ECCB 2017-2018 Annual Report and Statement of Accounts

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ECCB ANNUAL REPORT 2017/2018

(expressed in Eastern Caribbean dollars) Eastern Caribbean Central Bank Notes to the Financial Statements March 31, 2018 (expressed in Eastern Caribbean dollars) 2. Summary of significant accounting policies …continued a) Basis of preparation ...continued

EASTERN CARIBBEAN CENTRAL BANK NOTES TO THE FINANCIAL STATEMENTS

March 31, 2018

Standards, interpretations and amendments to published standards that are not yet effective and have not been early adopted …continued (ii) Classification – Financial assets...continued A financial asset is classified into one of these categories on initial recognition. However, for financial assets held at initial application, the business model assessment is based on facts and circumstances at that date. Also, IFRS 9 permits new elective designations at FVTPL or FVOCI to be made on the date of initial application and permits or requires revocation of previous FVTPL elections at the date of initial application depending on the facts and circumstances at that date. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. Preliminary impact assessment Based on its preliminary high-level assessment of possible changes to the classification and measurement of financial assets held, the Bank’s current expectation is that there will be no significant impact on its financial position and performance. This assessment was made after the Bank performed an initial review of its business models based on the different portfolios of financial assets and the characteristics of these financial assets. Consequently, debt instruments whose cash flows represent solely payments of principal and interest "SPPI" will be designated either at amortised cost or at fair value through other comprehensive income depending on the objectives of the business model. The existing investments in equity instruments at the date of initial application will be classified between fair value through profit or loss or fair value through other comprehensive income depending on the characteristics. This is not expected to have a significant impact on the Bank. (iii) Impairment of financial assets IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward ‑ looking ‘expected credit loss’ (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability ‑ weighted basis. The new impairment model will apply to the following financial instruments that are not measured at FVTPL: — financial assets that are debt instruments; — lease receivables; — financial guarantee contracts issued; and — loan commitments issued No impairment loss will be recognised on equity investments.

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