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AL MAlAYA HOLDING COMPANY K.S.C. (CLOSED) AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
(All amounts are in Kuwaiti Dinars)
b) Estimates and assumptions
The key assumptions concerning the future and other key sources of estimating uncertainty at the
consolidated balance sheet 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.
(i) 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.
(ii) 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.
(iii) Long term contracts
Revenue from long term contracts is recognized in accordance with the percentage of completion
method of accounting measured by reference to the percentage that actual costs incurred to date
bear to total estimated costs for each contract. The revenue recognition as per the above criteria
should correspond to the actual work completed. The determination of estimated costs and the
application of percentage of completion method involve estimation. Further, the budgeted cost and
revenue should consider the claims and variations pertaining to the contract.
(iv) Provision for doubtful debts
The extent of provision for doubtful debts involves estimation process. Provision for doubtful debts is
made when there is 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.
d) Principles of consolidation
Subsidiaries are those enterprises controlled by the Parent Company. Control exists when the Parent
Company has the power, directly or indirectly, to govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control effectively commences
until the date that control effectively ceases. Inter-company balances and transactions, including
inter-company profits and unrealized profits and losses are eliminated on consolidation. Consolidated
financial statements are prepared using uniform accounting policies for like transactions and other
events in similar circumstances.
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