Page 229 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

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

(o) Income recognition (cont’d.)
(i) Profit and income from financing (cont’d.)

(9) Musyarakah Mutanaqisah
In Musyarakah Mutanaqisah contract, the customer and the Bank jointly acquire and own the
asset. The Bank then leases its equity or share of asset to the customer on the basis of Ijarah.
The customer is given the right to acquire the Bank’s equity in the asset periodically. Financing income
is accounted for on the basis of reducing balance on a time apportioned basis that reflects the
effective yield of the asset.
Financing income under this contract is recognised on effective profit rate basis over the period
of the contract based on the principal amount outstanding.

(ii) Fee and other income recognition
Financing arrangement, management and participation fees, underwriting commissions, guarantee
fees and brokerage fees are recognised as income based on accrual on time apportionment method.
Fees from advisory and corporate finance activities are recognised at net of service taxes and discounts on
completion of each stage of the assignment.

Dividend income from securities is recognised when the Bank’s right to receive payment is established.
(p) Income and deferred taxes

Income tax for the year comprises current and deferred tax. Current tax is the expected amount of income taxes
payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted
at the reporting date.

Deferred tax is provided for using the liability method. In principle, deferred tax liabilities are recognised
for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary
differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profits will
be available against which the deductible temporary differences, unused tax losses and unused tax credits can
be utilised.

Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from
the initial recognition of an asset or liability in a transaction which is not a business combination and at
the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised
or the liability is settled, based on tax rates that have been enacted or substantively enacted at the financial
position date. Deferred tax is recognised as income or expense and included in the statements of profit or loss
for the period, except when it arises from a transaction which is recognised directly in equity, in which case
the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an
acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of
the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
over the cost of the combination.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set-off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation
authority.

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