Page 224 - 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.)

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

(i) The Group and the Bank as lessee (cont’d.)
Short-term leases and leases of low-value assets
The Group and the Bank applies the short-term lease recognition exemption to its short-term leases
of office building (i.e. those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option). It also applies the lease of
low-value assets recognition exemption to leases of office building that are considered to be low
value. Lease payments on short-term leases and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.

(ii) The Group and the Bank as lessor
Leases in which the Group and the Bank does not transfer substantially all the risks and rewards
incidental to ownership of an asset are classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms and is included in revenue in the statements
of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging
an operating lease are added to the carrying amount of the leased asset and recognised over
the lease term on the same basis as rental income. Contingent rents are recognised as revenue
in the period in which they are earned.

(i) Foreign currencies
(i) Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency
of the primary economic environment in which the entity operates (“the functional currency”).
The consolidated financial statements are presented in Ringgit Malaysia (“RM”), which is also the
Bank’s functional currency.
(ii) Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Bank and
its subsidiaries, and are recorded on initial recognition in the functional currencies at exchange rates
approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary
items denominated in foreign currencies that are measured at historical cost are translated using the
exchange rates as at the date of the initial transactions. Non-monetary items denominated in foreign
currencies measured at fair value are translated using the exchange rates at the date when the fair value
was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items
at the reporting date are recognised in statement of profit or loss except for exchange differences
arising on monetary items that form part of the Group’s net investment in foreign operations, which are
recognised initially in other comprehensive income and accumulated under exchange fluctuation reserve in
equity.

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