Page 225 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

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

(i) Foreign currencies (cont’d.)
(ii) Foreign currency transactions and balances (cont’d.)

The exchange fluctuation reserve is reclassified from equity to statement of profit or loss of the Group and
of the Bank on disposal of the foreign operations.
Exchange differences arising on the translation of non-monetary items carried at fair value are included
in statements of profit or loss for the period except for the differences arising on the translation of
non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange
differences arising from such non-monetary items are also recognised directly in equity.
(iii) Foreign operations
The results and financial position of the Group’s and the Bank’s foreign operations, whose functional
currencies are not the presentation currency, are translated into the presentation currency at average
exchange rates for the year, which approximates the exchange rates at the date of the transaction,
and at the closing exchange rate as at reporting date respectively. All resulting exchange differences
are taken directly to other comprehensive income and are subsequently recognised in the statements
of profit or loss upon disposal of the foreign operations.

(j) Provision for liabilities
Provisions are recognised when the Group and the Bank have a present obligation as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific
to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised
as finance cost.

(k) Impairment of non-financial assets
The Group and the Bank assess at each reporting date whether there is an indication that an asset may be
impaired. If any such indication exists, or when an annual impairment assessment for an asset is required,
the Group and the Bank make an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value-in-use.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units (“CGU”)).

In assessing value-in-use, the estimated future cash flows expected to be generated by the asset are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable
amount, the asset is written-down to its recoverable amount. Impairment losses recognised in respect of a
CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those
units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups
of units on a pro-rata basis.

223