Page 196 - Bank-Muamalat-AR2020

194 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.)

(d) Derivative instruments and hedge accounting (cont’d.)
(ii) hedge accounting (cont’d.)

(2) Cash flow hedge
For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging
instrument is initially recognised directly in other comprehensive income into cash flow hedge reserve.
The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in
statements of profit or loss. When the hedged cash flow affects the statements of profit or loss, the gain
or loss on the hedging instrument previously recognised in other comprehensive income are reclassified
from equity and is recorded in the corresponding income or expense line of the statements of profit or
loss.

When a hedging instrument expires, or is sold, terminated, exercised or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss exist in other comprehensive income at that
time remains in other comprehensive income and is recognised when the hedged forecast transaction is
ultimately recognised in the statements of profit or loss.

When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in other comprehensive income is immediately transferred to the statements of profit or loss.

The Group and the Bank did not apply cash flow hedge as at the financial year end.
(e) Foreclosed properties

Foreclosed properties are those properties acquired in full or partial satisfaction of financing and are stated at the
lower of cost and net realisable value and reported within other assets.

(f) Investment properties
Investment properties, comprising principally land and shoplots, are held for long term rental yields or for capital
appreciation or both, and are not occupied by the Group and the Bank.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition,
investment properties are stated at fair value, representing open-market value determined annually by registered
independent valuer having appropriate recognised professional qualification. Fair value is based on active market
prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this
information is not available, the Group and the Bank use alternative valuation methods such as recent prices of less
active markets or discounted cash flow projections. Changes in fair values are recorded in statement of profit or loss
in the year in which they arise.

On disposal of an investment property, or when it is permanently withdrawn from use or no future economic
benefits are expeted from its disposal, it shall be derecognised. The difference between the net disposal proceeds
and the carrying amount is recognised in statement of profit or loss in the period of the retirement or upon disposal.