Page 223 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

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

(h) Leases (cont’d.)
(b) Recognition and initial measurement (cont’d.)

(i) The Group and the Bank as lessee (cont’d.)
Right-of-use (“ROU”) asset
The Group and the Bank recognises right-of-use assets at the commencement date of the lease
(i.e., the date the underlying asset is available for use). Right-of- use assets are measured at cost,
less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful life of the assets, as follows:
Office building 2 to 3 years
If ownership of the leased asset is transferred to the Group and the Bank at the end of the lease term
or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated
useful life of the asset.
The right-of-use assets are also subject to impairment in accordance with Note 2.2(k) on impairment
of non-financial assets.
Lease liabilities

At the commencement date of the lease, the Group and the Bank recognises lease liabilities
measured at the present value of lease payments to be made over the lease term. The lease payments
include fixed payments (including in substance fixed payments) less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees.

The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Group and the Bank and payments of penalties for terminating the lease, if the lease
term reflects the Group and the Bank exercising the option to terminate. Variable lease payments
that do not depend on an index or a rate are recognised as expenses (unless they are incurred
to produce inventories) in the period in which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments, the Group and the Bank uses its incremental
profit rate at the lease commencement date because the profit rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of profit and reduced for the lease payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in
the lease payments (e.g. changes to future payments resulting from a change in an index or rate
used to determine such lease payments) or a change in the assessment of an option to purchase
the underlying asset.

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