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
Taxation
Kuwait Foundation for the Advancement of Sciences (KFAS)
The Parent Company calculates the contribution to KFAS at 1% in accordance with the modified calculation based on
the Foundation’s Board of Directors resolution, which states that the income from associates and subsidiaries, Board of
Directors’ remuneration, transfer to statutory reserve should be excluded from profit for the year when determining the
contribution.
National Labour Support Tax (NLST)
The Parent Company calculates the NLST in accordance with Law No. 19 of 2000 and the Ministry of Finance Resolutions
No. 24 of 2006 at 2.5% of taxable profit for the year. As per law, income from associates and subsidiaries, cash dividends
from listed companies which are subjected to NLST have been deducted from the profit for the year.
Zakat
Contribution to Zakat is calculated at 1% of the profit of the Parent Company in accordance with the Ministry of Finance
resolution No. 582007/.
Segment information
A segment is a distinguishable component of the Group that engages in business activities from which it earns revenues
and incurs costs. The operating segments are used by the management of the Group to allocate resources and assess
performance and the reporting is consistent with the internal reports provided to the chief operation decision maker.
Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate
are aggregated and reported as reportable segments.
Foreign currency translation
Each entity in the Group determines its own functional currency and items included in the financial statements of each
entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates
prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated
at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated
statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also
recorded in consolidated statement of income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value is determined . The gain or loss arising on retranslation of
non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also
recognised in other comprehensive income or profit or loss, respectively).
Group companies
The assets and liabilities of foreign operations are translated into Kuwaiti Dinars at the rate of exchange prevailing at
the reporting date and their statement of incomes are translated at average exchange rates during the period where such
averages are reasonable approximation of actual rates. The exchange differences arising on the translation are recognised
in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income
relating to that particular foreign operation is recognised in the consolidated statement of income.
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5.SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in
outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgments
In the process of applying the Group's accounting policies, management has made the following judgements, apart from
those involving estimations, which has the most significant effect on the amounts recognised in the consolidated financial
statements:
Classification of property
The Group determines whether a property is classified as investment property or properties held for trading:
• Investment property comprises land and buildings which are not occupied substantially for use by, or in the operations
of, the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and/or
capital appreciation.
• Properties held for trading comprises property that is held for sale in the ordinary course of business.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting 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 described below:
The group based its assumptions and estimation parameters available when the consolidated financial statements were
prepared. Existing circumstances and assumptions about future developments however may change due to market changes
or circumstances arising beyond the content of the Group. Such changes are reflected in the assumptions when they occur.
Estimation of net realisable value for property held for trading
Property held for trading is stated at the lower of cost and net realisable value (NRV). NRV for completed property held for
trading is assessed with reference to market conditions and prices existing at the reporting date and is determined by the
Group in the light of recent market transactions.
NRV in respect of property held for trading under construction is assessed with reference to market prices at the reporting
date for similar completed property, less estimated costs to complete construction and less an estimate of the time value
of money to the date of completion.
Valuation of investment properties
Fair value of investment properties have been assessed by an independent real estate appraiser. Two main methods were
used to determine the fair value of property interests in investment properties; (a) formula based discounted cash flow
analysis and (b) comparative analysis as follows:
(a)
Formula based discounted cash flow, is based on a series of projected free cash flows supported by the terms of
any existing lease and other contracts and discounted at a rate that reflects the risk of the asset.
(b)
Comparative analysis is based on the assessment made by an independent real estate appraiser using values
of actual deals transacted recently by other parties for properties in a similar location and condition, and based
on the knowledge and experience of the real estate appraiser.
The significant methods and assumptions used by valuers in estimating fair value of investment property are stated in note
8 and 29.
Valuation of unquoted equity investments
Valuation of unquoted equity investments is normally based on one of the following:
•
Recent arm’s length market transactions;
•
Current fair value of another instrument that is substantially the same;
•
The expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics;or
•
Other valuation models.
The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation.
Where this estimation cannot be reliably determined these investments are carried at cost less impairment.
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