24 / 87
Notes to the Consolidated Financial Statements
22
Dar Al-Maal Al-Islami Trust
Annual Report 2014
paid under these agreements are
included under investments in
financings. The difference between
the contracted price and the resale
price is amortised over the period
of the contract and is recognised
as income in the consolidated
statement of income.
Obligations for the return of securities
or for forward sales, which are a
part of the repurchase agreements,
are recognised as commitments as
disclosed in note 37.
Financial Assets
The Group classifies its financial
assets into the following categories:
financial assets at fair value
through profit or loss; loans and
receivables;
held-to-maturity
investments and available-for-sale
financial assets. The classification
of investments is determined at
initial recognition. Financial assets
are initially recognised at fair
value plus transaction costs for all
financial assets not carried at fair
value through profit or loss (refer
to details below). Financial assets
are derecognised when the rights
to receive cash flows from the
financial assets have expired or
when the Group has transferred
substantially all risks and rewards
of ownership.
(a) Financial assets at fair value
through profit or loss
This category includes financial
assets held for trading, including
trading securities and those
designated at fair value through
profit or loss at inception. A financial
asset is classified in this category if
acquired principally for the purpose
of selling in the short term or if
so designated by management.
Derivatives are also categorised as
held for trading unless qualifying for
hedge accounting.
Financial assets at fair value
through profit and loss are initially
recognised at fair value (which
excludes transaction costs) and
subsequently carried at fair value
based on quoted bid prices. All
related realised and unrealised
gains and losses are included
in net trading income in the period
in which they arise. Dividends
declared are included in dividend
income.
All purchases and sales of financial
assets held for trading and at fair
value through profit and loss that
require delivery within the time frame
established by regulation or market
convention (‘regular way’ purchases
and sales) are recognised at trade
date, which is the date that the
Group commits to purchase or sell
the asset.
(b) Loans and receivables
Loans and receivables, which
include investments in financings,
are non-derivative financial assets
with fixed or determinable payments
that are not quoted in an active
market other than: (a) those that the
Group intends to sell immediately
or in the short term, which are
classified as held for trading, and
those that the entity upon initial
recognition designates as at fair
value through profit or loss; (b)
those that the entity upon initial
recognition designates as available-
for-sale; or (c) those for which
the holder may not recover
substantially all of its initial
investment, other than because
of credit deterioration. In general,
they arise when the Group provides
money, goods or services directly to
a debtor with no intention of trading
the receivable and also includes
purchased loans and receivables
that are not quoted in an active
market. Loans and receivables are
carried at amortised cost using the
effective yield method. All loans are
recognised when cash is advanced
to the customer.
(c) Held-to-maturity
Held-to-maturity investments are
non-derivative financial assets with
fixed or determinable payments and
fixed maturities and there is the
intent and the ability to hold them to
maturity. If more than an insignificant
amount of held-to-maturity assets is
sold, the entire category will be
considered tainted and reclassified
as available-for-sale.
Held-to-maturity investments are
carried at amortised cost using the
effective yield method, less any
provision for impairment.
(d) Available-for-sale
Available-for-sale investments are
those intended to be held for an
indefinite period of time, which may
be sold in response to needs for
liquidity or changes in exchange
rates, equity prices or other market
rates. All regular way purchases
and sales of investment securities
are recognised at trade date, which
is the date that the entity commits to
purchase or sell the asset.
Available-for-sale investments are
initially recognised at fair value
(which includes transaction costs)
and subsequently carried at fair
value. The fair values of quoted
investments in active markets are
based on current bid prices. If the
market for a financial asset is not
active or the asset is an unlisted
security, the Group establishes
fair value by using valuation
techniques. These include the use
of recent arm’s length transactions,
discounted cash flow analysis,
option pricing models and other
valuation techniques commonly
used by market participants.
Unrealised gains and losses arising
from changes in the fair value of
securities classified as available-
for-sale which are not part of a
hedging relationship are recognised
in comprehensive income. When
the securities are disposed of or
impaired, the related accumulated
fair value adjustments are included in
the consolidated statement of income
as gains or losses from investment
securities. Dividends declared are
included in dividend income.
Changes in the fair value of
monetary securities denominated in
a foreign currency and classified
as available-for-sale are analysed
between translation differences
resulting from changes in amortised
cost of the security and other
changes in the carrying amount
of the security. The translation
differences on monetary securities
are recognised in profit and loss;
translation differences on non-
monetary securities are recognised
in comprehensive income. Changes
in the fair value of monetary and
non-monetary securities classified
as available-for-sale are recognised
in comprehensive income.