Quarter 1 - financial statement for 2025

Corporate information 1

Results at a glance 2

Certification pursuant to section 60 3

Statement of Financial Position 4

Statement of Comprehensive Income 5

Statement of Changes in Equity 6

Statement of Cash Flows 7

Notes to the Financial Statements 8

Free float Status 30

Directors: High Chief (Sir) Simeon Olusola Oguntimehin, OON - (Chairman)

Pastor Akin Laoye- Managing Director

Otunba' Wale Jubril Nathaniel Durant Jr. Titilayo Ayoka Aderonmu

Tel. 234-7035051231

E-mail: alphagenasec@bakertillynigeria.com

Tel. 234-1-7409651

Website: https://www.ftncocoa.com.ngE-mail: info@ftncocoa.com.ng

Tel. 234-2-7404744

Kresta Laurel Complex (4th Floor), 376, Ikorodu Road, Maryland, Lagos. Tel. 234-9031613983

E-mail: btnlag@bakertillynigeria.comm

213, Herbert Macaulay Street,Yaba, Lagos. Tel.: 234-1-8920491, 234-1-8920492

E-mail: info@meristemregistrars.com

United Bank for Africa Plc

We the undersigned hereby certify the following with regards to our unaudited reports and financial statements for the year ended 31 March, 2025 that:

1. We have reviewed the report;

2. To the best of our knowledge, the report does not contain:

   1. any untrue statement of a material fact, or

   2. omit to state a material fact, which would make the statements, misleading in the light of circumstances under which such statements were made;

3. To the best of our knowledge, the financial statements and other financial information included in the report fairly present in all material respects the financial condition and results of operation of the company as of, and for the periods presented in the report;

4. We:

   1. are responsible for establishing and maintaining internal controls;

   2. have designed such internal controls to ensure that material information relating to the company and its consolidated subsidiaries is made known to such officers by others within those entities particularly during the period in which the periodic reports are being prepared;

   3. have evaluated the effectiveness of the company's internal controls as of date within 90 days prior to the report;

   4. have presented in the report our conclusions about the effectiveness of our internal controls based on our evaluation as of that date;

5. We have disclosed to the auditors of the company and audit committee:

   1. all significant deficiency in the design or operation of internal controls which would adversely affect the company's ability to record, process, summarize and report financial data and have identified for the company's auditors any material weakness in internal controls; and

   2. any fraud, whether or not material, that involves management or other employees who have significant role in the company's internal controls;

      
      
      
      
      
      

6. We have identified in the report whether or not there were significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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The financial statements were approved by the Board of Directors on 29 April, 2025 and signed on its behalf by:

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High Chief (Sir) Simeon O. Oguntimehin OON Pastor Akin Laoye Olumayowa P Jimoh Chairman Managing Director Chief Finance Officer

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The accounting policies and notes on pages 8 to 30 form an integral part of these financial statement

The accounting policies and notes on pages 8 to 30 form an integral part of these financial statements

The accounting policies and notes on pages 8 to 30 form an integral part of these financial statements

The accounting policies and notes on pages 8 to 30 form an integral part of these financial statements

1. General Information

   FTN Cocoa Processors Plc was incorporated on 26 August 1991 in Nigeria as a private Company limited by shares under the name Fantastic Abiola Nigeria Limited which later became Fantastic Traders Nigeria Limited on 26 August, 1998. The Company became a public limited liability Company on 29 February, 2008 and got listed on the Nigeria Stock Exchange. The principal activities of the Company are the processing of cocoa beans and palmkernel into cocoa cake, liquor, butter, palm kernel oil and palm kernel cake for export and sales to local manufacturing companies.

2. Statement of Compliance

   The financial statement has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) with the Interpretations issued by the International Financial Reporting InterpretationsCommittee (IFRIC).

3. Significant Accounting Policies

   The principal accounting policies adopted in the preparation of the Company's financial statements are set out below.

   1. Basis of preparation of the financial statements
      1. Basis of Measurement

         The accounts have been prepared on an accrual basis and under the historical cost convention except for available for certain financial instruments which are measured at fair value.

         These financial statements are presented in Nigerian Naira (N), which is the Company's functional currency. All financial information presented in Naira has been rounded to the nearest thousand unless otherwise stated.

      2. Use of Estimates and Judgements

         The preparation of financial statements requires management to exercise judgement and to make estimates and assumptions that affect the application of policies, reported amounts of revenues, expenses, assets and liabilities and disclosures. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

   2. Foreign Currency

      1. Foreign Currency Translation

         The Company's transactions in foreign currency are translated to its functional currency for inclusion in the financial statements. Functional currency is the currency of the primary economic environment in which the entity operates. For FTN Cocoa Processors Plc the functional currency is the Nigerian Naira which is also its presentation currency.

      2. Foreign Currency Transactions

         • Foreign currency transactions are recorded on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

         • Foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translatedusing the exchange rate at the date of the transaction.

      3. Exchange Differences

         • Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss within 'finance income or cost' except where translation reserve is required it is then recognized in other comprehensive income.

   3. Property, plant and equipment

      The Company uses the cost model for property, plant and equipment. All property, plant and equipment are stated at cost less accumulated depreciation and impairments.

      Cost includes

      • The purchase price, including import duties, and non-refundable purchase taxes, afterdeducting trade discounts and rebates.

      • Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management including costs associated with site preparation.

        Subsequent costs

      • The costs of replacing part of an item of property, plant and equipment are recognizedin the asset's carrying amount, only when it is probable that future economic benefitsassociated with the item will flow to the Company and the cost of the item can be measured reliably.

      • All repairs and maintenance costs are charged to the income statement during thefinancial period in which they are incurred

      1. Depreciation

         Depreciation on property, plant and equipment is calculated on the straight-line basis to write-off the costs of components that have homogenous useful lives to their residual values over their estimated useful lives.

         Depreciation begins when an asset is available for use and ceases at the earlier of the date thatthe asset is derecognized or classified as held for sale in accordance with IFRS 5 Non-currentAssets Held for Sale and Discontinued Operations.

         Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimateduseful lives.

         Buildings	2%	50 years
         Office Equipment	10%	10 years
         Plant and machinery	5%	20 years
         Motor vehicles	20%	5 years
         Furniture and fittings	10%	10 years

         The asset's residual values and useful lives are reviewed and adjusted if appropriate at the end ofeach reporting period.

         An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

      2. De-recognition

      An item of property, plant and equipment is de-recognized on disposal or when no future economic benefit is expected to flow to the Company from its continuing use. Any gain or loss arising from derecognition of an asset (calculated as the difference between the net disposal proceeds and the carrying amount of the assets) is recognized in the incomestatement, in the year the asset is derecognized.

   4. Intangible Assets
      1. Acquired Computer Software

         Software acquired by the Company is stated at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over the estimated useful life of the computer software, the estimated useful life and amortization is reviewed at the end of each reporting period, with the effect of any changes being accounted for on a prospective basis. Acquired computer software is amortized over a three (3) year period.

         Acquired computer software is de-recognized when no future economic benefit is expected from its use.

   5. Inventories

      These are measured at the lower of cost and net realizable value. The net realizable value is the amount the inventories are expected to realize less the estimated costs of completion andselling expenses. The estimates of net realizable value are based on the most reliable evidenceavailable at the time the estimates are made, of the amount the inventories are expected to realize.

      The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is determined using the weighted average cost formula. Any write down or reversals are recognized in the profit or loss account.

      i Raw materials

      These are measured using the weighted average cost formula. It comprises of the purchase price and all other cost incurred that are necessary to bring it to its present location and condition. Raw materials are sourced locally and internationally.

      1. Spare parts

         These are stated at their purchase price and are generally expensed. However, where they are used specifically for the enhancement of an equipment or machinery it is capitalized.

      2. Finished Goods and Work-in-progress

      These are measured at production cost based on weighted average cost taking into account the stage of production. It includes an apportionment of the factory production overheads incurred based on the normal operating capacity.

   6. Revenue

      Revenue represents amounts received and receivable from third parties for goods supplied to customers. It is recognized in the profit and loss account when the amount of revenue can bemeasured reliably, the significant risk and rewards are transferred to the buyer, recovery of the consideration is probable and the associated cost and possible return of products can be reliably estimated and there is no management involvement in the product. Revenue is derivedfrom export and local sales of cocoa cake, liquor, cocoa powder, palm kernel oil, butter and palm kernel cake.

      1. Export Sales

         Revenue is recognized on exported goods in the income statement when the significant risk and rewards of ownership of the goods has been transferred to the buyer and this is mainly upon shipment. This is also when the final invoice and bill of lading is raised. Export sales are measured at the agreed price based on current market situation.

      2. Local Sales

         Revenue on local sales is recognized in the income statement upon delivery of the goods to

         the buyer's warehouse. This is when the significant risk and rewards of ownership on the goods are transferred to the buyer. It is measured at the fair value of consideration received or receivable net of VAT, excise duties, returns, customer discounts and other sales related discounts.

      3. Other Income

         Other income comprises grants on export (Export expansion grant receivable from the FederalGovernment as a rebate on export costs), interest income, dividend received, bad debt recovered, exchange gain and others.

         • Export Expansion Grant

           Export expansion grants are grants receivable from the Federal Government of Nigeriathrough the Nigerian Export Promotion Council. The grant is backed by the Export (incentives and miscellaneous provisions) Act to encourage companies engaged in exportation of locally manufactured products by reducing the cost borne by local producers/non-oil exporters through giving a rebate of 30% on goods exported. It is recognized as an income in the period in which the export is made. The export grant is not given in monetary value but as certificate known as the Export Credit Certificate(ECC).

           A Company is entitled to receive the export expansion grant only if it has fulfilled therelevant conditions and has made necessary application to the Nigerian Export Promotion Council. The certificate on the average is issued on submission of necessaryexport documents.

           Export expansion grants are initially recognized at fair value and subsequently discounted at the point of sale.

         • Dividend and Interest Income

           Dividend income from investments is recognized only when shareholders right to receive payment has been established and the amount of income can be reliably measured. Interest income from a financial asset is recognized when it is probable thateconomic benefits will flow to the Company and the amount of income can be reliablymeasured. Interest income is accrued on a time basis with reference to the principal outstanding and the effective interest rates applicable.

   7. Borrowing Cost

      Borrowing costs that are directly attributable to the acquisition, construction or production ofa qualifying asset are capitalized. Other borrowing costs are recognized as an expense. Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

      A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

   8. Income Tax Expense

      Income tax expense comprises current tax and deferred tax. Income tax expense is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity or in other comprehensive income. Current income tax is the estimated income tax payable on taxable income for the year, using tax ratesenacted or substantively enacted at the balance sheet date, and any adjustment to tax payablein respect of previous years.

      Deferred tax assets and liabilities are recognized where the carrying amount differs from the tax base of the assets. Deferred taxes are recognized using the balance sheet liability method providing for temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes (tax bases of the assets and liability). The amount of deferred tax provided is based on the expected manner ofrealization or settlement of the carrying amount of assets and liabilities using tax rates enactedor substantively enacted by the reporting date.

      A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable thatthe related tax benefit will be realized.

   9. Provisions, Contingent Liabilities and Contingent Assets

      1. Provisions

         Provisions are recognized when there is a present obligation, whether legal or constructive, as a result of a past event for which it is probable that a transfer of economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation. Such provisions are calculated on a discounted basis where the effect is material to the original undiscounted provision. The Company reviews provisions existing at the end of each reporting period and makes appropriate adjustment to reflect the current best estimate.If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

      2. Contingent Liability

         A contingent liability is disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote. Where the Company is jointly and severally liable for an obligation, the part of the obligation that is expected to be met by other parties is treated as acontingent liability. The entity recognizes a provision for the part of the obligation for which an outflow of resources embodying economic benefits is probable, except in the extremely rare circumstances where no reliable estimate can be made. Contingent liabilities are assessedcontinually to determine whether an outflow of resources embodying economic benefits has become probable. If it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as a contingent liability, a provision is recognized in the financial statements of the period in which the change in probability occurs except in the extremely rare circumstances where no reliable estimate can be made.

      3. Contingent Assets

         Contingent assets arising from unplanned or other unexpected events giving rise to the possibility of an inflow of economic benefits are disclosed in the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, an entity discloses the contingent asset.

   10. Financial Assets Financial Assets and Liabilities Recognition Recognition

       Financial assets are initially recognized at their fair value plus, in the case of financial asset

       not carried at fair value through profit or loss, directly attributable costs to their acquisition. All other financial assets and liabilities are initially recognized on the trade date at which theCompany becomes a party to the contractual provisions of the instrument.

       Classification and Measurement

       Initial measurement of a financial asset or liability is at fair value plus transaction costs that are directly attributable to its purchase or issuance. For instruments measured at fair value through profit or loss, transaction costs are recognized immediately in profit or loss.

       Financial assets are classified into one of the following measurement categories:

       • Amortized cost

       • Fair Value through Other Comprehensive Income (FVOCI)

       • Fair Value through Profit or Loss (FVTPL) for trading related assets

       • Equity Instruments

       The Company classifies all of its financial assets based on the business model for managingthe assets and the asset's contractual cash flow characteristics.

       1. Financial assets measured at amortized cost

          Financial assets are measured at amortized cost if they are held within a business model whoseobjective is to hold for collection of contractual cash flows. After initial measurement, debt instruments in this category are carried at amortized cost using the effective interest rate method. Amortized cost is calculated considering any discount or premium on acquisition, transaction costs and fees that are an integral part of the effective interest rate. Amortization is included in Interest income in the Statement of Income. Impairment on financial assets measured at amortized cost is calculated using the expected credit loss approach. Loans measured at amortized cost are presented net of the allowance for credit losses (ACL) in the statement of financial position.

       2. Financial Assets measured at FVOCI

          Financial assets are measured at FVOCI if they are held within a business model whose objective is to hold for collection of contractual cash flows and for selling financial assets. Subsequent to initial

          recognition, unrealized gains and losses on debt instruments measured at FVOCI are recorded in other comprehensive Income (OCI). Upon de-recognition, realizedgains and losses are reclassified from OCI and recorded in Other Income in the Statement ofIncome. Premiums, discounts and related transaction costs are amortized over the expected life of the instrument to Interest income in the Statement of Income using the effective interestrate method. Impairment on financial assets measured at FVOCI is calculated using the expected credit loss approach.

       3. Financial Assets measured at FVTPL

          Debt instruments measured at FVTPL include assets held for trading purposes, assets held as part of a portfolio managed on a fair value basis and assets whose cash flows do not represent payments that are solely for business transaction. Financial assets may also be designated at FVTPL if by so doing eliminates or significantly reduces an accounting mismatch which would otherwise arise. These instruments are measured at fair value in the Statement of Financial Position, with transaction costs recognized immediately in the Statement of Incomeas part of Other Income. Realized and unrealized gains and losses are recognized as part of Other Income in the Statement of Income.

       4. Equity Instruments

          Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, any contract that evidences a residual interest in the issuer's net assets. Equity instruments are measured at FVTPL, unless an election is made to designate them at FVOCI upon purchase. For equity instruments measured at FVTPL, changes in fair value are recognized as part of Other Income in the Statement of Income.

          The Company can elect to classify non-trading equity instruments at FVOCI. This election will be used for certain equity investments for strategic or longer -term investment purposes.The FVOCI election is made upon initial recognition, on an instrument-by-instrument basis and once made is irrevocable. Gains and losses on these instruments including when derecognized/sold are recorded in OCI and are not subsequently reclassified to the Statement of Income. Dividends received are recorded in other income in the Statement of Income. Any transaction costs incurred upon purchase of the security are added to the cost basis of the security and are not reclassified to the Statement of Income on sale of the security. Transaction cost on disposal of equity instruments is recognized as an expense in the income statement.

          Financial liabilities are classified into one of the following measurement categories:

          • Amortized cost

          • Fair Value through Profit or Loss (FVTPL)

       5. Financial Liabilities at Amortized Cost

          Financial liabilities that are not classified at fair value through profit or loss fall into this category and are measured at Amortized cost using the effective interest rate method. Financial liabilities measured at Amortized cost are loans and other borrowed funds

       6. Financial Liabilities at fair value through profit or loss

       Financial liabilities accounted for at fair value through profit or loss fall into two categories:financial liabilities held for trading and financial liabilities designated at fair value through profit or loss on inception. Financial liabilities at fair value through profit or loss are financialliabilities held for trading. A financial liability is classified as held for trading if it is incurred principally for the purpose of repurchasing it in the near term or if it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence ofa recent actual pattern of short-term profit-taking. Gains and losses arising from changes in fair value of financial liabilities classified as held

       for trading are included in the income statement and are reported as 'Net gains/(losses) on financial instruments classified as held for trading'. Interest expenses on financial liabilities held for trading are included in 'Net interest income'. Financial Liabilities are designated at FVTPL when either the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise, or the financial liability contains one or more embedded derivatives which significantly modify the cash flows otherwise required. For liabilities designated at fair value through profit or loss, all changes in fair value are recognized in Other Income in the Statement of Income, except for changes in fair value arising from changes in the Company's own credit risk whichare recognized in OCI. Changes in fair value of liabilities due to changes in the Company's own credit risk, which are recognized in OCI, are not subsequently reclassified to the Statement of Income upon de-recognition/extinguishment of the liabilities.

   11. Reclassifications

       Financial assets are not reclassified subsequent to their initial recognition, except in the periodafter the Company changes its business model for managing financial assets. A change in the Bank's business model will occur only when the Company either begins or ceases to perform an activity that is significant to its operations such as significant internal restructuring and anyother reason that might warrant a change in the Company's business model as determined by management based on facts and circumstances.

       The following are not considered to be changes in the business model:

       • A change in intention related to particular financial assets (even in circumstances of significant changes in market conditions)

       • A temporary disappearance of a particular market for financial assets.

       • A transfer of financial assets between parts of the Company with different business models. When reclassification occurs, the Company reclassifies all affected financial assets inaccordance with the new business model. Reclassification is applied prospectively from the 'reclassification date'. Reclassification date is 'the first day of the first reporting period following the change in business model. For example, if the company decides to shut downthe corporate mortgage business segment, the reclassification date is the first day of the nextreporting period.

   12. Impairment of Financial Assets

In line with IFRS 9, the Company assesses the under listed financial instruments for impairment using Expected Credit Loss (ECL) approach:

• Amortized cost financial assets;

• Debt securities classified as at FVOCI;

  Equity instruments and financial assets measured at FVTL are not subjected to impairment under the standard.

  Expected Credit Loss Impairment Model

  The Company's allowance for credit losses calculations are outputs of models with several underlying assumptions regarding the choice of variable inputs and their interdependencies. The expected credit loss impairment model reflects the present value of all cash shortfalls related to default events either over the following twelve months or over the expected life ofa financial instrument depending on credit deterioration from inception. The allowance for credit losses reflects an unbiased, probability-weighted outcome which considers multiple scenarios based on reasonable and supportable forecasts. The Company adopts a three-stage approach for impairment assessment.

  Stage 1 - Where there has not been a significant increase in credit risk (SICR) since initial recognition of a financial instrument, an amount equal to 12 months expected credit loss is recorded. The expected credit loss is computed using a probability of default occurring over the next 12 months. Stage 2 - When a financial instrument experiences a SICR subsequent to origination but is not considered to be in default, it is included in Stage 2. This requires the computation of expected credit loss based on the probability of default over the remaining estimated life of the financial instrument. Stage 3 - Financial instruments that are considered to be in default are included in this stage.Like Stage 2, the allowance for credit losses captures the lifetime expected credit losses. Measurement of Expected Credit Losses

  The probability of default (PD), exposure at default (EAD), and loss given default (LGD) inputs used to estimate expected credit losses are modelled based on macroeconomic variablesthat are most closely related with credit losses in the relevant portfolio. Details of these statistical parameters/inputs are as follows:

  Probability of Default - The probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the remaining estimated life, if the facility has not been previously derecognized and is still in the portfolio.
• 12-month PDs - This is the estimated probability of default occurring within the next 12 months (or over the remaining life of the financial instrument if that is less than 12 months). This is used to calculate 12-month ECLs. The Company obtains the constant and relevant coefficients for the various independent variables and computes the outcome by incorporating forward looking macroeconomic variables and computing the forward probability of default.
• Lifetime PDs - This is the estimated probability of default occurring over the remaining life of the financial instrument. This is used to calculate lifetime ECLs for 'stage 2' and 'stage 3'exposures. PDs are limited to the maximum period of exposure required by IFRS 9. Variables and adopts exponentiation method to compute cumulative PD for future time periods for each obligor. Exposure at Default - The exposure at default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date. Loss Given Default - The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. Forward-looking information

  IFRS 9 specifies that ECLs should include a forward-looking element which translates into an allowance for changes in macro-economic conditions and forecasts when estimating lifetime ECLs. It is important to understand the effect of forecasted changes in the macro- economic environment on ECLs, so that an appropriate level of provisions can be raised. Themost acceptable way of allowing for macro-economic conditions is to build a regression model that aims to explain and predict the impact of macro-economic indicators on default rates. Such regression models are usually built on a history of default rates and macro- economic variables covering at least one economic cycle, but preferable more. Information gathering is based on historical Nigerian macro-economic indicators from a host of reliable sources, including the International Monetary Fund. The following steps were followed in quantifying the impact of macro-economic scenarios on ECLs.

  Step 1

  Using the statistical methodology of multiple Regression, estimate the relationship between collected historical non-performing loans and on a list of macro-economic indicators.

  Step 2

  Identify variables that are statistically significant (that is variables that have the most significant predictive power)

  Step 3

  Forecast macroeconomic forward-looking information for periods over which lifetime PD will be determined

  Step 4

  Using the equation derived in step one as, significant coefficient obtained in step 2 as well asforecast macroeconomic forward-looking information in step 3, predict the default probabilityfor relevant periods.

  Step 5

  Determine Scalars for relevant period. In order to remove the impact of any historical trendsincluded in the data, the scalar denominator is adjusted based on the estimation period used to derive the PDs.

  Step 6

  Apply the scalars calculated in Step 5 to the lifetime PDs as derived. A scalar factor of one means that the probability of default for the forecast year is expected to be in line with historical average probability of default. A scalar factor less than one means that theprobability of default for the forecast year is expected to be less than the historical average probability of default. A scalar factor greater than one means that the probability of default for the forecast year is expected to be greater than the historical average probability of default.

  Presentation of Allowance for ECL in the Statement of Financial Position

  Allowances for ECL are presented in the statement of financial position as follows:

• Financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;

• Loan commitments as a provision; and

• Debt instruments measured at FVOCI: no loss allowance is recognized in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognized in the fair value reserve.

The Company writes off an impaired financial asset (and the related impairment allowance), either partially or in full, where there is no reasonable expectation of recovery as set out in IFRS 9, paragraph

5.4.4. After a full evaluation of a non-performing exposure, in the event that either one or all of the following conditions apply, such exposure shall be recommendedfor write-off (either partially or in full):

• continued contact with the customer is impossible;

• recovery cost is expected to be higher than the outstanding debt;

• Where all possible avenues for recoveries have been explored and it is evident that the financial capacity of the borrower makes it impossible to recover part or the whole amount ofindebtedness.

All impaired financial asset write-offs shall require endorsement at the appropriate level, as stated in the Company Policy. write-off approval shall be documented in writing and properly initialed by the