MCCU Annual Report - page 59

59
3.
Statement of Compliance, Basis of Preparation and Significant Accounting Policies:
(a)
Statement of Compliance and Basis of Preparation -
(b)
Use of Estimates -
(c)
Loans to Members and Provisions for Loan Impairment -
A provision for loan impairment is established if there is objective evidence that a loan is impaired. A
loan is considered impaired when management determines that it is probable that all amounts due
according to the original contractual terms will not be collected. When a loan is identified as impaired,
the carrying amount of the loan is reduced by recording specific provisions for credit losses to write down
the loan to its estimated recoverable amount which is the present value of expected future cash flows
including amounts recoverable from guarantees and collateral, discounted at the original effective interest
rate of the loan.
The provision for loan impairment also covers situations where there is objective evidence that probable
losses are present in components of the loan portfolio at the date of the statement of financial position.
These have been estimated based on historical patterns of losses in each component, the credit ratings
allocated to the borrowers and reflecting the current economic climate in which the borrowers operate.
YEAR ENDED 31ST DECEMBER 2013
MANCHESTER CO-OPERATIVE CREDIT UNION (1977) LIMITED
Loans are recognized when cash is advanced to borrowers. They are initially recorded at cost, which is
the cash given to originate the loan including any transaction costs and subsequently measured at
amortized cost using the effective interest rate method.
NOTES TO THE FINANCIAL STATEMENTS - (CONT'D)
The preparation of financial statements in accordance with International Financial Reporting Standards
(IFRS) requires directors and management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. These estimates are based on historical
experience and directors and management's best knowledge of current events and actions and are
reviewed on an ongoing basis. Actual results could differ from those estimates.
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) and their interpretations adopted by the International Accounting Standards Board
(IASB), and comply with the requirements of the Co-operative Societies Act. They have been prepared
under the historical cost convention and are represented in Jamaican Dollars which is the functional
currency of the Credit Union.
Specific provisions are established as a result of a review of the carrying value of loans in arrears and are
derived based on the regulator's provisions in accordance with the policy of making a full provision for
loans in arrears over twelve (12) months. General provisions of ten percent (10%) to one hundred percent
(100%) are established in respect of loans in arrears for two (2) to twelve (12) months and one hundred
percent (100%) for those over twelve (12) months.
MANCHESTER CO-OPERATIVE CREDIT UNION
ANNUAL REPORT 2013
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