Page 200 - Bank-Muamalat-AR2020

198 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.)

(j) Foreign currencies
(i) Functional and presentation currency
The individual financial statements of each entity in the Group are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated financial
statements are presented in Ringgit Malaysia (“RM”), which is also the Bank’s functional currency.
(ii) Foreign currency transactions and balances
Transactions in foreign currencies are measured in the respective functional currencies of the Bank and its
subsidiaries, and are recorded on initial recognition in the functional currencies at exchange rates approximating
those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign
currencies that are measured at historical cost are translated using the exchange rates as at the date of the
initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are
translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the
reporting date are recognised in statement of profit or loss except for exchange differences arising on monetary
items that form part of the Group’s net investment in foreign operations, which are recognised initially in
other comprehensive income and accumulated under exchange fluctuation reserve in equity.
The exchange fluctuation reserve is reclassified from equity to statement of profit or loss of the Group and of
the Bank on disposal of the foreign operations.
Exchange differences arising on the translation of non-monetary items carried at fair value are included in
statements of profit or loss for the period except for the differences arising on the translation of non-monetary
items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from
such non-monetary items are also recognised directly in equity.
(iii) Foreign operations

The results and financial position of the Group’s and the Bank’s foreign operations, whose functional
currencies are not the presentation currency, are translated into the presentation currency at average exchange
rates for the year, which approximates the exchange rates at the date of the transaction, and at the closing
exchange rate as at reporting date respectively. All resulting exchange differences are taken directly to other
comprehensive income and are subsequently recognised in the statements of profit or loss upon disposal of
the foreign operations.

(k) Provision for liabilities
Provisions are recognised when the Group and the Bank have a present obligation as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to
reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted
using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of time is recognised as finance cost.