Page 213 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)
2.2 Material accounting policy information (cont’d.)

(b) Financial assets (cont’d.)
(i) Initial recognition and subsequent measurement (cont’d.)

(3) Financial assets at fair value through profit or loss (“FVTPL”) (cont’d.)
The Group and the Bank designate an instrument at FVTPL upon initial recognition when one
of the following criteria is met. Such designation is determined on an instrument-by-instrument basis:

• The designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognising gains or losses on them
on a different basis; or

• The assets and liabilities are part of a group of financial assets, financial liabilities or both, which are
managed and their performance evaluated on a fair value basis, in accordance with a documented
risk management or investment strategy.
Included in financial assets at FVTPL are financial investments, financial assets designated upon
initial recognition, financing of customers and derivatives.
Subsequent to initial recognition, financial assets held-for-trading and financial assets designated
at FVTPL are recorded in the statement of financial position at fair value. Changes in fair value are
recognised in profit or loss under the caption of ‘other operating income’.
(ii) Reclassifications

Reclassifications of financial assets are made when, and only when, the business model for those assets
changes. Such changes are expected to be infrequent and arise as a result of significant external or
internal changes such as the termination of a line of business or management buy-over.

(iii) Derecognition
A financial asset is derecognised when:

- The rights to receive cash flows from asset have expired.
- The Group and the Bank have transferred their rights to receive cash flows from the asset or have assumed
an obligation to pay the received cash flows in full without material delay to a third party under a “pass
through” arrangement; and either:
- The Group and the Bank have transferred substantially all the risks and rewards of the asset; or

- The Group and the Bank have neither transferred nor retained substantially all the risks and rewards of
the assets, but has transferred control of the financial asset.

When the Group and the Bank have transferred their rights to receive cash flows from a financial asset
or have entered into a pass through arrangement, and have neither transferred nor retained substantially
all the risks and rewards of the asset nor transferred control of the financial asset, the financial asset is
recognised to the extent of the Group’s and the Bank’s continuing involvement in the financial asset. In that
case, the Group and the Bank also recognise an associated liability. The transferred asset and associated
liability are measured on a basis that reflects the rights and obligations that the Group and the Bank
have retained.

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