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ANNUAL REPORT 2021 119

Notes to the fiNaNcial statemeNts

2. significant accOUnting POlicies (cOnt’D.)

2.4 Summary of significant accounting policies (cont’d.)
(g) Impairment of financial assets
The Group and the Bank assess at each reporting date whether there is any objective evidence that a financial
asset or a group of financial assets is impaired. The Group and the Bank recognise an allowance for expected
credit losses (“ECLs”) for all financial assets carried at amortised cost and debt instruments not classified at FVTPL.
ECLs are based on the difference between the contractual cash flows due in accordance with the contract and
all the cash flows that the Group and the Bank expect to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible
within the next 12- months (a 12-month ECL). For those credit exposures for which there has been a significant
increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For debt instruments at FVOCI, the Group and the Bank apply the low credit risk simplification. At every reporting
date, the Group and the Bank evaluate whether the debt instrument is considered to have low credit risk using all
reasonable and supportable information that is available without undue cost or effort. In making that evaluation,
the Group and the Bank reassess the internal credit rating of the debt instrument. In addition, the Group and the
Bank consider that there has been a significant increase in credit risk when contractual payments are more than
30 days past due.
The Group and the Bank consider a financial asset in default when contractual payments are more than
90 days past due. However, in certain cases, the Group and the Bank may also consider a financial asset to be in
default when internal or external information indicates that the Group and the Bank are unlikely to receive the
outstanding contractual amounts in full before taking into account any credit enhancements held by the Group
and Bank. A financial asset is written off when there is no reasonable expectation of recovering the contractual
cash flows.

(h) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as either at amortised cost or as financial liabilities at FVTPL.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.

The Group’s and the Bank’s financial liabilities include trade and other payables, loans, and borrowings including
bank overdrafts, and derivative financial instruments.