21 / 43
AL MAZAYA HOLDING COMPANY K.S.c. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 20 Il
MAZAYA
AIM
ro uso
3.
BASIS OF PREPRATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of these consolidated
financial statements, the results and financial position of each Group entity are translated into KD which is the
functional currency of the Parent Company and the presentation currency for these consolidated financial
statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each consolidated statement of financial position date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the consolidated statement of financial position date.
Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined and resulting exchange differences are transferred to
consolidated statement of comprehensive income for available for sale equity instruments and to consolidated
statement of income for debt instruments. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences on monetary items are recognised in consolidated statement of income in the period in
which they arise except for:
• exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment to
interest costs on those foreign currency borrowings;
• exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign
operation), which are recognised initially in other comprehensive income and reclassified from equity to
profit or loss on repayment of the monetary items.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign
operations are translated into KD using exchange rates prevailing at the consolidated statement of financial
position date. Income and expense items are translated at the average exchange rates for the period, unless
exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the
transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the
Group's foreign currency translation reserve. Such exchange differences are recognised in the consolidated
statement of income in the period in which the foreign operation is disposed of
Borrowing costs
Borrowing costs directly attributable to the construction of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use, are added to the cost of those assets by
applying a capitalisation rate on the expenditure on such assets, until such time as the assets are substantially
ready for their intended use. The capitalisation rate used by the Group is the weighted average of the borrowing
costs applicable to the outstanding borrowings during the period. The remaining borrowing costs are recognised
in the consolidated statement of income in the period in which they are incurred.
Fiduciary assets
Assets held in trust or in a fiduciary capacity are not treated as assets of the Group and accordingly are not
included in these consolidated financial statements but are disclosed in the Notes to the consolidated financial
statements.
Kuwait Foundation for the Advancement of Sciences
The Group is legally required to contribute to the Kuwait Foundation for the Advancement of Sciences
("KFAS"). The Group's contributions to KFAS are recognised as an expense in the period during which the
Group's contribution is legally required.
19