Page 11 University of Technology, Jamaica Notes to the Financial Statements 31 March 2020 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) (f) Financial instruments (continued) Financial assets (continued) Measurement Debt instruments Measurement of debt instruments depends on the University’s business model for managing the asset and the cash flow characteristics of the asset. The University classifies its debt instruments as discussed below. There are no debt instruments classified as FVOCI or FVPL. • Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest (SPPI), are measured at amortised cost. Interest income from these financial assets is included in net surplus using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in net surplus. Impairment losses are presented as a separate line item in net surplus. Equity instruments The University measures all equity investments at fair value. Where the University’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to net surplus following the de-recognition of the investment. Dividends from such investments continue to be recognised in net surplus when the University’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in net surplus. Impairment The University assesses on a forward-looking basis the expected credit loss (ECL) associated with its financial assets classified at amortised cost. Application of the General Model The University has applied the ‘general model’ as required under IFRS 9 for financial assets other than receivables Under this model, the University is required to assess on a forward-looking basis, the ECL associated with its debt investments carried at amortised cost. The ECL is recognised in net surplus before a loss event has occurred. The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes and considers the time value of money in relation to these outcomes. The probability-weighted outcome considers multiple scenarios based on reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ECL is calculated by multiplying the Probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD). The impairment model uses a three-stage approach based on the extent of credit deterioration since origination: • Stage 1 – 12-month ECL applies to all financial assets that have not experienced a significant increase in credit risk since origination and are not credit impaired. The ECL is computed using a 12-month PD that represents the PD occurring over the next 12 months. University of Technology, Jamaica 127
RkJQdWJsaXNoZXIy NDQ5NzI=