Page 219 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

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 (cont’d.)

(2) Financial liabilities at amortised cost (cont’d.)
(c) Payables
Payables are recognised initially at fair value plus directly attributable transaction costs and
subsequently measured at amortised cost using the effective profit rate method.
(d) Bills and acceptances payable

Bills and acceptances are recognised at amortised cost using effective profit rate method.
Payables represent the Group’s and the Bank’s own bills and acceptances rediscounted
and outstanding in the market.

(e) Other liabilities
Other liabilities are stated at cost, which is the fair value of the consideration expected to be
paid in the future for goods and services received.
(f) Recourse obligation on financing sold to Cagamas
Recourse obligations on financing sold to Cagamas are recognised initially at fair value,
net of transaction costs incurred, and subsequently measured at amortised cost using the
effective profit method.

(iii) Derecognition
A financial liability is derecognised when the obligation under the liability is redeemed or otherwise
extinguished. When an existing financial liability is replaced by another from the same financier
on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and the recognition
of a new liability, and the difference in the respective carrying amounts is recognised in the statements
of profit or loss.

(d) Derivative instruments and hedge accounting
(i) Derivative instruments
The Group and the Bank use derivatives such as profit rate swap and forward foreign exchange contracts.

Derivative instruments are initially recognised at fair value, which is normally zero or negligible at inception
for non-option derivatives and equivalent to the market premium paid or received for purchased or
written options. The derivatives are subsequently re-measured at their fair value. Fair values are
obtained from quoted market prices in active markets, including recent market transactions and
valuation techniques that include discounted cash flow models and option pricing models, as appropriate.

All derivative financial instruments are measured at fair value and are carried as assets when the fair value
is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in the
fair value of the derivatives are recognised in the statements of profit or loss unless these form part of a
hedging relationship.

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