Microsoft Word - DMIT FINANCIAL STATEMENTS 2025-Final draft.

Dar Al-Maal Al-Islami Trust NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2025 in thousands of USD 21 3. Significant accounting judgements and estimates (continued) Impairment assessment of financial contracts subject to credit risk (continued) Determining whether credit risk has increased significantly (continued) The Group considers that a significant increase in credit risk occurs no later than when an asset is more than 30 days past due. Days past due are determined by counting the number of days since the earliest elapsed due date in respect of which full payment has not been received. Due dates are determined without considering any grace period that might be available to the borrower. The Group monitors the effectiveness of the criteria used to identify significant increases in credit risk by regular reviews and validations. The Group classifies its financial instruments into stage 1, stage 2 and stage 3, based on the applied impairment methodology, as described below: • Stage 1- 12 month ECL: for financial instruments where there has not been a significant increase in credit risk since initial recognition and that are not credit-impaired on origination, the Group recognises an allowance based on the 12-month ECL. • Stage 2 – lifetime ECL-not credit impaired: for financial instruments where there has been a significant increase in credit risk since initial recognition but they are not credit-impaired, the Group recognises an allowance for the lifetime ECL for all financings categorized in this stage based on the actual / expected maturity profile including restructuring or rescheduling of facilities. • Stage 3 – lifetime ECL-credit impaired: for credit-impaired financial instruments, the Group recognises the lifetime ECL. Default identification process i.e. DPD of 90 more is used as stage 3. Non-Retail The Group has set out the following definition of default. Non-retail customers with the following characteristics: • All or any of the facilities in which any instalment or part thereof is outstanding for a period of 90 days or more; • All or any of the facilities put on non-accrual status (i.e. profit suspended); • All or any of the facilities wherein ‘specific provision’ is set aside individually; Event driven defaults such as declaration of bankruptcy, death of borrower (in absence of succession plan or professional management), and other specific events which would significantly impact the borrower’s ability the Group. The Group will not consider the 90 days past due criteria in cases of technical defaults (e.g. facilities marked as 90+DPD due to administrative reasons and not credit related concerns and there is no dispute regarding repayment). Its subsidiary, Faysal Bank Limited has incorporated an additional criterion of days past due for determining SICR, which requires that all financing facilities in which any instalment or part thereof is outstanding for 60 days or more at the reporting date shall be marked as stage 2, irrespective of the credit risk rating. Retail The Group has set out the following definition of default: All facilities in which any instalment or part thereof is outstanding for a period of 90 days or more. The Group will not consider the 90 days past due criteria in cases of technical defaults (e.g. facilities marked as 90+DPD due to administrative reasons and not credit related concerns and there is no dispute regarding repayment). Measurement of ECL ECL is a probability-weighted estimate of credit losses. It is measured as follows: • Financial assets that are not credit-impaired at the reporting date: as the value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);