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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
statement of financial position, as
the Group does not obtain control
over the assets. Amounts paid
under these agreements are
included under investments in
financings. The difference between
the contracted price and the resale
price is amortised over the period
of the contract and is recognised
as income in the consolidated
statement of income.
Obligations for the return of securities
or for forward sales, which are a part
of the repurchase agreements, are
recognised as commitments as
disclosed in note 36.
Financial Assets
The Group classifies its financial
assets into the following categories:
financial assets at fair value through
profit or loss; loans and receivables;
held-to-maturity investments and
available-for-sale financial assets.
The classification of investments is
determined at initial recognition.
Financial assets are initially
recognised at fair value plus
transaction costs for all financial
assets not carried at fair value
through profit or loss (refer to
details below). Financial assets are
derecognised when the rights to
receive cash flows from the financial
assets have expired or when the
Group has transferred substantially
all risks and rewards of ownership.
(a) Financial assets at fair value
through profit or loss
This category includes financial
assets held for trading, including
trading securities, and those
designated at fair value through
profit or loss at inception. A financial
asset is classified in this category if
acquired principally for the purpose
of selling in the short term or
if so designated by management.
Derivatives are also categorised
as held for trading unless qualifying
for hedge accounting.
Financial assets at fair value
through profit and loss are initially
recognised at fair value (which
excludes transaction costs) and
subsequently carried at fair value
based on quoted bid prices. All
related realised and unrealised
gains and losses are included
in net trading income in the period
in which they arise. Dividends
declared are included in dividend
income.
All purchases and sales of financial
assets held for trading and at
fair value through profit and loss
that require delivery within the
time frame established by regulation
or market convention (‘regular
way’ purchases and sales) are
recognised at trade date, which is
the date that the Group commits to
purchase or sell the asset.
(b) Loans and receivables
Loans and receivables, which
include investments in financings,
are non-derivative financial assets
with fixed or determinable payments
that are not quoted in an active
market other than: (a) those that the
Group intends to sell immediately
or in the short term, which are
classified as held for trading, and
those that the entity upon initial
recognition designates as at fair
value through profit or loss;
(b) those that the entity upon initial
recognition designates as available-
for-sale; or (c) those for which
the holder may not recover
substantially all of its initial
investment, other than because of
credit deterioration. In general, they
arise when the Group provides
money, goods or services directly to
a debtor with no intention of trading
the receivable and also includes
purchased loans and receivables
that are not quoted in an active
market. Loans and receivables are
carried at amortised cost using the
effective yield method. All loans are
recognised when cash is advanced
to the customer.
(c) Held-to-maturity
Held-to-maturity investments are
non-derivative financial assets with
fixed or determinable payments and
fixed maturities and there is the
intent and the ability to hold
them to maturity. If more than an
insignificant amount of held-to-
maturity assets is sold, the entire
category will be considered tainted
and reclassified as available-for-
sale.
Held-to-maturity investments are
carried at amortised cost using
the effective yield method, less any
provision for impairment.
(d) Available-for-sale
Available-for-sale investments are
those intended to be held for an
indefinite period of time, which may
be sold in response to needs for
liquidity or changes in exchange
rates, equity prices or other market
rates. All regular way purchases
and sales of investment securities
are recognised at trade date, which
is the date that the entity commits to
purchase or sell the asset.
Available-for-sale investments are
initially recognised at fair value
(which includes transaction costs)
and subsequently carried at fair
value. The fair values of quoted
investments in active markets are
based on current bid prices. If the
market for a financial asset is not
active or the asset is an unlisted
security, the Group establishes
fair value by using valuation
techniques. These include the use of
recent arm’s length transactions,
discounted cash flow analysis,
option pricing models and other
valuation techniques commonly
used by market participants.
Unrealised gains and losses arising
from changes in the fair value of
securities classified as available-for-
sale which are not part of a hedging
relationship are recognised in
comprehensive income. When the
securities are disposed of or
impaired, the related accumulated
fair value adjustments are included
in the consolidated statement of
income as gains or losses from
investment securities. Dividends
declared are included in dividend
income.
Changes in the fair value of
monetary securities denominated
in a foreign currency and classified
as available-for-sale are analysed
between translation differences
resulting from changes in amortised
cost of the security and other
changes in the carrying amount
of the security. The translation
differences on monetary securities
are recognised in profit and
loss; translation differences on non
monetary securities are recognised
23
Dar Al-Maal Al-Islami Trust
Annual Report 2011