30 / 87
Notes to the Consolidated Financial Statements
28
Dar Al-Maal Al-Islami Trust
Annual Report 2014
On occasion the Group may hold
investments whose fair value cannot
be reliably measured. In those
instances, full disclosure with a
description of the investment, the
carrying value and an explanation of
why fair value cannot be measured
reliably are included in the notes to
the financial statements.
Fair value of investment
properties
The Group may from time to
time hold investment properties
which are carried at fair value,
representing open market value
determined annually by reference
either to external valuers or to other
independent valuation sources.
Income taxes
The Group is subject to income taxes
in some jurisdictions. Estimates are
required in determining the provision
for income taxes. There are some
transactions and calculations for
which the ultimate tax determination
is uncertain. Where the final tax
outcome of these matters is different
from the amounts that were initially
recorded, such differences impact
the income tax and deferred tax
provisions in the period in which
such determination is made.
Consolidation of entities in
which the Group holds less
than 50%
The Group considers it has de
facto control of Ithmaar Bank
B.S.C. even though it has less
than 50% of the voting rights. The
Group is the majority shareholder
with a 46.49% equity interest. As
the Group maintains control over
Ithmaar’s Board of Directors and
considering the dispersed nature
of the remaining shareholders, DMI
continues to consolidate Ithmaar
Bank B.S.C. as a subsidiary based
upon the Group’s assessment under
IFRS 10. There is no history of
other shareholders forming a group
to exercise their votes collectively.
Impairment of associated
companies
The Group assesses at each
statement of financial position date
whether there is objective evidence
that its investments in associated
companies are impaired. In general,
an investment in an associated
company is impaired and an
impairment loss incurred when the
carrying amount of the investment
exceeds its recoverable amount.
The recoverable amount is defined
as the higher of its fair value less
costs to sell and its value in use.
On assessing its investments for
impairment at the year end, the
Group has relied upon cash flow
projections as approved by the
board of the underlying associates
that are based upon judgements
and estimates related to future
events which ultimately could have a
significant impact on the recoverable
amounts of these investments in the
consolidated financial statements.
Estimated impairment
of goodwill
The Group tests annually whether
goodwill has suffered any
impairment in accordance with the
accounting policy stated in note
2. The recoverable amounts of
cash-generating units have been
determined based on estimated future
cash flows and comparisons with
market multiples. These calculations
require the use of estimates, which
are subject to judgement. Changes
in the underlying assumptions may
impact the reported numbers.
During 2014 the Group used a
sum-of-the-parts approach to arrive
at a business value of the Ithmaar
Bank B.S.C. CGU. The valuation
methodology for the separately
identified parts at Ithmaar Bank
B.S.C. level based on the operational
activities is the following:
• Formerly Shamil Bank: value
in use based on discounted
cash flows;
• Faysal Bank Limited: value
in use based on discounted
cash flows;
• BBK: average of residual
income and price to book
value multiple.
Ithmaar Bank residual assets:
investments measured at their
carrying value adjusted for fair value
changes.
3. Critical accounting
estimates and
judgements in applying
accounting policies
(continued)