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AL MAZAYA HOLDING COMPANY K.S.C. (CLOSED) AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
(All amounts are in Kuwaiti Dinars)
h) Receivables
Receivables are recognized initially at fair value and subsequently measured at amortized cost using
the effective interest method, less provision for impairment. A provision for impairment of trade
receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or
delinquency in payments are considered indicators that the trade receivable is impaired. The amount
of the provision is the difference between the asset's carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account, and the amount of the loss is
recognized in the consolidated statement of income within "general and administration expense".
When a trade receivable is uncollectible, it is written off against the allowance account for trade
receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated
statement of income.
i) Gross amount due from (to) customersfor contract work
The gross amount due from (to) customers for contract work represents the net amount of costs
incurred plus recognized profits, less the sum of recognized losses and progress billings for all
contracts in progress. Cost comprises direct materials, direct labor and an appropriate allocation of
overheads. For contracts where progress billings exceed costs incurred plus recognized profit (less
recognized losses), the excess is included under liabilities.
j) Financial instruments
Financial assets and financial liabilities carried on the consolidated balance sheet include cash and
cash equivalents, receivables, investments, bank borrowings and payables. The accounting policies
on recognition and measurement of these items are disclosed in the respective accounting policies
found in this Note.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains, and losses relating to a financial instrument
classified as a liability are reported as expense or income. Distributions to holders of financial
instruments classified as equity are charged directly to equity. Financial instruments are offset when
the Group has a legally enforceable right to offset and intends to settle either on a net basis or to
realize the asset and settle the liability simultaneously.
k) Joint venture
A joint venture is a contractual arrangement whereby the Group and other parties undertake an
economic activity that is subject to joint control that is when the strategic financial and operating policy
decisions relating to the activities require the unanimous consent of the parties sharing control.
Where a Group undertakes its activities under joint venture arrangements directly, the Group's share
of jointly controlled assets and any liabilities incurred jointly with other venturers are recognized in the
financial statements of the relevant group and classified according to their nature. Liabilities and
expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an
accrual basis. Income from the sale or use of the Group's share of the output of jointly controlled
assets, and its share of joint venture expenses, are recognized when it is probable that the economic
benefits associated with the transactions will flow to/from the Group and their amount can be
measured reliably.
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