ECCB 2022-2023 Annual Report and Financial Statements

Eastern Caribbean Central Bank Notes to the Financial Statements For the year ended 31 March 2023 (Expressed in Eastern Caribbean dollars)

2. Summary of significant accounting policies (continued)

g)

Financial assets and financial liabilities

(i) Initial recognition and measurement of financial assets and liabilities

A financial instrument (financial asset or financial liability) is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are initially recognised on the settlement date, which is the date that an asset is delivered to or by the Bank. This includes regular way trades: purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. At initial recognition, the Bank measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition or issue of the instrument, such as fees and commissions. Subsequent measurement of financial assets and financial liabilities is described below. The Bank classifies its financial assets in the following measurement categories based on the business model for managing the assets and the assets’ contr actual cash flow characteristics under IFRS 9:  Amortised cost;  Fair value through other comprehensive income (FVOCI); and  Fair value through profit or loss (FVTPL). A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:  the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and  the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. A debt financial asset is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL:  the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and  the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Bank may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis. All other equity investments are classified as measured at FVTPL.

(ii) Classification and measurement of financial assets

15