Page 217 - 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.)
(iv) Impairment of financial assets (cont’d.)

(6) Valuation of collateral held as security for financial assets (cont’d.)
The main types of collateral obtained by the Group and the Bank are as follows: (cont’d.)
- For syndicated financing - charges over the properties being financed;

- For vehicle financing - charges over the vehicles financed; and
- For other financing - charges over business assets such as premises, inventories, trade receivables or
deposits.
(7) Impairment process – written-off accounts

Where a financing is uncollectible, it is written-off against the related allowances for impairment.
Such financing are written-off after the necessary procedures have been completed and
the amount of the loss has been determined. Subsequent recoveries of the amounts previously
written-off are recognised in the statements of profit or loss.
(8) Impairment of other financial assets
The Group and the Bank apply the MFRS 9 Financial Instruments simplified approach to measure
expected credit losses, which uses a lifetime expected loss allowance for other financial assets.
The simplified approach excludes tracking of changes in credit risk.

(v) Determination of fair value
For financial instruments measured at fair value, the fair value is determined by reference to quoted
market prices or by using valuation models. For financial instruments with observable market prices,
which are traded in active markets, the fair values are based on their quoted market price or dealer price
quotations.

For all other financial instruments, fair value is determined using appropriate valuation techniques.
In such cases, the fair values are estimated using discounted cash flow models and option pricing
models, and based on observable data in respect of similar financial instruments and using inputs
(such as yield curves) existing as at reporting date. The Bank generally uses widely recognised valuation
models with market observable inputs for the determination of fair values, due to the low complexity
of financial instruments held; with exception to investment in private equity funds.
(c) Financial liabilities
(i) Date of recognition

All financial liabilities are initially recognised on the trade date, i.e. the date that the Group and the Bank
become a party to the contractual provision of the instruments.

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