Page 87 - UBF AR 2018 - E Version

NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2018

33.7 Impairment Assessment Collectively assessed allowances

For accounting purposes, the company uses an incurred loss Allowances are assessed collectively for losses on loans

model for the recognition of losses on impaired financial and advances and for held to maturity debt investments

assets. This means that losses can only be recognized that are not individually significant and for individually

when objective evidence of a specific loss event has been significant loans and advances that have been assessed

observed. Triggering events include the following: individually and found not to be impaired.

- Significant financial difficulty of the customer The company generally bases its analysis on historical

- A breach of contract such as a default of payment. experience. However, when there are significant market

- Where the company grants the customer a concession developments, the company would include macroeconomic

due to the customer experiencing financial difficulty factors within its assessments.

- It becomes probable that the customer will enter

bankruptcy or other financial reorganization Allowances are evaluated separately at each reporting

- Observable data that suggests that there is a decrease date with each portfolio.

in the estimated future cash flows from the loans

The collective assessment is made for groups of assets with

Individually assessed allowances similar risk characteristics, in order to determine whether

The company determines the provisions appropriate provision should be made due to incurred loss events for
for each individually significant loan or advance on which there is objective evidence, but the effects of which
an individual basis by Credit Department, Finance are not yet evident in the individual loans assessments.
Department, including any overdue payments of interests, The collective assessment takes account of data from the
or infringement of the original terms of the contract. loan portfolio (such as historical losses on the portfolio,
Items considered when determining provisioning amounts levels of arrears, credit utilization, loan to collateral ratios
include the sustainability of the counterparty’s business and expected receipts and recoveries once impaired) or
plan, its ability to improve performance if it is in a financial economic data.

difficulty, projected receipts and the expected payout

should bankruptcy ensue, the availability of other

financial support, the realizable value of collateral and the

timing of the expected cash flows. Impairment allowances

are evaluated at each reporting date, unless unforeseen

circumstances require more careful attention.

33.8 Credit Quality by Class of Financial Assets
T he company manages the credit quality of financial assets by categorising its credit exposure by class of financial asset,

line of business and geographic region. It is the company’s policy to maintain accurate and consistent risk profile across

the credit portfolio. The table below shows the credit quality for all financial assets exposed to credit risk, based on the

company’s internal credit rating system. Neither Past Due but Individually Total
As at 31 March 2018 Past Due Not Impaired Impaired Rs.
Nor Impaired Rs.
Rs.
Rs.

Cash in hand and balances with Banks 455,042,958 - - 455,042,958
Sri Lanka Government Securities - Available for Sale -
Cash collateral on securities borrowed & reverse -- -
repurchased agreements 455,652,248
Loans and receivables from customers - - 455,652,248
Financial investments – Available-for-sale
Commercial Paper Investment 2,747,404,709 6,760,187,483 503,906,795 10,011,498,987
200,900 - - 200,900
- - 158,703,642
158,703,642
3,817,004,457 6,760,187,483 503,906,795 11,081,098,735

Aging Analysis of past due (i.e. facilities in arrears of 1 day and above) but not impaired loans by class of financial

assets Past Due But Not Impaired *

Less than 3 3 to 6 6 to 12 More than Total
Months Months Months 12 Months

Loans and receivables from customers 3,633,999,555 613,519,021 158,499,163 2,354,169,744 6,760,187,483

* Past due but not Impaired Loans and Receivable include the Loans and Receivables that are collectively impaired.

Annual Report 2018 85