Notes to the Consolidated Financial Statements
18
Dar Al-Maal Al-Islami Trust
Annual Report 2013
1. Formation and activities
Dar Al-Maal Al-Islami Trust (DMI)
was formed by indenture under
the laws of the Commonwealth
of The Bahamas for the purpose
of conducting business affairs
in conformity with Islamic law,
principles and traditions. DMI
subsidiaries and associates offer
a wide range of Islamic financial
services including investment,
commercial and private banking,
private equity, public and private
issue of securities, mergers and
acquisitions advice, takaful,
equipment leasing real estate
development and modarabas which
are similar to investment funds. The
modarabas, being separate entities,
do not have their funds consolidated
in the annexed financial statements.
They are included in off-balance
sheet accounts as disclosed in
note 33.
2. Accounting policies
The principal accounting policies
adopted in the preparation of these
consolidated financial statements
are set out below. These policies
have been consistently applied
to all the years presented, unless
otherwise stated.
Basis of preparation
The
consolidated
financial
statementsof DMI and its subsidiaries
(the Group) are prepared in
accordance with International
Financial Reporting Standards
(IFRS) and IFRS interpretations. The
consolidated financial statements
are prepared under the historical
cost convention, as modified by
the revaluation of available-for-sale
financial assets, trading securities,
financial assets and financial
liabilities held at fair value through
profit or loss, derivative instruments
and investment property.
The preparation of financial
statements in conformity with
IFRS requires the use of certain
critical accounting estimates. It also
requires management to exercise its
judgement in the process of applying
the Group’s accounting policies.
The areas involving a higher degree
of judgement or complexity, or areas
where assumptions and estimates
are significant to the consolidated
financial statements are disclosed
in note 3.
As of 31 December 2013 DMI Trust
has a $190 million borrowing from
its controlled and fully consolidated
subsidiary Ithmaar Bank B.S.C. The
facility is repayable on 14 August
2014. As of today, DMI Trust and
Ithmaar Bank have held discussions
on how the facility could be rolled
over; however no formal agreement
has yet been reached. Management
is confident that a solution can be
reached with all parties ahead of the
repayment date.
Impact of New Accounting
Pronouncements:
International Financial
Reporting Standards
New and amended
standards adopted by the
Group
The following new standards
and amendments to standards
are mandatory for the first time
for the financial year beginning
1 January 2013.
There are no IFRS or IFRIC
interpretations that are effective for
the first time for the financial year
beginning on 1 January 2013 that
are expected to have a material
impact on the Group, unless
otherwise mentioned below.
Amendment to IAS 1, ‘Financial
statement presentation’ regarding
other comprehensive income. The
main change resulting from these
amendments is a requirement for
entities to group items presented in
‘other comprehensive income’ (OCI)
on the basis of whether they are
potentially reclassifiable to profit or
loss subsequently (reclassification
adjustments). Effective date
1 January 2013.
IAS 19, ‘Employee benefits’ was
revised in June 2011. The changes
on the Group’s accounting policies
has been as follows: to immediately
recognise all past service costs and
to replace interest cost and expected
return on plan assets with a net
interest amount that is calculated
by applying the discount rate to the
net defined benefit liability (asset).
See note 42 for the impact on the
financial statements. Effective date
1 January 2013.
Amendment to IFRS 7, ‘Financial
instruments: Disclosures’, on
asset and liability offsetting.
This amendment includes new
disclosures to facilitate comparison
between those entities that prepare
IFRS financial statements to those
that prepare financial statements in
accordance with US GAAP. Effective
date 1 January 2013. These
amendments have a very limited
impact, as there are no offsetting or
netting agreements in place within
the Group.
IFRS 10, ‘Consolidated financial
statements’ builds on existing
principles by identifying the concept
of control as the determining factor
in whether an entity should be
included within the consolidated
financial statements of the parent
company. The standard provides
additional guidance to assist in the
determination of control where this
is difficult to assess. Effective date
1 January 2013.
Financial assets and liabilities are
offset and the net amount reported
in the balance sheet when there is
a legally enforceable right to offset
the recognised amounts and there is
an intention to settle on a net basis
or realise the asset and settle the
liability simultaneously.
During the 2012 year end audit
of the DMI Consolidated Financial
Statements an assessment was
made as to the control over our
investee, Faisal Islamic Bank of
Egypt. DMI considered at that
time that even though our 49%
shareholding did not rise to the level
of a subsidiary by owning more
than half of the voting power, DMI,
through its control over the FIBE
Board of Directors and the dispersed
nature of the remaining shareholders,
assessed to have control over
FIBE effective 1 January 2013.
Based upon further analysis of
specific events during the course
of 2013, DMI determined it was
not able to exercise in practice
sufficient de facto control and direct
