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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Summary of significant accounting policies (cont’d)
(f) Financial assets
Financial asset are recognised in the statements of financial position when, and only when, the Group and the Bank
become a party to the contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not
at fair value through profit or loss, directly attributable transaction cost.
The Group and the Bank determine the classification of their financial assets at initial recognition, and the categories
include loans and receivables, held-to-maturity investments and available-for-sale financial assets.
(i) Loans and receivables
Financial assets with fixed or determinable payments that are not quoted in an active market are classified as
loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective
interest method. Gains and losses are recognised in statements of income when the loans and receivables are
derecognised or impaired, through the amortisation process.
Loans and receivables are classified as current assets, except for those having maturity dates later than 12
months after the reporting date which are classified as non-current.
(ii) Financing and receivables
Financing and receivables consist of Murabahah, Istisna, Bai’ Al-Dayn, Tawarruq, Ijarah and Kafalah. These
contracts are recognised at amortised cost (except for kafalah contract), including direct and incremental
transaction costs using the effective profit method. These contracts are stated at net of unearned income and
any amounts written off and/or impaired.
Definition of Shariah concept:
(a) Murabahah: Sale of an asset by the Bank to the customer at cost plus a mark-up in which the profit and the
rate has to be disclosed to the customer. The sale price is payable by the customer on deferred terms.
(b) Tawarruq: An arrangement that involves sale of commodity by the Bank to the customer in which the sale
price is payable on a deferred basis and subsequent sale of the commodity to a third party on a cash basis
to obtain cash.
(c) Ijarah: A lease contract to transfer the usufruct (benefits) of a particular property of the Bank to customer in
exchange for a rental payment for a specified period.
(d) Istisna’: An agreement to sell to a customer a non-existent asset that is to be manufactured or build according
to the agreed specifications and delivered on a specified future date at a predetermined selling price.
(e) Bai’ Al Dayn: Sale of debt in which the customer sells his payable right to the Bank at discount price or at
cost price on the spot payment basis.
EXIM Bank Annual Report 2013
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