Notes to the Consolidated Financial Statements
28
Dar Al-Maal Al-Islami Trust
Annual Report 2013
determining whether an impairment
loss should be recorded in the
consolidated statement of income,
judgements are made as to
whether there is any observable
data indicating that there is a
measurable decrease in the
estimated future cash flows. This
evidence may include observable
data indicating that there has been
an adverse change in the payment
status of a borrower, or national
or local economic conditions that
correlate with defaults on assets.
The methodology and assumptions
used for estimating both the amount
and timing of future cash flows are
reviewed regularly.
Fair value and impairment
of available-for-sale equity
investments
The Group may from time to time
hold investments in financial
instruments that are not quoted
in active markets. Fair values of
such instruments are determined
using valuation techniques. Where
valuation techniques are used to
determine fair values, they are
validated and periodically reviewed
by Group management.
The Group determines that available-
for-sale equity investments are
impaired when there has been a
significant or prolonged decline in
the fair value below its cost. This
determination of what is significant
or prolonged requires judgement. In
making this judgement, the Group
evaluates among other factors, the
normal volatility in share price.
In addition, impairment may be
appropriate when there is evidence
of a deterioration in the financial
health of the investee, industry and
sector performance, changes in
technology, and operational and
financing cash flows.
On occasion the Group may hold
investments whose fair value cannot
be reliably measured. In those
instances, full disclosure with a
description of the investment, the
carrying value and an explanation of
why fair value cannot be measured
reliably are included in the notes to
the financial statements.
Fair value of investment
properties
The Group may from time to
time hold investment properties
which are carried at fair value,
representing open market value
determined annually by reference
either to external valuers or to other
independent valuation sources.
Income taxes
The Group is subject to income taxes
in some jurisdictions. Estimates are
required in determining the provision
for income taxes. There are some
transactions and calculations for
which the ultimate tax determination
is uncertain. Where the final tax
outcome of these matters is different
from the amounts that were initially
recorded, such differences impact
the income tax and deferred tax
provisions in the period in which
such determination is made.
Impairment of associated
companies
The Group assesses at each
statement of financial position date
whether there is objective evidence
that its investments in associated
companies are impaired. In general,
an investment in an associated
company is impaired and an
impairment loss incurred when the
carrying amount of the investment
exceeds its recoverable amount.
The recoverable amount is defined
as the higher of its fair value less
costs to sell and its value in use.
On assessing its investments
for impairment at the year end,
the Group has relied upon cash
flow projections as approved by
the board of the underlying
associates that are based upon
judgements and estimates related
to future events which ultimately
could have a significant impact on
the recoverable amounts of these
investments in the consolidated
financial statements.
On the basis that the Group used
a discounted cash flow model to
arrive at a value in use which
ultimately was higher than both
the carrying amount and the fair
value less cost to sell (based on the
underlying quoted market price), no
impairment charge was recorded
in the consolidated financial
statements. Had the assumptions
utilised in the discounted cash
flow model for future cash flows
decreased by 10% this would
equate to the Group’s share of
the value in use in Faisal Islamic
Bank of Egypt of $246.2 million.
Had the assumptions utilised in
the discounted cash flow model for
the underlying discounting factor
increased by 10.0% this would
equate to the Group’s share of the
value in use in Faisal Islamic Bank
of Egypt of $245.7 million. The
carrying value in the consolidated
statement of financial position as
at 31 December 2013 for Faisal
Islamic Bank of Egypt was $272.7
million, which is higher than the
“value in use” amounts mentioned
above.
Estimated impairment
of goodwill
The Group tests annually whether
goodwill has suffered any
impairment in accordance with
the accounting policy stated in
note 2. The recoverable amounts
of cash-generating units have been
determined based on estimated future
cash flows and comparisons with
market multiples. These calculations
require the use of estimates, which
are subject to judgement. Changes
in the underlying assumptions may
impact the reported numbers.
During 2013 the Group used a
sum-of-the-parts approach to arrive
at a business value of the Ithmaar
Bank B.S.C. CGU. The valuation
methodology for the separately
identified parts at Ithmaar Bank
B.S.C. level based on the operational
activities is the following:
• Formerly Shamil Bank: value
in use based on discounted
cash flows
• Faysal Bank Limited: value
in use based on discounted
cash flows
• BBK: average of residual
income and price to book
value multiple
Ithmaar Bank residual assets:
investments measured at their
