ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

Year ended December 31, 2022, with comparative information for 2021

3. Significant accounting policies (continued):

(b) Financial instruments (continued):

(i) Non-derivative financial assets (continued):

Cash:

Cash is comprised of cash on hand and cash managed within the investment portfolio.

Interest income:

Interest income is accrued using the effective interest rate method, which uses the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.

(ii) Non-derivative financial liabilities:

All financial liabilities are recognized initially on the date that the Exchange becomes a party to the contractual provisions of the instrument.

The Exchange derecognizes a financial liability when its contractual obligations are discharged, canceled or expire.

The Exchange classifies all non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognized initially at fair value along with any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method.

Non-derivative financial liabilities are comprised of accounts payable and accrued liabilities.

(iii) Fair value of financial instruments:

The fair value of non-derivative financial assets and liabilities, with standard terms and conditions and traded on active liquid markets, are determined by reference to quoted market prices.

The fair value of other non-derivative financial assets and liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

(c) Impairment of financial assets:

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively impacted. For certain categories of financial assets, such as accounts receivable, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets and the loss is recognized in comprehensive income.