DMIT_Annual_Report_2018_EN

N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS Dar Al-Maal Al-Islami Trust 37 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 Holding 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 Holding 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. The de facto control of Ithmaar Holding BSC is constantly assessed for changes in shareholding which may impact this assessment Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The determination of whether an outflow is probable and the amount, which is assessed by Group management, in conjunction with the Group’s legal and other advisors, requires the judgement of the Group’s management. 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. Ithmaar Holding BSC During 2018 and 2017 the Group used a sum-of- the-parts approach to arrive at a business value of the Ithmaar Holding B.S.C. CGU as Ithmaar Holding B.S.C did not had any independent cash flow generating activity at its own level. Management has considered both PB multiple and value in use calculation for the impairment assessment. Level 2 PB multiple valuation method were used instead of Level 1 listed share price as it did not consider that an active market existed for the shares of Ithmaar as the trading activity in the past years have been very minimal. The valuation methodology for the separately identified parts at Ithmaar Holding B.S.C. level based on the operational activities is the following: • Formerly Shamil Bank: residual income based on discounted cash flows; (2017: value in use based on discounted cash flows); • Faysal Bank Limited: distributable income based on discounted cash flows; (2017: value in use based on discounted cash flows); • BBK: Based on Market Approach using Comparable Companies Multiple Method (“CCM”) (2017: Market Approach using Relative Valuation (price to book multiple methods) for determine the (FVLCTS) as per IFRS 5 requirements. Ithmaar Holding B.S.C. residual assets: investments measured at their carrying value adjusted for fair value changes. Management has also considered PB multiple approach for further assessing the impairment for both Ex-Shamil and Faysal Bank Limited. Based on lower end PB multiple and this additional stress test has also not resulted in any impairment. Islamic Investment Company of the Gulf (Bahamas) Limited During 2017, on the basis that the Group used a discounted cash flow model, for the next 5 years, and assuming a discount rate of 12.91%, to arrive at