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Notes to the Consolidated Financial Statements
24
Dar Al-Maal Al-Islami Trust
Annual Report 2014
is an increased risk of difficulties
in servicing external debt, an
assessment of the political and
economic situation is made and
additional country risk provisions
may be established.
(b) Assets classified
as available-for-sale
In the case of equity investments
classified as available-for-sale, a
significant or prolonged decline
in the fair value of the security
below its cost is considered in
determining whether the assets
are impaired. If any such evidence
exists for available-for-sale equity
financial assets, the cumulative
loss - measured as the difference
between the acquisition cost and
the current fair value, less any
impairment loss on that financial
asset previously recognised in
profit or loss - is removed from
equity and recognised in the
consolidated statement of income.
Impairment losses recognised in the
consolidated statement of income
on equity instruments are not
reversed through the consolidated
statement of income. If, in a
subsequent period, the fair value
of a debt instrument classified as
available-for-sale increases and the
increase can be objectively related
to an event occurring after the
impairment loss was recognised in
profit or loss, the impairment loss is
reversed through the consolidated
statement of income.
Impairment of non-financial
assets
Assets that have an indefinite useful
life are not subject to amortisation
and are tested annually for
impairment. Assets that are subject
to amortisation are reviewed for
impairment whenever events or
changes in circumstances indicate
that the carrying amount may not
be recoverable. An impairment loss
is recognised for the amount by
which the asset’s carrying amount
exceeds its recoverable amount.
The recoverable amount is the
higher of an asset’s fair value less
costs to sell and value in use.
For the purposes of assessing
impairment, assets are grouped at
the lowest levels for which there
are separately identifiable cash
flows (cash-generating units). Non-
financial assets other than goodwill
that suffered an impairment are
reviewed for possible reversal of the
impairment at each reporting date.
Investments with Islamic
Institutions
Investments with Islamic institutions
comprises mainly short term
deposits in the form of parallel
purchase and sale of currencies
and commodities (PPSC), which
are spot purchases of internationally
traded currencies and commodities
and a corresponding forward sale
of the same. For the purpose of
accounting, these are treated as term
deposits and the return is recorded
as income from investments with
Islamic institutions in the statement
of income.
Intangible assets
(a) Goodwill
Goodwill represents the excess of
the cost of an acquisition over the
fair value of the Group’s share of the
net identifiable assets of the acquired
subsidiary/associate at the date of
acquisition. Goodwill on acquisitions
of subsidiaries is included in
intangible assets. Goodwill
on acquisitions of associates
is included in investments in
associates. Goodwill on subsidiaries
is tested annually for impairment
and carried at cost less accumulated
impairment losses. An impairment
loss is recognised for the amount by
which the asset’s carrying amount
exceeds its recoverable amount. The
recoverable amount is an asset’s
fair value less costs to sell. Gains
and losses on the disposal of an
entity include the carrying amount of
goodwill relating to the entity sold.
Goodwill is allocated to cash-
generating units for the purpose of
impairment testing.
(b) Computer software
Acquired computer software licenses
are capitalised on the basis of the
costs incurred to acquire and bring
to use the specific software. These
costs are amortised on the basis of
the expected useful lives (three to
five years).
Costs associated with developing
or maintaining computer software
programs are recognised as an
expense as incurred. Costs that
are directly associated with the
production of identifiable and
unique software products controlled
by the Group, and that will probably
generate economic benefits
exceeding costs beyond one year,
are recognised as intangible assets.
Direct costs include software
development employee costs and
an appropriate portion of relevant
overheads.
Computer software development
costs recognised as assets are
amortised using the straight line
method over their useful lives.
(c) Other acquired intangible assets
Other acquired intangible assets
determined to have finite lives, such
as core deposits and customer
relationships, are amortised on
a straight line basis over their
estimated useful lives. The original
carrying amount of core deposits
and customer relationships has
been determined by independent
appraisers, based on the interest
differential on the expected deposit
duration method.
Investment Property
Investment property principally
comprises office buildings which
are held to earn rental income or
for long term capital appreciation
or both. Investment property is
treated as a long term investment
and is carried at fair value,
representing open market value
determined annually by reference
either to external valuers or to other
independent valuation sources.
Changes in fair values are recorded
in the consolidated statement of
income and are included in other
income. The Group does not classify
operating leases as investment
property.
Property, plant and
equipment and depreciation
Property, plant and equipment
are stated at historical cost less
subsequent depreciation and
impairment, except for land, which
is shown at cost less impairment.