Notes to the Consolidated Financial Statements
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.
Property, plant and
equipment and depreciation
Property, plant and equipment
are stated at historical cost less
subsequent depreciation and
impairment, except for land, which is
shown at cost less impairment. Land
is not depreciated. Cost includes
expenditure that is directly attributable
to the acquisition of the items.
Depreciation is calculated on the
straight-line method to write off the
cost of each asset over its estimated
useful life as follows:
Buildings: 50 years
Leasehold improvements:
over the period of the lease
Furniture, equipment and motor
vehicles: 3-10 years
Aircraft: 25 years
Depreciation is calculated separately
for each significant part of an
asset category. Where the carrying
amount of an asset is greater than
its estimated recoverable amount,
it is written down immediately
to its recoverable amount. The
asset’s residual value and useful
life are reviewed, and adjusted if
appropriate, at each statement of
financial position date.
Subsequent costs are included in
the asset’s carrying amount or are
recognised as a separate asset, as
appropriate, only when it is probable
that future economic benefits
associated with the item will flow
to the Group and the cost can be
measured reliably. All other repairs
and renewals are charged to the
consolidated statement of income
during the financial period in which
they are incurred.
Gains and losses on disposal of
property, plant and equipment are
determined by comparing proceeds
with carrying amounts. These are
included as other operating income
or expenses in the consolidated
statement of income.
Leases
Total payments made under
operating leases are charged to the
consolidated statement of income on
a straight-line basis over the period
of the lease. When an operating
lease is terminated before the lease
period has expired, any payment
required to be made to the lessor
by way of penalty is recognised as
an expense in the period in which
termination takes place.
When a Group company is the lessee
of property, plant and equipment and
the Group has substantially all the
risks and rewards of ownership,
they are classified as finance leases.
Finance leases are capitalised at the
inception of the lease at the lower of
the fair value of the leased property
or the present value of the minimum
lease payments. Each lease payment
is allocated between the liability and
finance charges so as to achieve a
constant rate on the finance balance
outstanding. The corresponding
rental obligations, net of finance
charges, are included in payables.
The profit element of the finance
cost is charged to the consolidated
statement of income over the lease
period. The asset acquired under
finance leases is depreciated over the
shorter of the useful life of the asset
or the lease term.
When a Group company is the
lessor and assets are held subject
to a finance lease, the value of the
lease payments is recognised as a
receivable. The difference between
the gross receivable and the present
value of the receivable is recognised
as unearned finance income. Lease
income is recognised over the term
of the lease using the actuarial
method.
Provisions
Provisions are recognised when
the Group has a present legal or
constructive obligation as a result
of past events; it is more likely than
not that an outflow of resources
embodying economic benefits will
25
Dar Al-Maal Al-Islami Trust
Annual Report 2012
