CFSL Integrated Report 2025

103

Introduction

Group Overview

Leadership

Strategy & Performance

Risk Management Report (Continued)

Measurement of the Expected Credit Loss (ECL) Cim Finance has implemented IFRS 9, which requires a forward-looking model for measuring Expected Credit Losses (ECL). This model incorporates: • Historical performance and past events. • Current macroeconomic conditions. • Reasonable, supportable, and unbiased forecasts. In line with IFRS 9 standards, the Group evaluates significant increases in credit risk using both quantitative metrics and qualitative insights. The ECL model was most recently enhanced in 2025 to improve accuracy and responsiveness. Governance and post-model adjustments The Group’s IFRS 9 models for probability of default (‘PD’), exposure at default (‘EAD’) and loss given default (‘LGD’) are governed by the ECL standard, which is approved by the Risk Management Committee and the Board. Post-model adjustments were applied when deemed necessary by management and/or the Board to ensure an adequate level of overall ECL provisioning, especially where the modelled allowance for ECL does not fully reflect the emerging risks and related uncertainty, or to capture any limitations which is not reflected in the modelled output.

Stage classification Cim Finance classifies its financial assets into three stages, based on material changes in the credit risk:

Stage 1

Stage 2

Stage 3

Asset Categorisation

Financial Assets with significantly increased credit risk

Performing Assets

Credit- impaired Financial Assets

Upon the origination or purchase of a financial instrument, 12-month Expected Credit Losses (ECLs) are recognised in profit or loss, with a corresponding loss allowance established as an initial estimate of credit risk

If there is a significant increase in credit risk that is not considered low, the recognition shifts to lifetime ECLs, which are also recorded in profit or loss

Lifetime ECLs are recognised, and these assets are assessed individually, reflecting the severity of credit impairment

Allowance

Interest revenue is calculated based on the gross carrying amount of the loan, without adjusting for ECLs

Interest revenue is calculated based on the asset's amortised cost (gross carrying amount minus the loss allowance)

Basis for calculation of interest income

Interest revenue calculation remains consistent with that of Stage 1

The transition from recognising 12-month ECLs (Stage 1) to lifetime ECLs (Stage 2) in IFRS 9 is determined by a significant increase in credit risk relative to the risk at initial recognition. This transition underscores the instrument’s evolving credit profile over its remaining life.