Page 202 - Bank-Muamalat-AR2020

200 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.)

(o) Employee benefits
(i) Short term benefits
Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which
the associated services are rendered by employees of the Group and the Bank. Short term accumulating
compensated absences such as paid annual leave are recognised when services are rendered by employees
that increase their entitlement to future compensated absences. Short term non-accumulating compensated
absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plan

Defined contribution plans are post-employment benefit plans under which the Group and the Bank pay fixed
contributions into separate entities or funds and will have no legal or constructive obligation to pay further
contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee
services in the current and preceding financial years. Such contributions are recognised as an expense in
the statements of profit or loss, as they are incurred. As required by law, companies in Malaysia make such
contributions to the Employees Provident Fund (“EPF”).

(p) Income recognition
Income is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
Bank and the income can be reliably measured. The following specific recognition criteria must also be met before
revenue is recognised:

(i) Profit and income from financing
For all financial assets measured at amortised cost, profit bearing financial assets classified as FVOCI
and financial assets designated at FVTPL, profit income or expense is recorded using the effective profit rate,
which is the rate that exactly discounts estimated future cash payments or receipts through the expected life
of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial
asset or financial liability. The calculation takes into account all contractual terms of the financial instrument
(for example, payment options) and includes any fees or incremental costs that are directly attributable to the
instrument and are an integral part of the effective profit rate, but not future credit losses.

For impaired financial assets, profit/financing income continues to be recognised using the effective profit
rate, to the extent that it is probable that the profit can be recovered.