Page 184 - Bank-Muamalat-Annual-Report-2021

182 bank MuaMalat Malaysia berhaD
ABOUT US OUR LEADERSHIP OUR STRATEGY OUR PERFORMANCE

NOTES TO THE FINANCIAL STATEMENTS
31 DECEMbEr 2021 (26 JAMADIL AwAL 1443H)

2. sIGNIfIcANT AccOuNTING POLIcIes (cONT’D.)

2.3 summary of significant accounting policies
(a) Investment in subsidiaries

Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so
as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group has such power over another entity.
In the Bank’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses.
On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is
recognised in statement of profit or loss.

(b) financial assets
(i) Initial recognition and subsequent measurement

The Group and the Bank classify all of its financial assets based on the business model for managing the
assets and the assets’ contractual cash flow characteristics. All financial assets are recognised initially at fair
value plus directly attributable transaction costs, except in the case of financial assets recorded at fair value
through profit or loss.

The categories of financial assets under MFRS 9 are as follows:
• Amortised cost;
• Fair value through other comprehensive income (“FVOCI”); and
• Fair value through profit or loss (“FVTPL”).
(1) financial assets at amortised cost

The Group and the Bank measure financial assets at amortised cost if both of the following conditions
are met:

• The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and profit (“SPPP”) on the principal amount outstanding; and

• The financial asset is held within a business model with the objective to hold financial assets in
order to collect contractual cash flows.
The details of these conditions are outlined below:

(i) The sPPP test
As a first step of its classification process, the Group and the Bank assess the contractual terms of
financial assets to identify whether they meet the SPPP test.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial
recognition and may change over the life of the financial asset (for example, if there were
payments of principal or amortisation of the premium/discount).