b'FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY. NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2018(Expressed in Trinidad and Tobago Dollars)4.Summary of significant accounting policies (continued)e.Financial assets (continued)ii.Loans and advancesLoans and advances are financial assets with fixed or determinable payments and are not quoted in an active market created by NIBTT providing money to a debtor other than those created with the intention of short-term profit sharing. Such assets are stated at amortised cost, net of any advances for credit losses using the effective interest method.Loans and advances include mortgage advances.Mortgage advances are measured net of provisions for impairment. A mortgage advance is classified as impaired (non-performing) when there is objective evidence that NIBTT will not be able to collect all amounts due according to the original contractual terms of the loan. Objective evidence of impairment includes observable data that comes to the attention of NIBTT such as:Significant financial difficulties of the borrowerActual delinquenciesAdverse change in the payment status of a borrowerBankruptcy or reorganisation by the borrower.If there is objective evidence that an impairment loss on mortgage advance has been incurred, the amount of the allowance for impairment is measured as the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans.The allowance which is made during the year, less amounts released and recoveries of bad debts previously written off, is charged against the statement of comprehensive income. When a loan is deemed uncollectible, it is written off against the related allowance for losses.f.Impairment of financial assetsThe carrying amounts of NIBTTs assets that are not carried at fair value, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated and an impairment loss is recognised whenever the carrying amount ofanassetexceedsitsrecoverableamount.Impairmentlossesarerecognisedinthestatementof comprehensive income. i.Losses on loans and advances NIBTTreviewsitsproblemloansandadvancesateachreportingdatetoassesswhetheran allowanceforimpairmentshouldberecordedinthestatementofcomprehensiveincome.In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.In addition to specific allowances against individually significant loans and advances, NIBTT also makes a collective impairment allowance where applicable, against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This takes into consideration factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows.43'