IFRS 9 was implemented by the Bank on 1 July 2018, This new standard requires the Bank to recognise expected credit losses ('ECL') on financial instruments, which involves significant judgements and estimates. The key areas where we identified greater levels of management judgements and estimates and therefore increased levels of audit focus in the implementation of IFRS 9 are:

• Model estimations - the Bank has used a combination
  of statistical model and credit rating model to estimate
  ECLs depending on type of portfolio which involves
  determining Probabilities of Default ('PD'), Loss Given
  Default (.LGD), and Exposures at Default ('EAD'). The
  PD and LGD models used in the loans portfolios are the
  key drivers of the ECL results and are therefore the
  most significant areas of judgements and estimates
  used in the ECL modelling approach.
• Determining the criteria for significant increase in credit
  ricl< ('SICR') and idcntifying SICR- Thcsc critcria arc
  highly judgemental and can impact the ECL materially
  where facilities have maturity of greater than 12
  months.
• Macro-Economic Forecasts - IFRS 9 requires to
  measure ECLs on a forward-looking basis using the
  most appropriate macro-economic forecasts. The
  macro-economic forecasts are estimates of future
  economic conditions.
• Qualitative adjustments - Adjustments to the modeldriven
  ECL results are raised by management to
  address known impairment model limitations or
  emerging trends, Such adjustments are inherently
  uncertain and significant management judgement is
  involved in estimating these amounts.

Our audit procedures included amongst others:

• Testing the design and operating effectiveness of the key controls over the completeness and accuracy of the key inputs and assumptions used in the models;
• Evaluating controls over model monitoring and validation;
• Use of specialist team in performing certain procedures;
• Verifying the historical data used in determination of PD in the models;
• Reviewing a sample of the rating reports derived from the internal rating system and the corresponding mapping to S&P table;
• Reviewing the criteria for staging of credit exposures and ensure these are in line with the requirements of IFRS 9 including any backstops used in the methodology;
• Assesslng the approprlateness of the macroeconomic forecasts used ;
• Independently assess probability of default, loss given default and exposure at default assumptions;
• Testing the accuracy and completeness of ECL by reperformance; and
• Assessing whether the disclosures are in accordance with the requirements of IFRS 9.

We found the assumptions used in determining the expected credit losses in the consolidated and separate financial statements and related disclosures to be appropriate.

Provision for credit losses on credit-impaired loans and advances to customers at 30 June 2019 amount to MUR 1,565 million and the charge to profit or loss for the year amount to MUR 870 million.

Due to the significance of the judgements applied in the identification of credit-impaired facilities and determination of the provision for credit losses, this item is considered as a key audit matter.

The use of assumptions for the measurement of provision for credit losses is subjective due to the level of judgement applied by Management, Changes in the assumptions and the methodology applied may have a major impact on the measurement of allowance for credit impairment.

The details of allowance for credit impairment on loans and advances are disclosed in Notes 38 and 17 to the financial statements.

The most significant judgements are:

- whether-impairment events have occurred

- valuation of collateral and future cash flows

- management judgements and assumptions used

Our audit procedures included amongst others:

• Obtaining audit evidence in respect of key controls over the processes for impairment events identification and collateral valuation;
• Inspecting the minutes of Credit Committee, Risk Committee and Board to ensure that there are governance controls in place in relation to assessment of allowance for credit impairment;
• Challenging the methodologies applied by using our industry knowledge and experience;
• Obtaining audit evidence of management judgements and assumptions, especially focusing on the consistency of the approach; and
• Performing a risk-based test of loans and advances to customers to ensure timely identification of impairment and for impaired loans to ensure appropriate allowance for credit impairment.

We found the assumptions used in determining the allowance for credit impairment and disclosures in the consoliddted and separate financial statements to be appropriate.

Goodwill arising from the acquisition of AfrAsia Capital Management Ltd amounting to MUR 134.9 million was fully impaired in profit or loss at 30 lune 2019.

Management conducts annual impairment test to assess the recoverability of the carrying value of goodwill. This is performed by calculating the asset's value-in-use using discounted cash flow models.

As disclosed in Notes 3B and 21, there is inherent uncertainty and significant judgements involved in preparing future cash flow forecasts and applying the appropriate discount rate to determine the value-in-use amount of the cash generating unit.

Accordingly, the impairment test of goodwill is considered to be a key audit matter.

In evaluating the impairment of goodwill, we reviewed the value in use calculations prepared by management. We performed various procedures, including the following:

• Reviewing the inputs used in the cash flow forecast against historical performance and in comparison to management's strategic plans;
• Comparing the growth rates used to historical data regarding economic arowth rates in the cash generating unit; . Reviewing appropriateness of discount factors used;
• Verifying the mathematical accuracy of the valuation; and
• Performing sensitivity analyses on discount rates to evaluate the extent of impact on the value in use.

We found the assumptions used and disclosures in the consolidated financial statements to be appropriate.

As disclosed in Notes 38 and 12(d), the Group and the Bank have recognized deferred tax assets as at 30 June 2019 for deductrble temporary ditferences that they have assessed to be recoverable.

The recoverability of recognized deferred tax assets is in part dependent on the ability of the Group and the Bank to generate future taxable profits to utilize deductible temporary differences as well as to obtain the tax benefits on thereon.

We have determined this to be a key audit matter due to the inherent uncertainty in forecasting the amount and timing of future taxable profits and the reversal of temporary d ifferences.

Our procedures in relation to management's assessment about the recoverability of deferred tax assets included:

• Challenging the assumptions made by management to assess whether the recognition of deferred tax assets is appropriate;
• Evaluating the management's assessment of the estimated manner in which the timing differences, including the recoverability of the deferred tax assets, would be realized by comparing this to evidence obtained in respect of other areas of the audit, including business plans and strategy, minutes of the directors' meetings and our knowledge of the business; and
• Assessing the trend of the recoverability of the tax benefit.

We found the assumptions used and disclosure in the consolidated and separate financial statements to be appropriate.