Macquarie Group Limited and its subsidiaries  2014 Annual Financial Report  macquarie.com.au  Risk Management Report  continued  Loan impairment review Ratio of provisions and impaired assets to loans, advances and leases  Notes: 28  — Loan assets exclude securitised mortgages, securitised Macquarie Capital loans/leases, segregated future funds and receivables in the  form of fees. — Net impaired assets and net losses exclude investment securities. — Collective provision (as per Note 11 of the Financial Report) is intended to cover losses inherent in the existing overall credit portfolio that  are not yet specifically identifiable.  — Net credit losses represent total profit and loss impact in the stated period due to additional specific provisions and direct write-offs net of any write-backs. — Please refer to Note 12 of the Financial Report for further information on impaired assets. All exposures are subject to recurring review and assessment for possible impairment. Provisions for loan losses are based on an  incurred loss model that recognises a provision where there is objective evidence of impairment at each balance date, and is  calculated based on the discounted values of expected future cash flows. Specific provisions are recognised where specific impairment is identified. The rest of the loans are placed into pools of assets with  similar risk profiles and collectively assessed for losses that have been incurred but not yet identified. Impaired assets continue to decline from the past year, driven by a combination of write-backs, write-downs and foreign currency  movements. Collective provision to loans, advances and leases (Balance sheet  Net impaired assets to loans, advances and leases (Balance sheet)  Net credit losses to loans, advances and leases (Income statement) 