Annual Report 2024

Dar Al-Maal Al-Islami Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2024 in thousands of USD 16 2. Accounting policies (continued) Material accounting policies (continued) Fiduciary activities The Group through its asset management subsidiary provides fund management and advisory services to third parties which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements. Income arising from fund management and advisory services comprises the revenues earned from the management of the funds in the modarabas accrued on the basis of the terms and conditions of the related management agreements. Funds under management represent amounts invested by clients and placed with funds managed by the Group. Financial assets: Classification and subsequent measurement The Group classifies its financial assets in the following measurement categories: • Fair value through profit or loss (FVTPL); • Fair value through other comprehensive income (FVOCI); or • Amortised cost. The classification requirements for debt instruments are described below: Debt instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse. Classification and subsequent measurement of debt instruments depend on: • The Group’s business model for managing the asset; and • The cash flow characteristics of the asset. Based on these factors, the Group classifies its debt instruments into one of the following three measurement categories. 1) Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and profit (SPP), and that are not designated at FVTPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss (“ECL”) allowance. Profit from these financial assets is included in profit or loss using the effective profit rate method. 2) Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the asset’s cash flow represents solely payments of principal and profit, and that are not designated at FVTPL, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, profit revenue and foreign exchange gains and losses on the instrument’s amortised cost which are recognised in the consolidated statement of income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to consolidated statement of income and recognised in ‘Net investment income’. Profit from these financial assets is included in profit income’ using the effective profit rate method. 3) Fair value through profit or loss : Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the consolidated statement of income within ‘Net trading income’ in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are net held for trading, in which case they are presented separately in Net investment income’. Profit from these financial assets is included in profit using effective profit rate method.