Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2014
Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2014
Financial assets available for sale
Financial assets available for sale are those non-derivative financial assets that are designated as available for sale or are
not classified as loans and receivables. After initial recognition at cost including transaction costs associated with the
acquisition, financial assets whose fair value cannot be reliably measured are carried at cost less impairment losses, if any.
Changes in fair value of available for sale investments are reported as a separate component of other comprehensive
income until the investment is derecognised or the investment is determined to be impaired, at which time, the cumulative
gain or loss previously reported in other comprehensive income is included in the consolidated statement of income.
Financial liabilities
The Group’s financial liabilities include Term loans, bank overdrafts and tawarruq payables and accounts payable and
other credit balances.
Term loans and bank borrowings
After initial recognition, interest bearing term loans and bank overdraft are subsequently measured at amortised cost using
the EIR method. Gains and losses are recognised in the income statement when the liabilities are derecognized
as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance
costs in the consolidated statement of income. Unpaid amounts of term loan are included in ‘accounts payable and other
credit balances’.
Term loans and bank overdraft are carried on the consolidated statement of financial position at their principal amounts
less any repayment Installments due within one year from the reporting date are shown as current liabilities.
Tawarruq payables
Tawarruq payable represent amounts due to financial institutions arising from an Islamic financing arrangement where the
liability is settled on a deferred settlement basis for assets purchased. Tawarruq payable are stated at the gross amount of
the payables, net of deferred profit payable. Tawarruq cost is expensed on a time apportionment basis taking account of
the profit rate attributable and the balance outstanding.
Ijara payable
Ijara payable represents the amount payable on a deferred settlement basis for assets purchased under ijara and leasing
arrangements. Ijara payable is stated at the aggregate of the minimum lease payment due, net of any deferred costs.
Accounts payable and other credit balances
Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier
or not.
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Derecognition of financial assets and financial liabilities
Financial assets
A financial asset (or, where applicable a part of a financial asset or a group of similar financial assets) is derecognised
where:
• the rights to receive cash flows from the asset have expired;
• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a)
the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred
nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an
existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the
consolidated statement of income.
Offsetting of financial instruments
Financial assets and liabilities are offset and net amount is reported in the consolidated statement of financial position
when the Group has currently legal enforceable right to offset and intends to settle either on a net basis or to realise the
asset and settle the liability simultaneously.
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there
is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the
asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset
or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the
borrowers or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable
data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults.
Financial assets available for sale
For financial assets available for sale, the Group assess at each reporting date whether there is objective evidence that
a financial asset available for sale or a group of financial assets available for sale is impaired. In the case of equity
investments classified as available for sale, objective evidence would include a significant or prolonged decline in the
fair value of the equity investment below its cost. ‘Significant’ is evaluated against the original cost of investment and
‘prolonged’ against the period in which fair value has been below its cost. Where there is evidence of impairment, the
cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment
loss on those financial assets available for sale previously recognised in the consolidated statement of income is removed
from other comprehensive income and recognised in the consolidated statement of income.
Impairment losses in equity investments are not reversed through consolidated statement of income; subsequent increase
in their fair value after impairment is recognized directly in other comprehensive income.
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