Page 188 - Bank-Muamalat-AR2020

186 BANK MUAMALAT MALAYSIA BERHAD About Us Our Leadership Our Strategy
ANNUAL REPORT FY2020

Notes to the fiNaNcial statemeNts
31 December 2020 (16 JamaDil awal 1442h)

2. SIGNIFICANT ACCOuNTING POLICIES (CONT’D.)
2.3 Summary of significant accounting policies (cont’d.)

(b) Financial assets (cont’d.)
(i) Initial recognition and subsequent measurement (cont’d.)
(2) Financial assets at fair value through other comprehensive income (“FvOCI”)

The Group and the Bank apply the new category under MFRS 9 of debt instruments measured at FVOCI
when both of the following conditions are met:

• The contractual terms of the financial assets meet the SPPP test; and
• The instrument is held within a business model, the objective of which is achieved by both
collecting contractual cash flows and selling financial assets.

Financial assets at FVOCI are subsequently measured at fair value with gains and losses arising due
to changes in fair value recognised in the Other Comprehensive Income (“OCI”). Profit income and
foreign exchange gains and losses are recognised in profit or loss in the same manner as for financial
assets measured at amortised cost. Where the Group and the Bank hold more than one investment in
the same security, they are deemed to be disposed off on a first–in-first–out basis. Upon derecognition,
cumulative gains or losses previously recognised in OCI are reclassified from OCI to profit or loss.
Equity instruments are normally measured at FVTPL. However, for non-traded equity instruments,
with an irrevocable option at inception, the Group and the Bank measure the changes through FVOCI
(without recycling profit or loss upon derecognition).
Included in financial assets at FVOCI are certain equity and debt instruments.

(3) Financial assets at fair value through profit or loss (“FvTPL”)
Financial assets at FVTPL are those that are held-for-trading and have been either designated by the
Group and the Bank upon initial recognition or are mandatorily required to be measured at fair value
under MFRS 9.

The Group and the Bank designate an instrument at FVTPL upon initial recognition when one of the
following criteria is met. Such designation is determined on an instrument-by-instrument basis:
• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise
arise from measuring the assets or liabilities or recognising gains or losses on them on a different
basis; or
• The assets and liabilities are part of a group of financial assets, financial liabilities or both, which are
managed and their performance evaluated on a fair value basis, in accordance with a documented
risk management or investment strategy.

Included in financial assets at FVTPL are financial investments, financial assets designated upon
initial recognition, financing of customers and derivatives.

Subsequent to initial recognition, financial assets held-for-trading and financial assets designated
at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are
recognised in the profit or loss under the caption of ‘other operating income’.