Page 218 - Bank-Muamalat_Annual-Report-2023

BANK MUAMALAT MALAYSIA BERHAD

NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2023 (18 JAMADIL AKHIR 1445H)

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

(c) Financial liabilities (cont’d.)
(ii) Initial recognition and subsequent measurement

Financial liabilities are classified according to the substance of the contractual arrangements entered into
and the definitions of a financial liability.
Financial liabilities are classified as either financial liabilities at FVTPL or at amortised cost.

(1) Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held-for-trading and financial liabilities
designated upon initial recognition as at FVTPL.
Financial liabilities held-for-trading include derivatives entered into by the Group and the Bank that
do not meet the hedge accounting criteria. Derivative liabilities are initially and subsequently
measured at fair value, with any resultant gains or losses recognised in statements of profit or
loss. Net gains or losses on derivatives include exchange differences.

(2) Financial liabilities at amortised cost
The Group’s and the Bank’s financial liabilities at amortised cost include deposits from customers,
deposits and placements of banks and other financial institutions, debt securities, payables,
bills and acceptances payable, recourse obligation on financing sold to Cagamas and other
liabilities.

(a) Deposits from customers, and deposits and placements of banks and other financial
institutions
Deposits from customers, and deposits and placements of banks and other financial institutions
are stated at placement values.
(b) Islamic debt securities

Issued Islamic debt securities are classified as financial liabilities or equity in accordance
with the substance of the contractual terms of the instruments. The Group’s and the
Bank’s debt securities consist of two tranches of subordinated sukuk.

These Islamic debt securities are classified as liabilities in the statement of financial position
as there is a contractual obligation by the Group and the Bank to make cash payments of
either principal or profit or both to holders of the debt securities and that the Group and
the Bank are contractually obliged to settle the financial instrument in cash or another
financial instrument.

Subsequent to initial recognition, all issued Islamic debt securities are recognised at amortised
cost, with any difference between proceeds net of transaction costs and the redemption
value being recognised in the statement of profit or loss over the period of the financing
on an effective profit rate method.

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