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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(b) Assets classified
as available-for-sale
In the case of equity investments
classified as available-for-sale, a
significant or prolonged decline in
the fair value of the security below
its cost is considered in determining
whether the assets are impaired.
If any such evidence exists for
available-for-sale equity financial
assets, the cumulative loss -
measured as the difference between
the acquisition cost and the current
fair value, less any impairment
loss on that financial asset
previously recognised in profit or
loss - is removed from equity
and recognised in the consolidated
statement of income. Impairment
losses recognised in the consolidated
statement of income on equity
instruments are not reversed
through the consolidated statement
of income. If, in a subsequent
period, the fair value of a debt
instrument classified as available-
for-sale increases and the increase
can be objectively related to an
event occurring after the impairment
loss was recognised in profit or
loss, the impairment loss is
reversed through the consolidated
statement of income.
(c) Renegotiated loans
Loans that are either subject to
collective impairment assessment
or individually significant and
whose terms have been renegotiated
are no longer considered to be past
due but are treated as new loans.
In subsequent years, the asset is
considered to be past due and
disclosed only if renegotiated.
Impairment of non-financial
assets
Assets that have an indefinite
useful life are not subject to
amortisation and are tested
annually for impairment. Assets
that are subject to amortisation are
reviewed for impairment whenever
events or changes in circumstances
indicate that the carrying amount
may not be recoverable. An
impairment loss is recognised for
the amount by which the asset’s
carrying amount exceeds its
recoverable amount. The recoverable
amount is the higher of an asset’s
fair value less costs to sell and
value in use. For the purposes
of assessing impairment, assets
are grouped at the lowest levels
for which there are separately
identifiable cash flows (cash-
generating units). Non-financial
assets other than goodwill that
suffered an impairment are reviewed
for possible reversal of the
impairment at each reporting date.
Investments with Islamic
Institutions
Investments with Islamic institutions
comprises mainly short term
deposits in the form of parallel
purchase and sale of currencies and
commodities (PPSC), which are
spot purchases of internationally
traded currencies and commodities
and a corresponding forward sale
of the same. For the purpose
of accounting, these are treated
as term deposits and the return
is recorded as income from
investments with Islamic institutions
in the statement of income.
Intangible assets
(a) Goodwill
Goodwill represents the excess of
the cost of an acquisition over the
fair value of the Group’s share of
the net identifiable assets of
the acquired subsidiary/associate
at the date of acquisition. Goodwill
on acquisitions of subsidiaries
is included in intangible assets.
Goodwill on acquisitions of
associates is included in investments
in associates. Goodwill on
subsidiaries is tested annually for
impairment and carried at cost less
accumulated impairment losses.
An impairment loss is recognised
for the amount by which the
asset’s carrying amount exceeds
its recoverable amount. The
recoverable amount is an asset’s
fair value less costs to sell. Gains
and losses on the disposal of an
entity include the carrying amount
of goodwill relating to the entity
sold.
Goodwill is allocated to cash-
generating units for the purpose of
impairment testing.
(b) Computer software
Acquired computer software licenses
are capitalised on the basis of the
costs incurred to acquire and bring
to use the specific software. These
costs are amortised on the basis of
the expected useful lives (three to
five years).
Costs associated with developing
or maintaining computer software
programs are recognised as an
expense as incurred. Costs that
are directly associated with the
production of identifiable and
unique software products controlled
by the Group, and that will
probably generate economic
benefits exceeding costs beyond
one year, are recognised as
intangible assets. Direct costs
include software development
employee costs and an appropriate
portion of relevant overheads.
Computer software development
costs recognised as assets are
amortised using the straight line
method over their useful lives.
(c) Other acquired intangible assets
Other acquired intangible assets
determined to have finite lives, such
as core deposits and customer
relationships, are amortised on
a straight line basis over their
estimated useful lives. The original
carrying amount of core deposits
and customer relationships has
been determined by independent
appraisers, based on the interest
differential on the expected deposit
duration method.
Investment Property
Investment property principally
comprises office buildings which
are held to earn rental income or for
long-term capital appreciation or
both. Investment property is treated
as a long-term investment and is
carried at fair value, representing
open market value determined
annually by reference either to
external valuers or to other
independent valuation sources.
Changes in fair values are recorded
in the consolidated statement of
income and are included in other
income. The Group does not classify
operating leases as investment
property.
25
Dar Al-Maal Al-Islami Trust
Annual Report 2011