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 25 3. Significant accounting judgements and estimates (continued) Presentation of allowance for ECL in the statement of financial position (continued) Impairment of goodwill (continued) 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. Impairment of investment securities at FVOCI The Group determines that investments carried at fair value through other comprehensive income (FVOCI) are impaired when there has been a significant or prolonged decline in the fair value below their cost. This determination of what is significant or prolonged requires judgment. In the case of quoted equity securities in active markets, the Group generally considers a decline in value below cost of 30%, or a decline that persists for more than 12 months as an indicator of impairment. In the case where markets for the investment are assessed to be inactive, the Group determines impairment based on its assessment of fair value and the investee companies’ financial health, industry and sector performance. In the extra-ordinary market conditions, for the purpose of determination of what constitutes significant or prolonged decline in fair value of investments, the management takes into account the following additional factors: • Their intention relating to the respective holding years of such investments i.e. for trading purposes, or with intention for strategic investment, or for long-term dividends and capital gains etc.; • As to whether the decline in value of investment is in line with the overall trend of decline in the relevant or local market corresponding to the uncertain economic condition; • Forecasts of expected recovery of market values within the expected holding years; and/ or • Forecasts of the expected recovery of the core business of the investee entity within the expected holding years and consequential cash flows to the institution. Measurement of the expected credit loss allowance The measurement of ECL allowance for financial assets measured at amortised cost and FVOCI is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as: Determining criteria for significant increase in credit risk; a. Choosing appropriate models and assumptions for the measurement of ECL; b. Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and c. Establishing groups of similar financial assets for the purposes of measuring ECL. Each financing and investment exposure is evaluated individually for impairment. In assessing impairment, the Group exercises judgement in the estimation of the amount and timing of future cash flows as well as an assessment of whether credit risk on the financial contracts has increased significantly since initial recognition and incorporation of forward-looking information in the measurement of ECL in accordance with impairment policy. The staging and ECL of related party exposures is considered separately from the other financing assets. The ECL is assessed using the cash shortfall method since the underlying collateral can be taken over without having to apply any haircut. Further, the increase in credit risk is also assessed separately for related parties, given their commitment to honour the amounts due to the Group. ECL were estimated based on a range of forecast economic conditions available as at the latest available date.