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Our Performance Sustainability Statement Governance Our Numbers Other Information

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

(p) Income recognition (cont’d.)
(i) Profit and income from financing (cont’d.)
(1) Bai’ Bithaman Ajil (“BBA”)

This contract involves the purchase and sale of an asset by the Bank to the customer on a deferred
payment basis either to be paid in lump sum or instalment basis within an agreed period of time at a
price which includes a profit margin agreed by both parties. Financing income is recognised on effective
profit rate basis over the period of the contract based on the principal amount outstanding.
(2) Ijarah Thumma Al-Bai’
This contract involves lease ending with transfer of ownership from the lessor to the lessee in the form
of sale transaction based on agreed terms and conditions. There are two (2) contracts involved in this
arrangement. The first contract is Ijarah where the lessee enjoys the usufruct of the assets for an agreed
rental during an agreed period of time while the ownership remains with the lessor. The second contract
is the sale contract which may take place at the end of the Ijarah period or at any point of time during the
period subject to the agreed terms and conditions between the contracting parties. Financing income is
recognised on effective profit rate basis over the lease term.
(3) Bai’ Inah
This contract involves sale and purchase of an asset whereby the Bank sells an asset to the customer on
a deferred basis and subsequently buys back the asset at a cash price lower than the deferred sales price.
Financing income is recognised on effective profit rate basis over the period of the contract based on the
principal amount outstanding.
(4) Tawarruq

This contract relates to the arrangement that involves a purchase of an asset or commodity based on
Murabahah contract on deferred term and a subsequent sale of the same asset to a third party in order
to obtain cash. The commodity trading fee incurred in the Tawarruq arrangement is borne by the Bank
and is recognised as an expense in the statements of profit or loss, as they are incurred. Financing income
is recognised on effective profit rate basis over the expected life of the contract based on the principal
amount outstanding.
(5) Bai Al-Dayn
This contract involves the sale and purchase of securities or debt certificates which conforms with
the Shariah ruling. Securities or debt certificates are issued by a debtor to a creditor as evidence of
indebtedness. Income from financing shall be recognised on effective profit rate basis over the expected
life of the contract based on principal amount outstanding.