Notes to the Consolidated Financial Statements
Receivables”, are both contractually
determined and quantifiable at the
commencement of the transaction,
are accrued on the effective return
method basis over the period of
the transaction. Where income is
not contractually determined or
quantifiable, it is recognised when
reasonably certain of realisation or
when realised. Once a financial
asset or a group of similar financial
assets has been written down as a
result of an impairment loss, income
is thereafter recognised using the
rate of return used to discount the
future cash flows for the purpose of
measuring the impairment loss.
Fee and commission income
Fees and commissions are generally
recognised as income when earned.
Origination fees for financings which
are probable of being drawn down,
are deferred and recognised over
the term of the financing as an
adjustment to the effective yield.
Structuring fees, commission and
fees arising from negotiating or
participating in the negotiation of an
Islamic transaction for a third party,
are recognised on completion of the
underlying transaction.
Asset management fees related to
investment funds are recognised over
the period the service is provided and
are recorded in fund management
and services income when capable
of being reliably measured.
Management advisory and technical
service fees are recognised based on
applicable service contracts usually
on a time-apportioned basis and are
recorded in other income.
Distribution to Massaref
account holders
Massaref accounts are included
in the IAS 39 category of “Other
Financial Liabilities” which are
measured at amortised cost and
the resulting expense charged
to the consolidated statement of
income as a distribution to Massaref
account holders represents the
share of the Group’s income from all
sources which is due to customers
of the Group under contractual
arrangements in force.
Sale and repurchase
agreements
Securities sold subject to a linked
repurchase agreement (repos) are
recognised in the consolidated
statement of financial position
and are measured in accordance
with related accounting policies for
trading or investment securities. The
counterparty liability for amounts
received under these agreements
is included in customer investment
accounts. The difference between
the sale and repurchase value
is accrued over the period of the
contract and recorded as expense
in the consolidated statement of
income.
Securities purchased under
agreement to resell (reverse
repos) are not recognised in the
consolidated statement of financial
position, as theGroupdoes 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
22
Dar Al-Maal Al-Islami Trust
Annual Report 2012
