comprehensive income (FVTOCI): Assets that are held for collection of contractual cash flows
and for selling the financial assets, where the assets'' cash flow represent solely payments of principal and interest, are
measured at fair value through other comprehensive income (FVTOCI). Movements in the carrying amount are taken
through OCI, except for recognition of impairment gains or losses, interest revenue and foreign exchange gains and
losses which are recognised in profit & loss in the same manner as for financial assets measured at amortised cost. The
remaining fair value changes are recognised in OCI.
- Fair value through profit or loss (FVTPL): Assets that do not meet the criteria for amortised cost, are measured at fair
value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through
profit or loss is recognised in profit or loss and presented net in the statement of profit and loss within other income in
the period in which it arises. Interest income from these financial assets is included in other income.
The Company recognizes impairment allowances using Expected Credit Losses ("ECL") method on all the financial
assets that are not measured at Fair value through profit or loss (FVTPL):
ECL are probability-weighted estimate of credit losses. They are measured as follows:
t> Financials assets that are not credit impaired - as the present value of all cash shortfalls that are possible within 12
months after the reporting date.
t> Financials assets with significant increase in credit risk - as the present value of all cash shortfalls that result from all
possible default events over the expected life of the financial assets.
t> Financials assets that are credit impaired - as the difference between the gross carrying amount and the present
value of estimated cash flows.
Financial assets are written off/fully provided for when there is no reasonable of recovering financial assets in its
entirety or a portion thereof.
However, financial assets that are written off could still be subject to enforcement activities under the Company''s
recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in
the statement of Profit and Loss.
A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual
rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to
one or more recipients.
Where the Company has transferred an asset, the Company evaluates whether it has transferred substantially all
risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the
entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is
not derecognised.
Where the Company has neither transferred a financial asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the
financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to
the extent of continuing involvement in the financial asset.
Transfer of loans through assignment transaction can be made only after continuing involvement in loans i.e
retaining a minimum specific percentage of loan but without retaining any substantial risk and reward in the loan
assigned. The assigned portion of loans is derecognized and gains/losses are accounted for, only if the Company
transfers substantially all risks and rewards specified in the underlying assigned loan contracts. Gain/loss arising on
such assignment transactions is recorded upfront in the Statement of Profit and Loss and the corresponding loan is
derecognized from the Balance Sheet immediately. Further, if the transfer of loan qualifies for derecognition, entire
interest spread at its present value (discounted over the life of the asset) is recognized on the date of derecognition
itself as interest strip receivable (interest strip on assignment) and correspondingly presented as gain/loss on
derecognition of financial asset.
(i) Initial recognition and measurement
All financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
financial instrument and are measured initially at fair value adjusted for transaction costs.
(ii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities
carried at fair value through profit or loss is measured at fair value with all changes in fair value recognised in the
Statement of Profit and Loss.
(iii) Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or
expires.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost of acquisition less accumulated depreciation except in the case of land
which is stated at cost. Cost includes expenditure that is directly attributable to the acquisition and installation of the assets.
Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be
measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when
replaced. All other repairs and maintenance are charged to Statement of profit and loss during the reporting period in which
they are incurred.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is
classified as capital advances under other non-financial assets and the cost of assets not put to use before such date are
disclosed under ''Capital work-in progress''.
Depreciation methods, estimated useful lives and residual value
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any.
The Company depreciates property, plant and equipment over their estimated useful lives on written down value method.
The estimated useful lives of assets are as follows
The useful lives for these assets is in compliance with the useful lives as indicated under Part C of Schedule II of the
Companies Act, 2013.
The useful lives, residual values of each part of tangible and the depreciation method are reviewed at the end of each
financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in an
accounting estimate.
Derecognition:
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic
benefits are expected from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with
carrying amount and are recognized in the statement of profit and loss when the asset is derecognized.
Measurement at recognition:
Intangible assets are recognized where it is probable that the future economic benefit attributable to the assets will flow to
the Company and its cost can be reliably measured. Intangible assets are stated at cost of acquisition less accumulated
amortization and impairment, if any.
Expenditure incurred on acquisition/development of intangible assets which are not put/ready to use at the reporting date
is disclosed under intangible assets under development. The Company amortizes intangible assets on a straight-line basis
over the four years commencing from the month in which the asset is first put to use. The Company provides pro-rata
amortization from the day the asset is put to use.
The amortization period and the amortization method for an intangible asset with infinite useful life is reviewed at the end of
each financial year. If any of these expectations differ from previous estimates, such change is accounted for as a change in
an accounting estimate.
The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expected
from its use or disposal. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are
recognized in the statement of profit and loss when the asset is derecognized.
1.9 Impairment of non-financial assets
At each reporting date, the Company assesses whether there is any indication based on internal/external factors, that an
asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. The
recoverable amount of asset is the higher of its fair value or value in use. Value in use is based on the estimated future cash
flows, discounted to their present value using a pre-tax discount rate that reflects the current market assessment of time
value of money and the risks specific to it. If such recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable
amount and the reduction is treated as an impairment loss and is recognised in the statement of profit and loss. All assets
(except goodwill) are subsequently reassessed for indications that an impairment loss previously recognised may no longer
exist. An Impairment loss is reversed if there has been a change in estimates used to determine the recoverable amount.
Such a reversal is made only to the extent that the assets carrying amount would have been determined, net of depreciation
or amortization, had no impairment loss been recognised.
1.10 Expected credit loss (ECL) model:
The Company applies the ECL model in accordance with Ind AS 109 for recognising impairment loss on financial assets. The
ECL allowance is based on the credit losses expected to arise from all possible default events over the expected life of the
financial asset (''lifetime ECL''), unless there has been no significant increase in credit risk since origination, in which case, the
allowance is based on the 12-month ECL. The 12-month ECL is a portion of the lifetime ECL which results from default events
that are possible within 12 months after the reporting date.
ECL is calculated on a collective basis, considering the retail nature of the underlying portfolio of financial assets.
The impairment methodology applied depends on whether there has been a significant increase in credit risk. When
determining whether the risk of default on a financial asset has increased significantly since initial recognition, the Company
considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis based on a provision matrix which takes into account the
Company''s historical credit loss experience, current economic conditions, forward looking information and scenario
analysis.
The expected credit loss is a product of exposure at default (''EAD''), probability of default (''PD'') and loss given default (''LGD'').
The Company has devised an internal model to evaluate the PD and LGD based on the parameters set out in Ind AS 109.
Accordingly, the financial assets have been segmented into three stages based on the risk profiles. The three stages reflect
the general pattern of credit deterioration of a financial asset. The company categorises financial assets at the reporting
date into stages based on the days past due
(''DPD'') status as under:
- Stage 1: Trade receivable for which credit risk has not increased significantly and that are also not credit impaired
- Stage 2: Trade receivable for which credit risk has increased significantly but not credit impaired
- Stage 3: Trade receivable for which credit risk has increased significantly and are credit impaired
LGD is an estimate of loss from a transaction given that a default occurs. PD is defined as the probability of whether the
borrowers will default on their obligations in the future. For assets which are in Stage 1, a 12-month PD is required. For Stage 2
assets a lifetime PD is required while Stage 3 assets are considered to have a 100% PD. EAD represents the expected
exposure in the event of a default and is the gross carrying amount in case of the financial assets held by the Company.
The Company incorporates forward looking information into both assessments of whether the credit risk of an instrument
has increased significantly since its initial recognition and its measurement of ECL. Based on the consideration of external
actual and forecast information, the Company forms a ''base case'' view of the future direction of relevant economic variables.
This process involves developing two or more additional economic scenarios and considering the relative probabilities of
each outcome. The base case represents a most likely outcome while the other scenarios represent more optimistic and
more pessimistic outcomes.
The measurement of impairment losses across all categories of financial assets requires judgement, in particular, the
estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the
assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can
result in different levels of allowances. The Company''s ECL calculations are outputs of complex models with a number of
underlying assumptions regarding the choice of variable inputs and their interdependencies. The inputs and models used
for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. The
Company regularly reviews its models in the context of actual loss experience and makes adjustments when such
differences are significantly material.
The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is
required to be recognised as an impairment gain or loss in profit or loss.
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