Page 46 - AOB 2018 (ENG)

Audit
Oversight
Board
ANNUAL
REPORT
2018

Lifetime expected credit losses are the expected credit losses that result from all possible default
events over the expected life of the asset, while 12-month expected credit losses are the portion
of expected credit losses that result from default events that are possible within the 12 months
after the reporting date. The maximum period considered when estimating expected credit
losses is the maximum contractual period over which the AOB is exposed to credit risk.

An impairment loss in respect of financial assets measured at amortised cost is recognised in
profit or loss and the carrying amount of the asset is reduced through the use of an allowance
account.

At each reporting date, the AOB assesses whether financial assets carried at amortised cost
are credit impaired. A financial asset is credit impaired when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.

The gross carrying amount of a financial asset is written off (either partially or full) to the
extent that there is no realistic prospect of recovery. This is generally the case when the AOB
determines that the debtor does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write-off. However, financial assets
that are written off could still be subject to enforcement activities in order to comply with the
AOB’s procedures for recovery of amounts due.

Previous financial year

All financial assets were assessed at each reporting date whether there was any objective
evidence of impairment as a result of one or more events having an impact on the estimated
future cash flows of the asset. Losses expected as a result of future events, no matter how likely,
were not recognised.

An impairment loss in respect of loans and receivables was recognised in profit or loss and
was measured as the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the asset’s original effective interest rate. The carrying
amount of the asset was reduced through the use of an allowance account.

If, in a subsequent period, the fair value of the financial asset increased and the increase could
be objectively related to an event occurring after the impairment loss was recognised in profit
or loss, the impairment loss was reversed, to the extent that the asset’s carrying amount did not
exceed what the carrying amount would have been had the impairment not been recognised at
the date the impairment was reversed. The amount of the reversal was recognised in profit or
loss.

44 | PART TWO STATEMENTS

T_2018 AOB AR PART 2.indd 44 10/04/2019 5:11 PM