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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Amendment to IFRS 7, ‘Financial
instruments: Disclosures’ on
derecognition – This amendment
will promote transparency in the
reporting of transfer transactions
and improve users’ understanding
of the risk exposures relating to
transfers of financial assets and the
effect of those risks on an entity’s
financial position, particularly those
involving securitisation of financial
assets. Effective date 1 July 2011.
IFRS 9, ‘Financial instruments’ –
addresses the classification,
measurement and recognition of
financial assets and financial
liabilities. IFRS 9 was issued in
November 2009 and October 2010.
It replaces the parts of IAS 39
that relate to the classification
and measurement of financial
instruments. IFRS 9 requires
financial assets to be classified
into two measurement categories:
those measured at fair value
and those measured at amortised
cost. The determination is made at
initial recognition. The classification
depends on the entity’s business
model for managing its financial
instruments and the contractual
cash flow characteristics of the
instrument. For financial liabilities,
the standard retains most of the IAS
39 requirements. The main change
is that, in cases where the fair
value option is taken for financial
liabilities, the part of a fair value
change due to an entity’s own
credit risk is recorded in other
comprehensive income rather than
the income statement, unless this
creates an accounting mismatch.
The Group has yet to assess IFRS
9’s full impact and intends to adopt
IFRS9 no later than the accounting
period beginning on or after
1 January 2015.
IFRS 10, ‘Consolidated financial
statements’ – The objective of IFRS
10 is to establish principles for the
presentation and preparation of
consolidated financial statements
when an entity that controls
one or more entities to present
consolidated financial statements.
Defines the principle of control, and
establishes controls as the basis for
consolidation. Sets out how to apply
the principle of control to identify
whether an investor controls an
investee and therefore must
consolidate the investee. Sets out
the accounting requirements for
the preparation of consolidated
financial statements. Effective date
1 January 2013.
IFRS 11, ‘Joint arrangements’ – This
standard is a more realistic
reflection of joint arrangements
by focusing on the rights and
obligations of the arrangement
rather than its legal form. There are
two types of joint arrangement: joint
operations and joint ventures. Joint
operations arise where a joint
operator has rights to the assets
and obligations relating to the
arrangement and hence accounts
for its interest in assets, liabilities,
revenue and expenses. Joint
ventures arise where the joint
operator has rights to the net assets
of the arrangement and hence
equity accounts for its interest.
Proportional consolidation of joint
ventures is no longer allowed.
Effective date 1 January 2013.
IFRS 12, ‘Disclosures of interest
in other entities’ – This standard
includes the disclosure requirements
for all forms of interests in other
entities, including joint arrangements,
associates, special purpose vehicles
and other off balance sheet vehicles.
Effective date 1 January 2013.
IFRS 13, ‘Fair value measurement’ -
This standard aims to improve
consistency and reduce complexity
by providing a precise definition of
fair value and a single source of fair
value measurement and disclosure
requirements for use across IFRSs.
The requirements, which are largely
aligned between IFRSs and US
GAAP, do not extend the use of
fair value accounting but provide
guidance on how it should be
applied where its use is already
required or permitted by other
standards within IFRSs and US
GAAP. Effective date 1 January 2013.
Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including
special purpose entities) over which
the Group has the power to
govern the financial and operating
policies generally accompanying a
shareholding of more than one half
of the voting rights. The existence
and effect of potential voting rights
that are currently exercisable or
convertible are considered when
assessing whether the Group
controls another entity. Subsidiaries
are fully consolidated from the date
on which control is transferred to the
Group. They are de-consolidated
from the date on which control
ceases.
The purchase method of accounting
is used to account for the acquisition
of subsidiaries by the Group. The
cost of an acquisition is measured
as the fair value of the assets given,
equity instruments issued and
liabilities incurred or assumed at the
date of exchange, plus costs directly
attributable to the acquisition.
Identifiable assets acquired and
liabilities and contingent liabilities
assumed in a business combination
are measured initially at their fair
values at the acquisition date,
irrespective of the extent of any
non-controlling interest. The excess
of the cost of acquisition over the fair
value of the Group’s share of the
identifiable net assets acquired is
recorded as goodwill. If the cost of
acquisition is less than the fair value
of the net assets of the subsidiary
acquired, the difference is recognised
directly in the consolidated statement
of income.
Intercompany transactions, balances
and unrealised gains on transactions
between group companies are
eliminated. Unrealised losses are
also eliminated unless the
transaction provides evidence of an
impairment of the asset transferred.
Subsidiaries’ accounting policies
have been changed where necessary
to ensure consistency with the
policies adopted by the Group.
Costs associated with the
restructuring of a subsidiary as a part
of the acquisition or subsequent to
the acquisition are included in the
consolidated statement of income
upon the date of commitment.
(b) Transactions and
non-controlling interests
The Group treats transactions
with non-controlling interests as
transactions with equity owners of
the Group. For purchases from non-
controlling interests, the difference
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Dar Al-Maal Al-Islami Trust
Annual Report 2011