ECCB 2023-2024 Annual Report

Eastern Caribbean Central Bank Notes to the Financial Statements For the year ended 31 March 2024 (Expressed in Eastern Caribbean dollars)

4. Critical accounting estimates and judgements in applying accounting policies (continued) Estimated pension obligation (continued) The assumptions used in determining the net cost (income) for pensions include the discount rate. The Bank determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash flows expected to be required to settle the pension obligations. The Bank considers the interest rates of high-quality instruments, normally long-term government bonds that are denominated in Eastern Caribbean currency which is the currency in which the benefits will be paid and that have terms of maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are based on current market conditions. Refer to Note 22 for further details. Impairment of financial assets The measurement of expected credit loss (ECL) allowance for financial assets measured at amortised cost and FVOCI requires the use of complex models and significant assumptions about future economic conditions and credit behaviour. In determining ECL, management is required to exercise judgement in defining what is considered a significant increase in credit risk and in making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. Explanation of the inputs, assumptions and estimation techniques used in measuring ECL is detailed in note 2 (g) (ix). A number of significant judgements are required in applying the accounting requirements for measuring ECL, such as:  The Bank’s criteria for determining if there has been a significant increase in credit risk with qualitative factors integrating the wider macroeconomic environment;  Selecting appropriate models and assumptions for the measurement of ECL;  Establishing the number and relative weightings of forward-looking macroeconomic scenarios for each type of product or market and the associated ECL;  Establishing groups of similar financial assets for the purposes of measuring ECL; and  Determination of associations between macroeconomic scenarios and, economic inputs, such as GDP growth, unemployment rates and inflation, and the effect on PDs, EADs and LGDs. Revaluation of land and buildings The Bank measures its land and buildings at revalued amounts with changes in fair value being recognised in other comprehensive income. The Bank utilises independent valuation specialists to determine fair value of its land and buildings. The valuation specialist uses judgment in the application of valuation techniques. Valuations are determined through the application of different valuation methods, which are all sensitive to the underlying assumptions chosen.

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