20 / 87
Notes to the Consolidated Financial Statements
18
Dar Al-Maal Al-Islami Trust
Annual Report 2014
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 34.
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 2014 DMI Trust
has a $190.0million borrowing from
its controlled and fully consolidated
subsidiary Ithmaar Bank B.S.C. The
facility is repayable on 15 August
2015. As of today, DMI Trust and
Ithmaar Bank have held discussions
on how the facility will be partially
repaid and partially 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
2014.
There are no IFRS or IFRIC
interpretations that are effective for
the first time for the financial year
beginning on 1 January 2014 that
are expected to have a material
impact on the Group, unless
otherwise mentioned below.
Amendment to IAS 32, ‘Financial
instruments: Presentation’ on
offsetting financial assets and
financial liabilities. This amendment
clarifies that the right of set-off must
not be contingent on a future event.
It must also be legally enforceable
for all counterparties in the normal
course of business, as well as in
the event of default, insolvency or
bankruptcy. The amendment also
considers settlement mechanisms.
The amendment did not have a
significant effect on the Group
financial statements.
Amendments to IAS 36, ‘Impairment
of assets’, on the recoverable
amount disclosures for non-
financial assets. This amendment
removed certain disclosures of the
recoverable amount of CGUs which
had been included in IAS 36 by the
issue of IFRS 13.
Amendment to IAS 39, ‘Financial
instruments: Recognition and
measurement’ on the novation of
derivatives and the continuation of
hedge accounting. This amendment
considers legislative changes
to ‘over-the-counter’ derivatives
and the establishment of central
counterparties. Under IAS 39
novation of derivatives to central
counterparties would result in
discontinuance of hedge accounting.
The amendment provides relief from
discontinuing hedge accounting
when novation of a hedging
instrument meets specified criteria.
The amendment did not have a
significant impact on the Group
financial statements.
IFRIC 21, ‘Levies’, sets out the
accounting for an obligation to pay
a levy if that liability is within the
scope of IAS 37 ‘Provisions’. The
interpretation addresses what the
obligating event is that gives rise
to pay a levy and when a liability
should be recognised. The Group
is not currently subjected to levies.
New standards,
amendments and
interpretations issued but
not effective for the financial
year beginning 1 January
2014 and not early adopted.
A number of new standards and
amendments to standards and
interpretations are effective for
annual periods beginning after
1 January 2014, and have not
been applied in preparing these
consolidated financial statement.
None of these is expected to have a
significant effect on the consolidated
financial statements of the Group,
except the following set out below:
IFRS 9, ‘Financial instruments’,
addresses the classification,
measurement and recognition
of financial assets and financial
liabilities. The complete version of
IFRS 9 was issued in July 2014.
It replaces the guidance in IAS
39 that relates to the classification
and measurement of financial