ECCB 2022-2023 Annual Report and Financial Statements

Eastern Caribbean Central Bank Notes to Consolidated Financial Statements

For the year ended 31 March 2023 (Expressed in Eastern Caribbean dollars)

3. Financial risk management (continued)

e) Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value of a liability must take account of non- performance risk, including the entity’s own credit risk. Determination of fair value The following methods and assumptions have been used to estimate the fair value of each class of financial instrument for which it is practical to estimate a value:  Short-term financial assets and liabilities: The carrying value of these financial assets and liabilities is a reasonable estimate of their fair value because of the short maturity of these instruments. Short-term financial assets are comprised of regional and foreign currencies, balances with other central banks, balances with foreign banks, money market instruments and money at call, treasury bills, balances with local banks, due from participating governments, interest receivable, and accounts receivable. Short-term financial liabilities are comprised of demand and deposit liabilities – domestic and foreign, interest payable and certain other liabilities.  Long-term financial instruments: The estimated fair value of long-term loans and receivables is based on discounted cash flows using prevailing market interest rates for debts with similar credit risk and remaining terms to maturity. Some of the financial assets included in participating governments’ securities and accounts receivable are long term.

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