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
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