Notes to The Consolidated Financial Statements
AL MAZAYA HOLDING K.S.C. (HOLDING) AND ITS SUBSIDIARIES
For the year ended 31 December 2011
Application of IFRIC 15 – Agreements for the construction of real estate.
The determination, whether the agreements within the scope of IAS 11– Construction Contracts or IAS 18 – Revenue,
require significant judgment.
The key assumptions concerning the future and other key sources of estimation uncertainty at the consolidated statement
of financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Fair value of unquoted equity investments
If the market for a financial asset is not active or not available, the Group establishes fair value by using valuation
techniques which include the use of recent arm’s length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.
This valuation requires the Group to make estimates about expected future cash flows and discount rates that are subject
to uncertainty.
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the “value
in use” of the asset or the cash-generating unit to which the goodwill is allocated. Estimating a value in use requires the
Group to make an estimate of the expected future cash-flows from the asset or the cash-generating unit and also choose
an appropriate discount rate in order to calculate the present-value of the cash-flows.
Provision for doubtful debts
The extent of provision for doubtful debts involves estimation process. Provision for doubtful debts is made when there is
an objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. The
benchmarks for determining the amount of provision or write-down include analysis, technical assessment and subsequent
events. The provisions and write-down of receivables are subject to management approval.
Revaluation of investment properties and properties held for sale
The Group carries its investment properties at fair value, with changes in fair value being recognized in the consolidated
statement of income. The Group engaged an independent valuation specialist to determine fair value as at 31 December
2011. For the investment property the evaluator used a valuation technique based on a discounted cash flow model as
there is a lack of comparable market data because of the nature of the property. The determined fair value of the investment
properties is most sensitive to the estimated yield as well as the long term vacancy rate.
5. RESTATEMENT
During the year, Group’s management discovered that the method of calculating the income based on percentage of
completion method from certain properties under development, classified as held for trading, was incorrect. This was
based on certain items specified in the contracts for the sale of these properties and laws governing real estate in the
jurisdiction where the Group builds and sells these properties. These regulations indicate that the transfer of risks and
rewards associated with ownership of properties may cease due to cancellation of sale contracts to customers.
Consequently, the Group has reassessed the revenues recognised based on percentage of completion method instead of
completed contract basis for the years 2008 to 2010 in compliance with IAS 18, in order to make the revenue recognition
consistent with the transfer of risk and rewards to the buyer. The comparative figures in these financial statements have
been restated as follows:
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