Page 283 - SAMRC AnnualReport 2025-26

F I NAN C IAL I N F O R MA T I O N

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2026
SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

1.8 Financial instruments (continued)

Credit-impaired financial asset is a financial asset that is credit-impaired when one or more events that
have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
Evidence that a financial asset is credit-impaired include observable data about the following events:
(a) significant financial difficulty of the issuer or the borrower;

(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise
consider;

(d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
(e) the disappearance of an active market for that financial asset because of financial difficulties; or

(f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit
losses.
It may not be possible to identify a single discrete event – instead, the combined effect of several events
may have caused financial assets to become credit-impaired.
Credit loss is the difference between all contractual cash flows that are due to an entity in accordance with
the contract and all the cash flows that the entity expects to receive (i.e. all cash shortfalls), discounted at
the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated
credit-impaired financial assets). An entity shall estimate cash flows by considering all contractual terms
of the financial instrument (for example, prepayment, extension, call and similar options) through the
expected life of that financial instrument. The cash flows that are considered shall include cash flows
from the sale of collateral held (where applicable) or other credit enhancements that are integral to the
contractual terms. There is a presumption that the expected life of a financial instrument can be estimated
reliably. However, in those rare cases when it is not possible to reliably estimate the expected life of a
financial instrument, the entity shall use the remaining contractual term of the financial instrument.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party
by failing to discharge an obligation.
Credit risk rating grades are the ratings of credit risk based on the risk of default occurring on the
financial instrument.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates.
Derecognition is the removal of a previously recognised financial asset or financial liability from an
entity’s statement of financial position.
(c) It is settled at a future date.

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