Financial Risk Management

Prudential Co-Operative Credit Union, Ltd.

Financial instruments consist of financial assets and liabilities. Financial assets of the Credit Union include cash, accounts receivable, investments and loans to members. Financial liabilities include members’ deposits and accounts payable.

Credit Risk

Cash is placed with a reputable banking institution. Credit risk on loans to members is limited, as these loans are shown net of provision for doubtful loans.

Fair Value

Fair value represents the amount at which financial instruments could be realized. The fair values of cash, accounts receivable, loans to members, accounts payable, and members’ deposits are not materially different from their carrying values in the financial statements.

Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Loans to Members

The nature of the Credit Union is such that loans can only be made to members of the Credit Union or similar societies. Management is unable to determine a market rate in respect of loans receivable and hence, it is impractical to estimate the fair value of these loans.

Capital Management

The Credit Union’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns to its members and benefits for other stakeholders, and to maintain a strong capital base to support the development of its business. The Credit Union’s capital is defined as share capital and statutory reserves.

Under governing legislation which became effective March 31, 2008 (the Co-Operative Societies [Amendment] Act 2008-39), the Credit Union is required to transfer from net surplus for the year, an amount equivalent to the greater 25% of net surplus or 0.5% of total assets until the capital to total assets ratio equals 10%.

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