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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Summary of significant accounting policies (cont’d)
(g) Impairment of financial assets (cont’d)
(i) Loan, advances, financing and receivable
For loans, advances, financing and receivables carried at amortised cost, the Group and the Bank first
assess individually whether objective evidence of impairment exists individually for financial assets that
are individually significant, or collectively for financial assets that are not individually significant. If the
Group and the Bank determine that no objective evidence of impairment exists for an individually assessed
financial asset, they include the asset in a group of financial assets with similar credit risk characteristics and
collectively assess them for impairment. Financial assets that are individually assessed for impairment and
for which an impairment loss is, or continues to be, recognised are not included in a collective assessment
of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows
(excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recognised in the statement
of income. Where appropriate, the calculation of the present value of the estimated future cash flows of a
collateralised loans or receivable reflect the cash flows that may result from foreclosure less costs of obtaining
and selling the collateral, whether or not foreclosure is probable.
Interest income continues to be accrued on the reduced carrying amount based on the original effective interest
rate of the asset. The interest income is recorded as part of the overall interest income.
Loans together with the associated allowance are written off when there is no realistic prospect of future
recovery and all collaterals have been realised or have been transferred. If, in a subsequent year, the amount
of the estimated impairment loss increases or decreases because of an event occurring after the impairment
was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance
account. If a future write-off is later recovered, the recovery is credited to the statements of income.
In deriving the collective impairment estimates, the Bank makes reference to the publicly available data
particularly relating to Probability of Default (“PD”) and Loss Given Default (“LGD”) as benchmark. The derived
PD and LGD are then adjusted for by the management where deemed necessary.
(ii) Held-to-maturity investments
The Group and the Bank assess at each reporting date whether objective evidence of impairment of held-to-
maturity investments exists as a result of one or more loss events and that loss event has an impact on the
estimated future cash flows of the investments that can be reliably estimated.
Where there is objective evidence of impairment, an impairment loss is recognised as the difference
between the amortised cost and the present value of the estimated future cash flows, less any impairment
loss previously recognised.
EXIM Bank Annual Report 2013
117