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Notes to the Consolidated Financial Statements
20
Dar Al-Maal Al-Islami Trust
Annual Report 2014
carrying value of net assets of the
subsidiary is recorded in equity.
Gains or losses on disposals to
non-controlling interests are also
recorded in equity.
When the Group ceases to have
control or significant influence, any
retained interest in the entity is
remeasured to its fair value, with
the change in carrying amount
recognised in profit or loss. The fair
value is the initial carrying amount
for the purposes of subsequently
accounting for the retained interest
as an associate, joint venture or
financial asset.
In addition, any amounts previously
recognised in other comprehensive
income in respect of that entity
are accounted for as if the Group
had directly disposed of the related
assets or liabilities. This may mean
that amounts previously recognised
in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in
an associate is reduced but
significant influence is retained,
only a proportionate share of the
amounts previously recognised in
other comprehensive income are
reclassified to profit or loss where
appropriate.
(c) Associates
Associates are all entities over
which the Group has significant
influence but not control, generally
accompanying a shareholding of
between 20% and 50% of the
voting rights. Investments in
associates are accounted for by
the equity method of accounting
and are initially recognised at
cost. The Group’s investment in
associates includes goodwill (net of
any accumulated impairment loss)
identified on acquisition.
The Group’s share of its associates’
post-acquisition profits or losses
is recognised in the consolidated
statement of income, and its share
of post-acquisition movements in
reserves is recognised in reserves.
The cumulative post-acquisition
movements are adjusted against the
carrying amount of the investment.
When the Group’s share of losses in
an associate equals or exceeds its
interest in the associate, including
any other unsecured receivables,
the Group does not recognise
further losses, unless it has incurred
obligations or made payments on
behalf of the associate.
Unrealised gains on transactions
between the Group and its
associates are eliminated to the
extent of the Group’s interest in
the associates. Unrealised losses
are also eliminated unless the
transaction provides evidence of an
impairment of the asset transferred.
Accounts for associated companies
have been restated to conform
with Group accounting policies,
if necessary, except as otherwise
disclosed.
Where a subsidiary or an associated
company is acquired and held
exclusively with a view to its disposal
within the next twelve months, the
subsidiary or associated company
is classified as an investment held
for sale in the Group’s consolidated
financial statements.
Dilution gains and losses arising
in investments in associates are
recognised in the income statement.
Foreign currency translation
(a) Functional and presentation
currency
Items included in the financial
statements of each of the Group’s
subsidiaries are measured using the
currency of the primary economic
environment in which the entity
operates (the functional currency).
The consolidated financial statements
are presented in United States
dollars, which is DMI’s functional
and presentation currency.
(b) Transactions and balances
Foreign currency transactions
are translated into the functional
currency using the exchange
rates prevailing at the dates of
the transactions. Foreign exchange
gains and losses resulting from
the settlement of such transactions
and from the translation at year
end exchange rates of monetary
assets and liabilities denominated
in foreign currencies are recognised
in the consolidated statement
of income, except where hedge
accounting is applied.
Translation differences on non-
monetary items, such as equities
held at fair value through profit or
loss, are reported as part of their
fair value gain or loss. Translation
differences on non-monetary items,
such as equities classified as
available-for-sale financial assets,
are included in the consolidated
statement of comprehensive income.
(c) Group companies
The results and financial position
of all group entities (none of
which has the currency of a hyper
inflationary economy) that have a
functional currency different from the
presentation currency are translated
into the presentation currency as
follows:
(i) assets and liabilities for each
statement of financial position
presented are translated at the
closing rate at the date of that
statement of financial position;
(ii) income and expenses for
each statement of income are
translated at average exchange
rates (unless this average is not
a reasonable approximation of
the cumulative effect of the rates
prevailing on the transaction
dates, in which case income
and expenses are translated at
the dates of the transactions);
and
(iii) all resulting exchange
differences are recognised as
a separate component in the
statement of comprehensive
income.
Exchange differences arising
from the translation of the net
investment in foreign entities, and
of borrowings and other currency
instruments designated as hedges
of such investments, are taken to
the statement of comprehensive
income on consolidation. When
a foreign operation is sold, such
exchange differences are recognised
in the consolidated statement of
income as part of the gain or loss
on sale.
Goodwill and fair value adjustments
arising on the acquisition of a
foreign entity are treated as assets