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Notes to the Consolidated Financial Statements
19
Dar Al-Maal Al-Islami Trust
Annual Report 2014
instruments. IFRS 9 retains but
simplifies the mixed measurement
model and establishes three
primary measurement categories
for financial assets: amortised
cost, fair value through OCI and
fair value through P&L. The basis
of classification depends on the
entity’s business model and the
contractual cash flow characteristics
of the financial asset. Investments in
equity instruments are required to be
measured at fair value through profit
or loss with the irrevocable option at
inception to present changes in fair
value in OCI not recycling. There is
now a new expected credit losses
model that replaces the incurred
loss impairment model used in IAS
39. For financial liabilities there
were no changes to classification
and measurement except for the
recognition of changes in own
credit risk in other comprehensive
income, for liabilities designated
at fair value through profit or loss.
IFRS 9 relaxes the requirements for
hedge effectiveness by replacing
the bright line hedge effectiveness
tests. It requires an economic
relationship between the hedged
item and hedging instrument and
for the ‘hedged ratio’ to be the same
as the one management actually
use for risk management purposes.
Contemporaneous documentation is
still required but is different to that
currently prepared under IAS 39. The
standard is effective for accounting
periods beginning on or after
1 January 2018. Early adoption
is permitted. The Group has yet to
assess IFRS 9’s full impact.
IFRS 15, ‘Revenue from contracts
with customers’ deals with revenue
recognition and establishes
principles for reporting useful
information to users of financial
statements about the nature,
amount, timing and uncertainty of
revenue and cash flows arising
from an entity’s contracts with
customers. Revenue is recognised
when a customer obtains control
of a good or service and thus
has the ability to direct the use
and obtain the benefits from the
good or service. The standard
replaces IAS 18 ‘Revenue’ and IAS
11 ‘Construction contracts’ and
related interpretations. The standard
is effective for annual periods
beginning on or after 1 January
2017 and earlier application is
permitted. The Group has yet to
assess the impact of IFRS 15.
There are no other IFRSs or IFRIC
interpretations that are not yet
effective that would be expected
to have a material impact on the
Group.
Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including
structured entities) over which
the Group has control. The Group
controls an entity when the Group
is exposed to, or has rights to,
variable returns from its involvement
with the entity and has the ability to
affect those returns through its power
over the entity. Subsidiaries are fully
consolidated from the date on which
control is transferred to the Group.
They are de-consolidated from the
date on which control ceases.
The Group applies the acquisition
method to account for business
combinations. The consideration
transferred for the acquisition of
a subsidiary is the fair values of
the assets transferred, the liabilities
incurred to the former owners of
the acquiree and the equity
interests issued by the Group. The
consideration transferred includes
the fair value of any asset or
liability resulting from a contingent
consideration
arrangement.
Identifiable assets acquired and
liabilities and contingent liabilities
assumed in a business combination
are measured initially at their fair
values at the acquisition date.
The Group recognises any non-
controlling interest in the acquiree on
an acquisition-by-acquisition basis,
either at fair value or at the non-
controlling interest’s proportionate
share of the recognised amounts of
acquiree’s identifiable net assets.
Acquisition-related costs are
expensed as incurred.
If the business combination is
achieved in stages, the acquisition
date carrying value of the acquirer’s
previously held equity interest in
the acquiree is re-measured to fair
value at the acquisition date; any
gains or losses arising from such
re-measurement are recognised in
profit or loss.
Any contingent consideration to be
transferred by the Group is recognised
at fair value at the acquisition date.
Subsequent changes to the fair value
of the contingent consideration that
is deemed to be an asset or liability
is recognised in accordance with
IAS 39 either in profit or loss or as
a change to other comprehensive
income. Contingent consideration
that is classified as equity is not
re-measured, and its subsequent
settlement is accounted for within
equity.
The excess of the consideration
transferred, the amount of any non-
controlling interest in the acquiree
and the acquisition-date fair value
of any previous equity interest in
the acquiree over the fair value of
the identifiable net assets acquired
is recorded as goodwill. If the total
of consideration transferred, non-
controlling interest recognised and
previously held interest measured
is less than the fair value of the net
assets of the subsidiary acquired in
the case of a bargain purchase, the
difference is recognised directly in the
income statement.
Intercompany transactions, balances
and unrealised gains on transactions
between group companies are
eliminated. Unrealised losses are
also eliminated unless the transaction
provides evidence of an impairment
of the asset transferred. Subsidiaries’
accounting policies have been
changed where necessary to ensure
consistency with the policies adopted
by the Group.
Costs associated with the
restructuring of a subsidiary as a
part of the acquisition or subsequent
to the acquisition are included in the
consolidated statement of income
upon the date of commitment.
(b) Transactions and
non-controlling interests
The Group treats transactions
with non-controlling interests as
transactions with equity owners of
the Group. For purchases from non-
controlling interests, the difference
between any consideration paid and
the relevant share acquired of the