Page 87 - Continental Reinsurance 2022 Annual Report
P. 87
Statement of Significant Accounting Policies 85
Available-for-sale financial assets are initially group of financial assets with similar credit risk
recognised at fair value, which is the cash characteristics and collectively assesses them for
consideration including any transaction costs, and impairment. Assets that are individually assessed for
measured subsequently at fair value with gains and impairment and for which an impairment loss is, or
losses being recognised in other comprehensive continues to be, recognised are not included in a
income. If an available-for-sale financial asset is collective assessment of impairment.
determined to be impaired, the cumulative gain or loss
previously recognised in the other comprehensive If there is objective evidence that an impairment loss
income is recognised in profit or loss. However, on assets carried at amortised cost has been incurred,
interest is calculated using the effective interest rate the amount of the loss is measured as the difference
method, and foreign currency gains and losses on between the carrying amount of the asset and the
monetary assets classified as available-for-sale are present value of estimated future cash flows excluding
recognised in profit or loss. Dividends on available- future expected credit losses that have not been
for-sale equity instruments are recognised in profit or incurred) discounted at the financial asset’s original
loss in ‘Dividend income’ when the Group’s right to effective interest rate. If a loan has a variable interest
receive payment is established. AFS financial assets rate, the discount rate for measuring any impairment
includes debt and equity (quoted and unquoted) loss is the current effective interest rate.
instruments.
e Impairment of financial assets (continued)
The carrying value at the reporting date of available
for sale financial instruments for the Group is The carrying amount of the asset is reduced through
N1,073,257,000 (2021:N1,189,153,000) and the use of an allowance account and the amount of the
Company N1,053,365,000 (2021:N1,168,563,000). loss is recognised in profit or loss. Interest income
continues to be accrued on the reduced carrying
e Impairment of financial assets amount and is accrued using the rate of interest used
The Group assesses at each reporting date whether to discount the future cash flows for the purpose of
there is any objective evidence that a financial asset or measuring the impairment loss. The interest income is
group of financial assets is impaired. A financial asset recorded in profit or loss. Loans together with the
or a group of financial assets is deemed to be impaired associated allowance are written off when there is no
if, and only if, there is objective evidence of realistic prospect of future recovery and all collateral
impairment as a result of one or more events that has has been realised or has been transferred to the Group.
occurred after the initial recognition of the asset (an If, in a subsequent year, the amount of the estimated
incurred ‘loss event’) and that loss event has an impact impairment loss increases or decreases because of an
on the estimated future cash flows of the financial event occurring after the impairment was recognised,
asset or the group of financial assets that can be the previously recognised impairment loss is increased
reliably estimated. Evidence of impairment may or reduced by adjusting the allowance account. If a
include indications that the debtors or a group of future write-off is later recovered, the recovery is
debtors is experiencing significant financial difficulty, credited to profit or loss.
default or delinquency in interest or principal
payments, the probability that they will enter For the purpose of a collective evaluation of
bankruptcy or other financial reorganisation and impairment, financial assets are grouped on the basis
where observable data indicate that there is a of the Group’s internal credit grading system, which
measurable decrease in the estimated future cash considers credit risk characteristics such as asset type,
flows, such as changes in arrears or economic industry, geographical location, collateral type, past-
conditions that correlate with defaults. due status and other relevant factors.
Financial assets carried at amortised cost Future cash flows on a group of financial assets that are
For financial assets carried at amortised cost, the collectively evaluated for impairment are estimated on
Group first assesses individually whether objective the basis of historical loss experience for assets with
evidence of impairment exists for financial assets that credit risk characteristics similar to those in the group.
are significant individually, or collectively for financial Historical loss experience is adjusted on the basis of
assets that are not individually significant. If the Group current observable data to reflect the effects of current
determines that no objective evidence of impairment conditions on which the historical loss experience is
exists for an individually assessed financial asset, based and to remove the effects of conditions in the
whether significant or not, it includes the asset in a historical period that do not exist currently. Estimates