Page 231 - Bank-Muamalat_Annual-Report-2023

ANNUAL REPORT 2023
OUR NUMBERS

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

(s) Government financing scheme and government financing facility
Financing under a government scheme is recognised and measured in accordance with MFRS 9 Financial
Instruments, with the benefit at a below market and concession rate is measured as the difference between the
initial carrying amount or fair value of the financing and the amount received. Government financing facility is
measured in accordance with the amount received.

The benefit of a financing or a facility under a government scheme that addresses identified costs or
expenses incurred by the Group and the Bank is recognised in the profit or loss in the same financial period
when the costs or expenses are recognised, when the required conditions are fulfilled in accordance with
MFRS 120 Accounting for Government Grants and Disclosure of Government Assistance.
(t) Investment accounts

Investment accounts are either:
i. Unrestricted investment accounts

An unrestricted investment account (“UA”) refers to a type of investment account where the investment
account holder (“IAH”) provides the Bank with the mandate to make the ultimate decision without
specifying any particular restrictions or conditions. The UA is structured under Mudarabah contracts.

Impairment allowances required on the assets for investment accounts are charged to and borne by
the investors.
ii. Restricted investment accounts

Restricted investment account (“RIA”) refers to a type of investment account where the IAH provides a
specific investment mandate to the Bank such as purpose, asset class, economic sector and period of
investment.
RIA is accounted for as off balance sheet as the Bank has no risk and reward in respect of the assets
related to the RIA or to the residual cash flows from those assets. RIA is a type of restricted investment
account based on the Mudarabah contract where the IAH and the Bank agree to share the profit
generated from the assets funded by the RIA based on an agreed profit sharing ratio (PSR), while losses
shall be borne by the IAH.

3. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of financial statements requires the Management to make judgments, estimates and assumptions that
affect the application of policies and reported amounts of assets, liabilities, income and expenses. Although these
estimates are based on the Management’s best knowledge of current events and actions, actual results may differ
from those estimates. Critical accounting estimates and assumptions used that are significant to the financial statements
and areas involving higher degree of judgment and complexity, are as follows:

3.1 Impairment of financial investments portfolio (Notes 5 and 32)
The Group and the Bank review their debt instruments at FVOCI, and financial investments at amortised cost under
MFRS 9 Financial Instruments, which requires the recognition of ECL at each reporting date to reflect change
in credit risk of the financial investments not at FVTPL. MFRS 9 Financial Instruments incorporates forward-looking
and historical, current and forecasted information into ECL estimation.

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