1    REPORTING ENTITY

GFH Financial Group BSC ("the Bank") was incorporated as Gulf Finance House BSC in 1999 in the Kingdom of Bahrain under Commercial Registration No. 44136 and operates under an Islamic Wholesale Investment Banking license issued by the Central Bank of Bahrain ("CBB"). The Bank's shares are listed on the Bahrain, Kuwait, Dubai and Abu Dhabi Financial Market Stock Exchanges. The Bank's sukuk certificates are listed on London Stock Exchange.

 

The Bank's activities are regulated by the CBB and supervised by a Shari'a Supervisory Board. The principal activities of the Bank include investment advisory services and investment transactions which comply with Islamic rules and principles determined by the Bank's Shari'a Supervisory Board.

 

The consolidated financial statements for the year comprise the results of the Bank and its material subsidiaries (together referred to as "the Group"). The significant subsidiaries of the Bank which consolidated in these financial statements are:

 

Investee name	Country of incorporation	Effective ownership interests as at 31 December 2023	Activities
GFH Partners Ltd (formally known as GFH Capital Limited)	United Arab Emirates	100%	Investment management
GFH Capital S.A.	Saudi Arabia	100%	Investment management
Khaleeji Bank BSC ('KHB')	Kingdom of Bahrain	85.14%	Islamic retail bank
GBCORP B.S.C (c)		62.91%	Investment firs (Islamic principles)
Al Areen Hotels W.L.L.		100%	Hospitality management services

 

 The Bank has other SPE holding companies and subsidiaries, which are set up to supplement the activities of the Bank and its principal subsidiaries and hold assets and non-core operations which are not material to the group.

 

 

2    STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in accordance with the Financial Accounting Standards ('FAS') issued by the Accounting and Auditing Organisation for Islamic Financial Institutions ("AAOIFI") and in conformity with Commercial Companies Law. In line with the requirement of AAOIFI and the Rulebook issued by CBB, for matters that are not covered by FAS, the Group uses guidance from the relevant IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards).

 

3    BASIS OF MEASUREMENT

The consolidated financial statements are prepared on the historical cost basis except for the measurement at fair value of investment securities.

 

The Group classifies its expenses in the consolidated income statement by the nature of expense method. The consolidated financial statements are presented in United States Dollars (US$), which is also the functional currency of the Group's operations. All financial information presented in US$ has been rounded to the nearest thousands, except when otherwise indicated.

 

The preparation of consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Management believes that the underlying assumptions are appropriate and the Group's consolidated financial statements therefore present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 5.

The below paragraphs and tables describe the Group's significant lines of business and sources of revenue they are associated with.

 

Activities:

The Group's primary activities include:

a) to provide investment opportunities and manage assets on behalf of its clients as an agent,

b) to provide commercial banking services,

c) to undertake targeted development and sale of infrastructure and real estate projects for enhanced returns, and

d) to co-invest with clients and hold strategic proprietary assets as a principal. In addition, the Group also manages its treasury portfolio with the objective of earning higher returns from capital and money market opportunities.

 

3    BASIS OF MEASUREMENT (continued)

 

Segments:

To undertake the above activities, the Group has organised itself in the following operating segments units:

 

Investment banking	Investment banking segment focuses on private equity and asset management activities. Private equity activities include acquisition of interests in unlisted businesses at average prices with potential for growth. The Group acts as both a principal and an intermediary by acquiring, managing and realizing investments in investment assets for institutional and high net worth clients. The asset management unit is responsible for identifying and managing investments in income yielding real estate and leased assets in the target markets. Investment banking activities focuses on acquiring, managing and realizing investments to achieve and exceed benchmark returns. Investment banking activities produce fee-based, activity-based and asset-based income for the Group.  Assets under this segment include investment banking receivables.
Commercial banking	This includes all sharia compliant corporate banking and retail banking activities of the Group provided through the Group's subsidiary, Khaleeji Bank BSC. The subsidiary also manages its own treasury and proprietary investment book within this operating segment.
Proprietary and treasury	All common costs and activities that are undertaken at the Group level, including treasury and residual proprietary and co-investment assets, is considered as part of the Proprietary and treasury activities of the Group.

 

Each of the above operating segments, except commercial banking which is a separate subsidiary, has its own dedicated team of professionals and are supported by a common placement team and support units.

 

The strategic business units offer different products and services and are managed separately because they require different strategies for management and resource allocation within the Group. For each of the strategic business units, the Group's Board of Directors (chief operating decision makers) review internal management reports on a quarterly basis.

 

The performance of each operating segment is measured based on segment results and are reviewed by the management committee and the Board of Directors on a quarterly basis. Segment results is used to measure performance as management believes that such information is most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing, if any is determined on an arm's length basis.

 

The Group classifies directly attributable revenue and cost relating to transactions originating from respective segments as segment revenue and segment expenses respectively. Indirect costs is allocated based on cost drivers/factors that can be identified with the segment and/ or the related activities. The internal management reports are designed to reflect revenue and cost for respective segments which are measured against the budgeted figures. The unallocated revenues, expenses, assets and liabilities related to entity-wide corporate activities and treasury activities at the Group level. Expenses are not allocated to the business segment.

 

3    BASIS OF MEASUREMENT (continued)

Sources of revenue:

The Group primarily earns its revenue from the following sources and presents its statement of income accordingly:

 

Activity/ Source	Products	Types of revenue
Investment banking	Deal-by-deal offerings of private equity, income yielding asset opportunities	Deal related income, earned by the Group from structuring and sale of assets.   Fee based income, in the nature of management fees, performance fee, acquisition fee and exit fee which are contractual in nature
Commercial banking	Islamic Shari'ah compliant corporate, institutional and retail banking financing and cash management products and services	Financing income, fees and investment income (net of direct funding costs)
Proprietary investments	Proprietary investments comprise the Group's strategic investment exposure. This also includes equity -accounted investees where the Bank has significant influence	Includes dividends, gain / (loss) on sale and remeasurement of proprietary investments and share of profit / (loss) of equity accounted investees   Income from restructuring of liabilities and funding arrangements are also considered as income from proprietary investments
Co-investment	Represent the Group's co-investment along with its clients in the products promoted by the Group	Dividends and gain / (loss) on co-investments of the Bank
Sale of assets	Proprietary holdings of real estate for direct sale, development and sale, and/ or rental yields.  This also includes the group's holding or participation in leisure and hospitality assets.	Development and sale income arises from development and real estate projects of the Group based on percentage of completion (POC) method.   Leasing and operating income, from rental and other ancillary income from investment in real estate and other assets.
Treasury operations	Represents the Bank's liquidity management operations, including its fund raising and deployment activities to earn a commercial profit margin.	Income arising from the deployment of the Bank's excess liquidity, through but not limited to short term placements with bank and financial institutions, money market instruments, capital market and other related treasury investments.

 

 

4    SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These accounting policies have been applied consistently to all periods presented in the consolidated financial statements and have been consistently applied by the Group.

 

(a)  New standards, amendments, and interpretations effective for annual periods beginning on or after 1 January 2023

 

The following new standards and amendments to standards are effective for financial years beginning on or after 1 January 2023 with an option to early adopt. However, the Group has not early adopted any of these standards.

 

(i)   FAS 39 Financial Reporting for Zakah

 

AAOIFI has issued FAS 39 Financial Reporting for Zakah in 2021. The objective of this standard is to establish principles of financial reporting related to Zakah attributable to different stakeholders of an Islamic financial Institution. This standard supersedes FAS 9 Zakah and is effective for the financial reporting periods beginning on or after 1 January 2023.

 

This standard shall apply to institution with regard to the recognition, presentation and disclosure of Zakah attributable to relevant stakeholders. While computation of Zakah shall be applicable individually to each institution within the Group, this standard shall be applicable on all consolidated and separate / standalone financial statements of an institution.

 

This standard does not prescribe the method for determining the Zakah base and measuring Zakah due for a period. An institution shall refer to relevant authoritative guidance for determination of Zakah base and to measure Zakah due for the period. (for example: AAOIFI Shari'a standard 35 Zakah, regulatory requirements or guidance from Shari'a supervisory board, as applicable).

 

An institution obliged to pay Zakah by law or by virtue of its constitution documents shall recognise current Zakah due for the period as an expense in its financial statements. Where Zakah is not required to be paid by law or by virtue of its constitution documents, and where the institution is considered as an agent to pay Zakah on behalf of certain stakeholders, any amount paid in respect of Zakah shall be adjusted with the equity of the relevant stakeholders.

 

The Group does not have any obligation to pay Zakah as per its constitutional documents but only pays Zakah on undistributed profits as an agent on behalf of its shareholders. The Group has adopted this standard and has provided the necessary additional disclosures in its annual financial statements (refer notes 27).

 

(ii) FAS 41 Interim financial reporting

This standard prescribes the principles for the preparation of condensed interim financial information and the relevant presentation and disclosure requirements, emphasizing the minimum disclosures specific to Islamic financial institutions in line with various financial accounting standards issued by AAOIFI. This standard is also applicable to the institutions which prepare a complete set of financial statements at interim reporting dates in line with the respective FAS's.

 

This standard is effective for financial statements for the period beginning on or after 1 January 2023. The Group has adopted this standard for the basis of preparation of its condensed consolidated interim financial information. The adoption of this standard did not have any significant impact on the Group's interim financial information.

 

(iii) FAS 44 Determining Control of Assets and Business

AAOIFI has issued FAS 44 "Determining Control of Assets and Business" on 31 December 2023, applicable with immediate effect. The objective of this standard is to establish clear and consistent principles for assessing whether and when an institution controls an asset or a business, both in the context of participatory structures and for consolidation purposes. 

 

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

 

This standard is applicable to all Islamic financial institutions ("IFIs") and entities who are party to the Sharia compliant transactions and structures (as allowed by the respective regulatory and reporting framework). This standard covers both on-balance sheet and off-balance sheet arrangements, including participatory structures like mudaraba, musharaka, and sukuk. The assessment of control is relevant across various accounting policies of the Group, including but not limited to consolidation of subsidiaries, recognition and de-recognition of various financial assets and participatory investment structures.

 

The Group has assessed the revised framework for control assessment provided by FAS 44 and does not expect any significant impact on its previously assessed control conclusions on the adoption of this standard.  However, the Groups accounting policies and disclosures have been revised to be consistent with the revised definitions and principles clarified under FAS 44

 

(b)  New standards, amendments, and interpretations issued but not yet effective

 

(i) FAS 1 General Presentation and Disclosures in the Financial Statements

 

AAOIFI has issued the revised FAS 1 General Presentation and Disclosures in the Financial Statements in 2021. This standard describes and improves the overall presentation and disclosure requirements prescribed in line with the global best practices and supersedes the earlier FAS 1. It is applicable to all the Islamic Financial Institutions and other institutions following AAOIFI FAS's. This standard is effective for the financial reporting periods beginning on or after 1 January 2024 with an option to early adopt.

 

The revision of FAS 1 is in line with the modifications made to the AAOIFI conceptual framework for financial reporting.

 

Some of the significant revisions to the standard are as follows:

a)   Revised conceptual framework is now integral part of the AAOIFI FAS's;

b)   Definition of Quassi equity is introduced;

c)   Definitions have been modified and improved;

d)   Concept of comprehensive income has been introduced;

e)   Institutions other than Banking institutions are allowed to classify assets and liabilities as current and non-current;

f)    Disclosure of Zakah and Charity have been relocated to the notes;

g)   True and fair override has been introduced;

h)   Treatment for change in accounting policies, change in estimates and correction of errors has been introduced;

i)    Disclosures of related parties, subsequent events and going concern have been improved;

j)    Improvement in reporting for foreign currency, segment reporting;

k)   Presentation and disclosure requirements have been divided into three parts. First part is applicable to all institutions, second part is applicable only to banks and similar IFI's and third part prescribes the authoritative status, effective date an amendments to other AAOIFI FAS's; and

l)    The illustrative financial statements are not part of this standard and will be issued separately.   

 

The Group is assessing the impact of adoption of this standard and expects changes in certain presentation and disclosures in its consolidated financial statement in line with the wider market practice.

 

(ii) FAS 45: Quasi-Equity (Including Investment Accounts)

AAOIFI has issued Financial Accounting Standard (FAS) 45 "Quasi-Equity (Including Investment Accounts)" during 2023. The objective of this standard is to establish the principles for identifying, measuring, and presenting "quasi-equity" instruments in the financial statements of Islamic Financial Institutions "IFIs".

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

 

The standard prescribes the principles of financial reporting to participatory investment instruments (including investment accounts) in which an IFI controls underlying assets (mostly, as working partner), on behalf of the stakeholders other than owner's equity. This standard provides the overall criteria for on-balance sheet accounting for participatory investment instruments and quasi-equity, as well as, pooling, recognition, derecognition, measurement, presentation and disclosure for quasi-equity.

 

This standard shall be effective for the financial reporting periods beginning on or after 1 January 2026 with an option to early adopt.

 

The Group does not expect any significant impact on the adoption of this standard.

 

(iii) FAS 46: Off-Balance-Sheet Assets Under Management

AAOIFI has issued Financial Accounting Standard ("FAS") 46 "Off-Balance-Sheet Assets Under Management" during 2023. The objective of this standard is to establish principles and rules for recognition, measurement, disclosure, and derecognition of off-balance-sheet assets under management, based on Shari'a and international best practices. The standard aims to improve transparency, comparability, accountability, and governance of financial reporting related to off-balance-sheet assets under management.

 

This standard is applicable to all IFIs with fiduciary responsibilities over asset(s) without control, except for the following:

• The participants' Takaful fund and / or participants' investment fund of a Takaful institution; and

• An investment fund managed by an institution, being a separate legal entity, which is subject to financial reporting in line with the requirements of the respective AAOIFI FAS.

 

This standard shall be effective for the financial reporting periods beginning on or after 1 January 2026 with an option to early adopt.

 

This standard shall be effective for the financial periods beginning on or after 1 January 2026 with an option to early adopt. This standard shall be adopted at the same time as adoption of FAS 45 "Quasi-Equity (Including Investment Accounts)".

 

The Group does not expect any significant impact on the adoption of this standard.

 

(iv) FAS 47: Transfer of Assets Between Investment Pools

AAOIFI has issued Financial Accounting Standard ("FAS") 47 "Transfer of Assets Between Investment Pools" during 2023.  The objective of this standard is to establish guidance on the accounting treatment and disclosures for transfers of assets between investment pools that are managed by the same institution or its related parties. The standard applies to transfers of assets that are not part of a business combination, a disposal of a business, or a restructuring of an institution.

 

The standard defines an investment pool as a group of assets that are managed together to achieve a common investment objective, such as a fund, a portfolio, or a trust. The standard also defines a transfer of assets as a transaction or event that results in a change in the legal ownership or economic substance of the assets, such as a sale, a contribution, a distribution, or a reclassification.

 

The transfer of assets between investment pools should be accounted for based on the substance of the transaction and the terms and conditions of the transfer agreement. The standard classifies transfers of assets into three categories: transfers at fair value, transfers at carrying amount, and transfers at other than fair value or carrying amount. The standard also specifies the disclosure requirements for transfers of assets between investment pools.

 

This standard shall be effective for the financial periods beginning on or after 1 January 2026 with an option to early adopt.

 

The Group does not expect any significant impact on the adoption of this standard.

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(c)  Basis of consolidation

(i)   Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

 

The Group measures goodwill at the acquisition date as:

·              the fair value of the consideration transferred; plus  

·              the recognised amount of any non-controlling interest in the acquiree; plus

·            if the business combination achieved in stages, the fair value of the pre-existing equity interest in the     acquiree; less

·              the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities  assumed.

 

When the excess is negative, a bargain purchase gain is recognised immediately in the consolidated income statement.

 

The consideration transferred does not include amounts related to settlement of pre-existing relationships. Such amounts are generally recognised in the consolidated income statement.  Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

Any contingent consideration payable is measured at fair value at the acquisition date.  If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted within equity. Otherwise subsequent changes in the fair value of the contingent consideration are recognised in the consolidated income statement.

 

(ii)  Subsidiaries

   Subsidiaries are those enterprises (including special purpose entities) controlled by the Bank. The Group controls a business if, and only if, it has a) power over the business b) exposure, or rights, to variable returns from its involvement with the business; and c) the ability to use its power over the business to affect the amount of the institution's returns.

 

Power is presumed when an entity directly, or indirectly through its subsidiaries, holds more than 50% of the voting rights.  Where the Group has less than majority voting rights, control may exist through a) agreement with other shareholders or the business itself; b) rights arising from other contractual arrangements; c) the institution's voting rights (de facto power); d) potential voting rights; or e) a combination thereof.

 

The Group considers only substantive voting rights in its assessment of whether it has power over a business. In order to be substantive, rights need to be exercisable when relevant decisions are required to be made and the holder of such rights must have the practical ability to exercise those rights.  When making an assessment of whether the Group controls a business, it considers the voting and other rights emanating from the investment in the business duly funded by the Group itself and its equity of investment accountholders. 

 

 

 

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

(c)  Basis of consolidation (continued)

 

(iii) Non-controlling interests (NCI)

NCI are measured at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.

If less than 100% of a subsidiary is acquired, then the Group elects on a transaction-by-transaction basis to measure non-controlling interests either at:

 

·      Fair value at the date of acquisition, which means that goodwill, or the gain on a bargain purchase, includes a portion attributable to ordinary non-controlling interests; or

·      the holders' proportionate interest in the recognised amount of the identifiable net assets of the acquire, which means that goodwill recognised, or the gain on a bargain purchase, relates only to the controlling interest acquired.

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

(iv)   Special purpose entities

 

Special purpose entities (SPEs) are entities that are created to accomplish a narrow and well-defined objective such as the securitisation of particular assets, or the execution of a specific borrowing or investment transaction and usually voting rights are relevant for the operating of such entities. An investor that has decision-making power over an investee and exposure to variability of returns determines whether it acts as a principal or as an agent to determine whether there is a linkage between power and returns. The Group in its ordinary course of business may manage an asset or a business for the benefit of stakeholders other than its equity holders through an agency (usually investment agency) or similar arrangement. Control does not include situations whereby the institution has the power, but such power is exercisable in a fiduciary capacity, and not for the variable returns to the institution itself. Performance incentives receivable by an agent are in a fiduciary capacity, and hence not considered to be variable returns for the purpose of control assessment

 

The Group in its fiduciary capacity manages and administers assets held in trust and other investment vehicles on behalf of investors. The financial statements of these entities are usually not included in these consolidated financial statements. Information about the Group's fiduciary assets under management is set out in note 25. For the purpose of reporting assets under management, the gross value of assets managed are considered.

 

(v)    Loss of control

When the Group losses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity. Any surplus or deficit arising on the loss of control is recognised in consolidated income statement. Any interest retained in the former subsidiary, is measured at fair value when control is lost. Subsequently it is accounted for as an equity-accounted investee or in accordance with the Group's accounting policy for investment securities depending on the level of influence retained.

 

 

 

 

 

 

 

 

 

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

(c)  Basis of consolidation (continued)

 

(vi)   Equity accounted investees

This comprise investment in associates and joint ventures. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exits when the Group holds between 20% and 50% of the voting power of another entity.  A joint venture is an arrangement in which the Group has joint control, where the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

 

Associates and Joint venters are accounted for under equity method. These are initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investees after the date of acquisition. Distributions received from an investees reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor's proportionate interest in the investees arising from changes in the investee's equity. When the

 

Group's share of losses exceeds its interest in an equity-accounted investees, the Group's carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the equity-accounted investees. Equity accounting is discontinued when an associate is classified as held-for-sale.

 

(vii)      Transactions eliminated on consolidation and equity accounting

Intra-group balances and transactions, and any unrealised income and expenses (except for foreign currency translation gains or losses) from intra-group transactions with subsidiaries are eliminated in preparing the consolidated financial statements. Intra-group gains on transactions between the Group and its equity-accounted investees are eliminated to the extent of the Group's interest in the investees. Unrealised losses are also eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.  Accounting policies of the subsidiaries and equity- accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

(d)  Assets held-for-sale

Classification

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use within twelve months.  A subsidiary acquired exclusively with a view to resale is classified as disposal group held-for-sale and income and expense from its operations are presented as part of discontinued operation.

 

Measurement

Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro-rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group's other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on re-measurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.

 

If the criteria for classification as held for sale are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale and shall measure the asset at the lower of its carrying amount before the asset (or disposal group) was classified as held-for-sale, adjusted for any depreciation, amortisation or revaluations that would have been recognised had the asset (or disposal group) not been classified as held-for-sale and its recoverable amount at the date of the subsequent decision not to sell.

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(e)  Foreign currency transactions

(i)      Functional and presentation currency

Items included in the consolidated financial statements 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 US dollars, which is the Group's functional and presentation currency.

 

(ii)         Transactions and balances

Transactions in foreign currencies are translated into the functional currency using the spot exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at the reporting date.

 

Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary items carried at their fair value, such as certain equity securities measured at fair value through equity, are included in investments fair value reserve.

 

(iii)         Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition are translated into US$ at exchange rates at the reporting date. The income and expenses of foreign operations are translated into US$ at the exchange rates at the date of the transactions. Foreign currency differences are accumulated into foreign currency translation reserve in owners' equity, except to the extent the translation difference is allocated to NCI.

 

When foreign operation is disposed of in its entirety such that control is lost, cumulative amount in the translation reserve is reclassified to consolidated income statement as part of the gain or loss on disposal.

 

(f)   Offsetting of financing instruments

Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.  Income and expense are presented on a net basis only when permitted under AAOIFI, or for gains and losses arising from a group of similar transactions.

 

(g)  Investment securities

Investment securities are categorised as proprietary investments, co-investments and treasury portfolio.

(refer note 3 for categorisation).

 

Investment securities comprise debt type and equity type instruments but exclude investment in subsidiaries and equity-accounted investees (note 4 (c) (ii) and (vi)).

 

(i)   Categorization and classification

The classification and measurement approach for investments in sukuk, shares and similar instruments that reflects the business model in which such investments are managed and the underlying cash flow characteristics. Under the standard, each investment is to be categorized as either investment in:        

i)         equity-type instruments

ii)        debt-type instruments, including:

·      monetary debt-type instruments; and

·      non-monetary debt-type instruments.

iii)       other investment instruments

Unless irrevocable initial recognition choices as per the standard are exercised, an institution shall classify investments as subsequently measured at either of: 

·    amortised cost;

·    fair value through equity (FVTE) or

·    fair value through income statement (FVTIS), on the basis of both:

Ø  the Group's business model for managing the investments; and

Ø  the expected cash flow characteristics of the investment in line with the nature of the underlying Islamic finance contracts.

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(g)        Investment securities (continued)

 

(ii)  Recognition and de-recognition

Investment securities are recognised at the trade date i.e. the date that the Group commits to purchase or sell the asset, at which date the Group becomes party to the contractual provisions of the instrument. Investment securities are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risk and rewards of ownership. 

 

(iii) Measurement

Investment securities are measured initially at fair value plus, except for investment securities carried at FVTIS, transaction costs that are directly attributable to its acquisition or issue.

 

Subsequent to initial recognition, investments carried at FVTIS and FVTE are re-measured to fair value. Gains and losses arising from a change in the fair value of investments carried at FVTIS are recognised in the consolidated income statement in the period in which they arise. Gains and losses arising from a change in the fair value of investments carried at FVTE are recognised in the consolidated statement of changes in owners equity and presented in a separate investment fair value reserve in equity.

 

The fair value gains / (losses) are recognised taking into consideration the split between portions related to owners' equity and equity of investment account holders. When the investments carried at FVTE are sold, impaired, collected or otherwise disposed of, the cumulative gain or loss previously recognised in the statement of changes in owners' equity is transferred to the income statement.

 

Investments at FVTE where the entity is unable to determine a reliable measure of fair value on a continuing basis, such as investments that do not have a quoted market price or there are no other appropriate methods from which to derive reliable fair values, are stated at cost less impairment allowances.

 

(iv) Measurement principles

Amortised cost measurement

The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus capital repayments, plus or minus the cumulative amortisation using the effective profit method of any difference between the initial amount recognised and the maturity amount, minus any reduction (directly or through use of an allowance account) for impairment or uncollectibility. The calculation of the effective profit rate includes all fees and points paid or received that are an integral part of the effective profit rate.

 

Fair value measurement

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date.  When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received.

 

If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), discounted cash flow analyses, price / earnings multiples and other valuation models with accepted economic methodologies for pricing financial instruments.

 

Some or all of the inputs into these models may not be market observable, but are estimated based on assumptions. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument.

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(g)        Investment securities (continued)

(iv)        Measurement principles (continued)

 

Fair value estimates involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. There is no certainty about future events (such as continued operating profits and financial strengths). It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the investments.

 

The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid.

 

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

 

(h)  Financing contracts

Financing contracts comprise Shari'a compliant financing contracts with fixed or determinable payments. These include financing provided through Murabaha, Musharaka, Istisna and Wakala contracts. Financing contracts are recognised on the date at which they are originated and are carried at their amortised cost less impairment allowances, if any.

 

(i)   Assets acquired for leasing

Assets acquired for leasing (Ijarah Muntahia Bittamleek) comprise finance lease assets which are stated at cost less accumulated depreciation and any impairment in value. Under the terms of lease, the legal title of the asset passes to the lessee at the end of the lease term, provided that all lease instalments are settled. Depreciation is calculated on a straight-line basis at rates that systematically reduce the cost of the leased assets over the period of the lease. The Group assesses at each reporting date whether there is objective evidence that the assets acquired for leasing are impaired. Impairment losses are measured as the difference between the carrying amount of the asset (including lease rental receivables) and the estimated recoverable amount. Impairment losses, if any, are recognised in the consolidated income statement.

 

(j)   Placements with and from financial and other institutions

These comprise placements made with/ from financial and other institutions under shari'a compliant contracts.  Placements are usually short term in nature and are stated at their amortised cost. 

 

(k)  Cash and cash equivalents

For the purpose of consolidated statement of cash flows, cash and cash equivalents comprise cash on hand, bank balances and placements with financial institutions) with original maturities of three months or less when acquired that are subject to insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments. Bank balances that are restricted and not available for day-to-day operations of the Group are not included in cash and cash equivalents.

 

(l)   Derivatives held for risk management purposes and hedge accounting.

Derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or liabilities. All derivatives are measured at fair value in the statement of financial position.

 

The Group designates certain derivatives held for risk management as hedging instruments in qualifying hedging relationships.

 

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(l)         Derivatives held for risk management purposes and hedge accounting (continued)

 

Policy applicable generally to hedging relationships

On initial designation of the hedge, the Group formally documents the relationship between the hedging instruments and hedged items, including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both on inception of the hedging relationship and on an ongoing basis, of whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a identified. For a cash flow hedge of a forecast transaction, the Group makes an assessment of whether the forecast transaction is highly probable to occur and presents an exposure to variations in cash flows that could ultimately affect profit or loss.

 

The Group normally designates a portion of the cash flows of a financial instrument for cash flow or fair value changes attributable to a benchmark profit rate risk, if the portion is separately identifiable and reliably measurable.

 

i. Fair value hedges

When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss. The change in fair value of the hedged item attributable to the hedged risk is recognised in profit or loss. If the hedged item would otherwise be measured at cost or amortised cost, then its carrying amount is adjusted accordingly.

 

If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively.

 

Any adjustment up to the point of discontinuation to a hedged item for which the effective profit method is used is amortised to profit or loss as an adjustment to the recalculated effective profit rate of the item over its remaining life. On hedge discontinuation, any hedging adjustment made previously to a hedged financial instrument for which the effective profit method is used is amortised to profit or loss by adjusting the effective profit rate of the hedged item from the date on which amortisation begins. If the hedged item is derecognised, then the adjustment is recognised immediately in profit or loss when the item is derecognised.

 

ii. Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in equity and presented in the hedging reserve within equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The amount recognised in the hedging reserve is reclassified from equity to profit or loss as a reclassification adjustment in the same period as the hedged cash flows affect profit or loss, and in the same line item in the statement of profit or loss and equity.

 

If the hedging derivative expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then hedge accounting is discontinued prospectively. If the hedged cash flows are no longer expected to occur, then the Group immediately reclassifies the amount in the hedging reserve from equity to profit or loss. For terminated hedging relationships, if the hedged cash flows are still expected to occur, then the amount accumulated in the hedging reserve is not reclassified until the hedged cash flows affect profit or loss; if the hedged cash flows are expected to affect profit or loss in multiple reporting periods, then the Group reclassifies the amount in the hedging reserve from equity to profit or loss on a straight-line basis.

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(l)         Derivatives held for risk management purposes and hedge accounting (continued)

 

Other non-trading derivatives

Other non-trading derivatives are recognised on balance sheet at fair value. If a derivative is not held for trading, and is not designated in a qualifying hedging relationship, then all changes in its fair value are recognised immediately in profit or loss as a component of net income from other financial instruments at FVTIS.

 

(m) Investment property

Investment property comprise land plots and buildings. Investment property is property held to earn rental income or for capital appreciation or both but not for sale in the ordinary course of business, use in the supply of services or for administrative purposes. Investment property is measured initially at cost, including directly attributable expenses. Subsequent to initial recognition, investment property is carried at cost less accumulated depreciation and accumulated impairment allowances (if any). Land is not depreciated, and building is depreciated over the period of 30 to 45 years.

 

A property is transferred to investment property when, there is change in use, evidenced by:

end of owner-occupation, for a transfer from owner-occupied property to investment property; or

commencement of an operating ijara to another party, for a transfer from a development property to investment property.

 

Further, an investment property is transferred to development property when, there is a change in use, evidenced by:

commencement of own use, for a transfer from investment property to owner-occupied property;

commencement of development with a view to sale, for a transfer from investment in real estate to development property.

 

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement in the period in which the property is derecognised.

 

(n)  Development properties

Development properties are properties held for sale or development and sale in the ordinary course of business. Development properties are measured at the lower of cost and net realisable value.

 

(o)  Property and equipment

Property and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projection if the recognition criteria are met.  All other repair and maintenance costs are recognised in the consolidated income statement as incurred.

 

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight line method over their estimated useful lives, and is generally recognised in the consolidated income statement.

 

The estimated useful lives of property and equipment of the industrial business assets are as follows:

 

Buildings and infrastructure on lease hold           30 - 50 years

Computers                                                        3 - 5 years

Furniture and fixtures                                         5 - 8 years

Motor vehicles                                                  4 - 5 years

 

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists and where

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(o)        Property and equipment (continued)

 

the carrying values exceed the estimated recoverable amounts, the assets are written down to their recoverable amounts, being the higher of the fair value less costs to sell and their value in use.

 

An item of property and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognised in the consolidated statement of income in the year of derecognition.

 

The assets' residual values, useful lives and methods of depreciation are reviewed annually and adjusted prospectively if appropriate.

 

(p)  Intangible assets

Goodwill

Goodwill that arises on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.

 

Other Intangible assets

Intangible assets acquired separately are initially measured at cost. The cost of intangible assets acquired in a business combination are their fair values as at the date of acquisition.  Subsequently, intangible assets are recognised at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in the consolidated income statement in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite.

 

Intangible assets with finite lives are amortised over the useful economic life of ten years and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at each reporting date. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

 

The amortisation expense on intangible assets with finite lives is recognised in the consolidated statement of income in the expenses category consistent with the function if intangible assets.

 

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Intangible assets with indefinite useful life consists of a license to construct and operate a cement plant in the Kingdom of Bahrain.

 

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of income when the asset is derecognised.

 

(q)  Impairment of exposures subject to credit risk

 

The Group recognises loss allowances for the expected credit losses "ECLs" on:

 

·    Bank balances.

·    Placements with financial institutions.

·    Financing contracts;

·    Lease rental receivables;

·    Investments in Sukuk (debt-type instruments carried at amortised cost);

·    Other receivables; and

·    Undrawn financing commitments and financial guarantee contracts issued.

4      SIGNIFICANT ACCOUNTING POLICIES (continued)

(q)    Impairment of exposures subject to credit risk (continued)

 

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

·    Debt-type securities that are determined to have low credit risk at the reporting date; and

·    Other debt-type securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

When determining whether the credit risk of an exposure subject to credit risk has increased significantly since initial recognition when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment including forward-looking information.

 

The Group assumes that the credit risk on exposure subject to credit risk increased significantly if it is more than 30 days past due. The Group considers an exposure subject to credit risk to be in default when:

·    the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security, if any is held; or

·    the exposure is more than 90 days past due.

 

The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of 'investment grade'. The Group considers this to be BBB- or higher per S&P.

 

The Group applies a three-stage approach to measuring ECL. Assets migrate through the following three stages based on the change in credit quality since initial recognition.

 

Stage 1: 12-months ECL

Stage 1 includes exposures that are subject to credit risk on initial recognition and that do not have a significant increase in credit risk since initial recognition or that have low credit risk. 12-month ECL is the expected credit losses that result from default events that are possible within 12 months after the reporting date. It is not the expected cash shortfalls over the 12-month period but the entire credit loss on an asset weighted by the probability that the loss will occur in the next 12-months.

 

Stage 2: Lifetime ECL - not credit impaired

Stage 2 includes exposures that are subject to credit risk that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognised. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the financial instrument. Expected credit losses are the weighted average credit losses with the life-time probability of default ('PD').

 

4      SIGNIFICANT ACCOUNTING POLICIES (continued)

(q)    Impairment of exposures subject to credit risk (continued)

 

Stage 3: Lifetime ECL - credit impaired

Stage 3 includes exposures that are subject to credit risk that have objective evidence of impairment at the reporting date in accordance with the indicators specified in the CBB's rule book. For these assets, lifetime ECL is recognised.

 

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. They are measured as follows:

·    Exposures subject to credit risk that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);

·    Exposures subject to credit risk that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;

·    Undrawn financing commitment: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn and the cash flows that the Group expects to receive; 

·    Financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover; and

·    ECLs are discounted at the effective profit rate of the exposure subject to credit risk.

 

Credit-impaired exposures

At each reporting date, the Group assesses whether exposures subject to credit risk are credit impaired. An exposure subject to credit risk is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that an exposure is credit-impaired includes the following observable data:

·      significant financial difficulty of the borrower or issuer;

·      a breach of contract such as a default or being more than 90 days past due;

·      the restructuring of a financing facility or advance by the Bank on terms that the Bank would not consider otherwise;

·      it is probable that the borrower will enter bankruptcy or other financial reorganisation; or

·      the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

Loss allowances for exposures subject to credit risk are deducted from the gross carrying amount of the assets.

 

(r)   Impairment of equity investments classified at fair value through equity (FVTE)

In the case of investments in equity securities classified as FVTE. A significant or prolonged decline in the fair value of the security below its cost is an objective evidence of impairment. The Group considers a decline of 30% to be significant and a period of nine months to be prolonged. If any such evidence exists, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in income statement - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are subsequently reversed through equity.

 

(s)  Impairment of non-financial assets

The carrying amount of the Group's non-financial assets (other than those subject to credit risk covered above) are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. The recoverable amount of an asset is the greater of its value in use or fair value less costs to sell. An impairment loss is recognised whenever the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. Impairment losses are reversed only if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

4      SIGNIFICANT ACCOUNTING POLICIES (continued)

(s)    Impairment of non-financial assets (continued)

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. Impairment losses are reversed only if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Separately recognised goodwill is not amortised and is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on separately recognised goodwill are not reversed. 

 

(t)   Clients' funds

These represents amounts received from customers for investments in SPEs or project companies formed as part of its investment management activities pending transfer to these entities. These funds are usually disbursed on capital calls from these entities based on its activities and requirements and are payable on demand. Such funds held by the Group are carried at amortised cost.

 

(u)  Current accounts

Balances in current (non-investment) accounts are recognised when received by the Group. The transactions are measured at the cash equivalent amount received by the Group at the time of contracting. At the end of the accounting period, the accounts are measured at their book value.

 

(v)  Term financing

Term financing represents facilities from financial institutions, and financing raised through Sukuk. Term financing are initially measured at fair value plus transaction costs, and subsequently measured at their amortised cost using the effective profit rate method. Financing cost, dividends and losses relating to the term financing are recognised in the consolidated income statement as finance expense. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

 

(w)  Financial guarantees

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee contract is recognised from the date of its issue. The liability arising from a financial guarantee contract is recognised at the present value of any expected payment to settle the liability, when a payment under the guarantee has become probable. The Group has issued financial guarantees to support its development projects (note 34).

 

(x)  Dividends

Dividends to shareholders is recognised as liabilities in the period in which they are declared.

 

(y)  Share capital and reserves

The Group classifies capital instruments as financial liabilities or equity instruments in accordance with the substance of the contractual terms of the instruments. Equity instruments of the group comprise ordinary shares and equity component of share-based payments and convertible instruments. Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments. 

 

Treasury shares

The amount of consideration paid including all directly attributable costs incurred in connection with the acquisition of the treasury shares are recognised in equity. Consideration received on sale of treasury shares is presented in the financial statements as a change in equity. No gain or loss is recognised on the Group's consolidated income statement on the sale of treasury shares.

 

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(y)        Share capital and reserves (continued)

 

Statutory reserve

The Commercial Companies Law requires that 10 percent of the annual net profit be appropriated to a statutory reserve which is normally distributable only on dissolution. Appropriations may cease when the reserve reaches 50 percent of the paid up share capital.  Appropriation to statutory reserve is made when approved by the shareholders.

 

(z)  Equity of investment account holders

Equity of investment account holders are funds held by the Group in unrestricted investment accounts, which it can invest at its own discretion. The investment account holder authorises the Group to invest the account holders' funds in a manner which the Group deems appropriate without laying down any restrictions as to where, how and for what purpose the funds should be invested.

 

The Group charges management fee (Mudarib fees) to investment account holders. Of the total income from investment accounts, the income attributable to customers is allocated to investment accounts after setting aside provisions, reserves (Profit equalisation reserve and Investment risk reserve) and deducting the Group's share of income as a Mudarib. The allocation of income is determined by the management of the Group within the allowed profit sharing limits as per the terms and conditions of the investment accounts. Only the income earned on pool of assets funded from IAH are allocated between the owners' equity and investment account holders. Administrative expenses incurred in connection with the management of the funds are borne directly by the Group and are not charged separately to investment accounts.

 

The Group allocates specific provision and collective provision to owners' equity. Amounts recovered from these impaired assets is not subject to allocation between the IAH and owners' equity.

 

Investment accounts are carried at their book values and include amounts retained towards profit equalisation, investment risk reserves, if any. Profit equalisation reserve is the amount appropriated by the Group out of the Mudaraba income, before allocating the Mudarib share, in order to maintain a certain level of return to the deposit holders on the investments. Investment risk reserve is the amount appropriated by the Group out of the income of investment account holders, after allocating the Mudarib share, in order to cater against future losses for investment account holders. Creation of any of these reserves results in an increase in the liability towards the pool of unrestricted investment accounts.

 

Restricted investment accounts

Restricted investment accounts represent assets acquired by funds provided by holders of restricted investment accounts and their equivalent and managed by the Group as an investment manager based on either a Mudaraba contract or agency contract. The restricted investment accounts are exclusively restricted for investment in specified projects as directed by the investments account holders. Assets that are held in such capacity are not included as assets of the Group in the consolidated financial statements.

 

(aa) Revenue recognition

Revenue is measured at the fair value of consideration received or receivable. Revenue is recognised to the extent that it is probable that future economic benefits associated with the item of revenue will flow to the Group, the revenue can be measured with reliability and specific criteria have been met for each of the Group's activities as described below:

 

Banking business

 

Income from investment banking activities include deal related income and fee based income.  Deal related income is earned by the Group from structuring and sale of assets at the time of placement of products. Fee based income, in the nature of management fees, performance fee, acquisition fee and exit fee, is recognised when the associated service is provided and income is earned. 

 

 

 

 

 

 

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(aa)       Revenue recognition  (continued)

 

Deal related income are embedded in the gains made from the placement of deals to investors and the portion of the gains relating to each performance obligations is recognized over the investment period. The Group has reviewed and analyzed the terms of the contracts that it has entered into with its investors arising from the placement of its investments and has identified its performance obligations arising from its contracts with investors and its expected continuing involvement with such products. Based on this review, the Group has determined the following two types of performance obligations that the Group is expected to satisfy: (i) by the Group during the year from purchase to the placement of the investment with investors, including deal identification, evaluation, funding, underwriting, maintaining a placement infrastructure, preparing the marketing materials for each deal etc; and (ii) services provided, either on a continuous or adhoc basis, over the period of the investment. As part of its revenue recognition assessment, the Group allocates the gains from deal placements to each of the above distinct performance obligations. The Group completes all of its performance obligations described in (i) above before placing an investment with its investors. Accordingly, the fee relating to this performance obligation is recognized upfront upon placement of the investment with investors. This portion of the placement fee is included under "Deal related income".  A portion of placement gains received upfront for the performance obligation described in (ii) above is deferred and recognized over time, as part of Fees based income, over the expected period of managing the investments.

 

Asset Management fee is recognized as per contractual terms when services are rendered over the period of the contract. Acquisition fee and exit fee are recognized when earned on completion of the underlying transactions. Performance fees are only recognized once it is highly probable that there would be no significant reversal of any accumulated revenue in the future. Estimates are needed to assess the risk that achieved earnings may be reversed before realization due to the risk of lower future overall performance of the underlying investments.

 

Income from placements with / from financial institutions are recognised on a time-apportioned basis over the period of the related contract using the effective profit rate.

 

Dividend income from investment securities is recognised when the right to receive is established.  This is usually the ex-dividend date for equity securities.

 

Finance income / expenses are recognised using the amortised cost method at the effective profit rate of the financial asset / liability.

 

Fees and commission income that are integral to the effective profit rate on a financial asset carried at amortised cost are included in the measurement of the effective profit rate of the financial asset. Other fees and commission income, including account servicing fees, sales commission, management fees, placement and arrangement fees and syndication fees, are recognised as the related services are performed.

 

Income from Murabaha and Wakala contracts are recognised on a time-apportioned basis over the period of the contract using the effective profit method.

 

Profit or losses in respect of the Bank's share in Musharaka financing transaction that commence and end during a single financial period is recognised in the income statement at the time of liquidation (closure of the contract). Where the Musharaka financing continues for more than one financial period, profit is recognised to the extent that such profits are being distributed during that period in accordance with profit sharing ratio as stipulated in the Musharaka agreement.

 

Income from assets acquired for leasing (Ijarah Muntahia Bittamleek) are recognised proportionately over the lease term.

 

Income from sukuk and income / expenses on placements is recognised at its effective profit rate over the term of the instrument.

 

 

 

 

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(aa)       Revenue recognition  (continued)

 

Non-banking business

Revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control - at a point in time or over time - requires judgement.

 

Revenue is recognised when the goods are provided to the customer, which was taken to be the point in time at which the customer accepted the goods and the related risks and rewards of ownership transferred. Revenue was recognised at that point provided that the revenue and cost could be measured reliably, the recovery of the consideration was probable and there was no continuing managerial involvement with the goods.

 

(bb)  Earnings prohibited by Shari'a

The Group is committed to avoid recognising any income generated from non-Islamic sources.  Accordingly, all non-Islamic income is credited to a charity account where the Group uses these funds for charitable means.

 

(cc)  Zakah

Zakah is calculated on the Zakah base of the Group in accordance with FAS 39 issued by AAOIFI using the net assets method. Zakah is paid by the Group based on the consolidated figures of statutory reserve, general reserve and retained earning balances at the beginning of the year. The remaining Zakah is payable by individual shareholders. Payment of Zakah on equity of investment account holders and other accounts is the responsibility of investment account holders.

 

(dd)  Employees benefits

 

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.  A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.  Termination benefits are recognised as an expense when the Group is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy.

Post employment benefits

Pensions and other social benefits for Bahraini employees are covered by the Social Insurance Organisation scheme, which is a "defined contribution scheme" in nature under, and to which employees and employers contribute monthly on a fixed-percentage-of-salaries basis.  Contributions by the Bank are recognised as an expense in consolidated income statement when they are due.

Expatriate and certain Bahraini employees on fixed contracts are entitled to leaving indemnities payable, based on length of service and final remuneration. Provision for this unfunded commitment, has been made by calculating the notional liability had all employees left at the reporting date.  These benefits are in the nature of a "defined benefit scheme" and any increase or decrease in the benefit obligation is recognised in the consolidated income statement.

The Group also operates a voluntary employee saving scheme under which the Group and the employee contribute monthly on a fixed percentage of salaries basis. The scheme is managed and administered by a board of trustees who are employees of the Group. The scheme is in the nature of a defined contribution scheme and contributions by the Group are recognised as an expense in the consolidated income statement when they are due.

 

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

(dd)       Employees benefits  (continued)

Share-based employee incentive scheme

The Bank operates a share-based incentive scheme for its employees (the "Scheme") whereby employee are granted the Bank's shares as compensation on achievement of certain non-market based performance conditions and service conditions (the 'vesting conditions'). The grant date fair value of equity instruments granted to employees is recognised as an employee expense, with a corresponding increase in equity over the period in which the employees become unconditionally entitled to the share awards.

Non-vesting conditions are taken into account when estimating the fair value of the equity instrument but are not considered for the purpose of estimating the number of equity instruments that will vest.  Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value but are considered for the purpose of estimating the number of equity instruments that will vest. The amount recognised as an expense is adjusted to reflect the number of share awards for which the related service and non-market performance vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of share awards that do meet the related service and non-market performance conditions at the vesting date. Amount recognised as expense are not trued-up for failure to satisfy a market condition.

 

(ee)       Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

 

(ff)    Onerous contracts

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from the contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. 

 

(gg)      Trade date accounting

All "regular way" purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.

 

(hh)      Investment account holder protection scheme

Funds held with the Group in unrestricted investment accounts and current accounts of its retail banking subsidiary are covered by the Deposit Protection Scheme (the Scheme) established by the Central Bank of Bahrain regulation in accordance with Resolution No (34) of 2010.

 

(ii)  Income tax

The Group is exposed to taxation by virtue of operations of subsidiaries. Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be realised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 

Currently, the Group does not have any material current or deferred tax exposure that requires recognition in the consolidated financial statements.

4          SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(jj)  Ijarah

Identifying an Ijarah

At inception of a contract, the Group assesses whether the contract is Ijarah, or contains an Ijarah. A contract is Ijarah, or contains an Ijarah if the contract transfers the usufruct (but not control) of an identified asset for a period of time in exchange for an agreed consideration.

At the commencement date, the Group shall recognises a right-of-use (usufruct) asset and a net ijarah liability

 

i)      Right-of-use (usufruct) asset

On initial recognition, the lessee measures the right-of-use asset at cost. The cost of the right-of-use asset comprises of:

•      The prime cost of the right-of-use asset;

•      Initial direct costs incurred by the lessee; and

•      Dismantling or decommissioning costs.

 

The prime cost is reduced by the expected terminal value of the underlying asset. If the prime cost of the right-of-use asset is not determinable based on the underlying cost method (particularly in the case of an operating Ijarah), the prime cost at commencement date may be estimated based on the fair value of the total consideration paid/ payable (i.e. total Ijarah rentals) against the right-of-use assets, under a similar transaction.

 

After the commencement date, the lessee measures the right-of-use asset at cost less accumulated amortisation and impairment losses, adjusted for the effect of any Ijarah modification or reassessment.

 

The Group amortises the right-of-use asset from the commencement date to the end of the useful economic life of the right-of-use asset, according to a systematic basis that is reflective of the pattern of utilization of benefits from the right-of-use asset. The amortizable amount comprises of the right-of-use asset less residual value, if any.

 

The Group determines the Ijarah term, including the contractually binding period, as well as reasonably certain optional periods, including:

•      Extension periods if it is reasonably certain that the Group will exercise that option; and/ or

•      Termination options if it is reasonably certain that the Bank will not exercise that option.

 

The Group carries out impairment assessment to determine whether the right-of-use asset is impaired and to account for any impairment losses. The impairment assessment takes into consideration the salvage value, if any. Any related commitments, including promises to purchase the underlying asset, are also considered.

 

ii)      Net ijarah liability

The net ijarah liability comprises of the gross Ijarah liability, plus deferred Ijarah cost (shown as a contra-liability).

The gross Ijarah liability shall be initially recognised as the gross amount of total Ijarah rental payables for the Ijarah term. The rentals payable comprise of the following payments for the right to use the underlying asset during the Ijarah term:

•      Fixed Ijarah rentals less any incentives receivable;

•      Variable Ijarah rentals including supplementary rentals; and

• Payment of additional rentals, if any, for terminating the Ijarah (if the Ijarah term reflects the lessee  exercising the termination option).

 

 

4    SIGNIFICANT ACCOUNTING POLICIES (continued)

(jj)         Ijarah (continued)

 

Advance rentals paid are netted-off with the gross Ijarah liability.

Variable Ijarah rentals are Ijarah rentals that depend on an index or rate, such as payments linked to a consumer price index, financial markets, regulatory benchmark rates, or changes in market rental rates. Supplementary rentals are rentals contingent on certain items, such as additional rental charge after provision of additional services or incurring major repair or maintenance. As of 31 December 2023, the Group did not have any contracts with variable or supplementary rentals.

After the commencement date, the Group measures the net Ijarah liability by:

•      Increasing the net carrying amount to reflect return on the Ijarah liability (amortisation of deferred Ijarah cost);

•      Reducing the carrying amount of the gross Ijarah liability to reflect the Ijarah rentals paid; and

•      Re-measuring the carrying amount in the event of reassessment or modifications to Ijarah contract, or reflect revised Ijarah rentals.

•      The deferred Ijarah cost is amortised to income over the Ijarah terms on a time proportionate basis, using the effective rate of return method.

After the commencement date, the Group recognises the following in the income statement:

•      Amortisation of deferred Ijarah cost; and

•      Variable Ijarah rentals (not already included in the measurement of Ijarah liability) as and when the triggering events/ conditions occur.

 

Ijarah contract modifications

After the commencement date, the Group accounts for Ijarah contract modifications as follows:

•      Change in the Ijarah term: re-calculation and adjustment of the right-of-use asset, the Ijarah liability, and the deferred Ijarah cost; or

•      Change in future Ijarah rentals only: re-calculation of the Ijarah liability and the deferred Ijarah cost only, without impacting the right-of- use asset.

 

An Ijarah modification is considered as a new Ijarah component to be accounted for as a separate Ijarah for the lessee, if the modification both additionally transfers the right to use of an identifiable underlying asset and the Ijarah rentals are increased corresponding to the additional right-of-use asset.  For modifications not meeting any of the conditions stated above, the Group considers the Ijarah as a modified Ijarah as of the effective date and recognises a new Ijarah transaction. The Group recalculates the Ijarah liability, deferred Ijarah cost, and right-of-use asset, and de-recognise the existing Ijarah transaction and balances.

 

Expenses relating to underlying asset.

Operational expenses relating to the underlying asset, including any expenses contractually agreed to be borne by the Group, are recognised by the Group in income statement in the period incurred. Major repair and maintenance, takaful, and other expenses incidental to ownership of underlying assets (if incurred by lessee as agent) are recorded as receivable from lessor.

 

Recognition exemptions and simplified accounting for the lessee

The Group does not to apply the requirements of Ijarah recognition and measurement of recognizing right-of-use asset and lease liability for the following:

•      Short-term Ijarah; and

•      Ijarah for which the underlying asset is of low value.

 

Short-term Ijarah exemption is applied on a whole class of underlying assets if they have similar characteristics and operational utility. However, low-value Ijarah exemption is applied on an individual asset/ Ijarah transaction, and not on group/ combination basis.

 

 

 

5    JUDGEMENTS AND ESTIMATES IN APPLYING ACCOUNTING POLICIES

The Group makes estimates and assumptions that effect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events.

 

(a)    Judgements

Establishing the criteria for determining whether credit risk on an exposure subject to credit risk has increased significantly since initial recognition, determining methodology for incorporating forward looking information into measurement of ECL and selection and approval of models used to measure ECL is set out in note 4(q) and note 35(a).

 

(i)         Classification of investments

In the process of applying the Group's accounting policies, management decides on acquisition of an investment whether it should be classified as investments carried at fair value through income statement or investments carried at fair value through equity or investments carried at amortised cost. The classification of each investment reflects the management's intention in relation to each investment and is subject to different accounting treatments based on such classification (note 4g(i)). 

 

(ii)        Special purpose entities

The Group sponsors the formation of special purpose entities (SPE's) primarily for the purpose of allowing clients to hold investments. The Group provides corporate administration, investment management and advisory services to these SPE's, which involve the Group making decisions on behalf of such entities. The Group administers and manages these entities on behalf of its clients, who are by and large third parties and are the economic beneficiaries of the underlying investments. The Group does not consolidate SPE's that it does not have the power to control. In determining whether the Group has the power to control an SPE, judgements are made about the objectives of the SPE's activities, its exposure to the risks and rewards, as well as about the Group intention and ability to make operational decisions for the SPE and whether the Group derives benefits from such decisions.

 

(iii)       Impairment of equity investments at fair value through equity - (refer to note 4 (g) (iii)

 

(b)    Estimations

 

(i)    Impairment of exposures subject to credit risk carried at amortised cost

Determining inputs into ECL measurement model including incorporation of forward-looking information is set out in note 4(q) and note 35(a).

 

(ii)   Measurement of fair value of unquoted equity investments

The group determines fair value of equity investments that are not quoted in active markets by using valuation techniques such as discounted cashflows, income approach and market approaches. Fair value estimates are made at a specific point in time, based on market conditions and information about the investee companies. These estimates are subjective in nature and involve uncertainties and matter of significant judgment and therefore, cannot be determined with precision. There is no certainty about future events such as continued operating profits and financial strengths. It is reasonably possible based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the investments. In case where discounted cash flows models have been used to estimate fair values, the future cashflows have been estimated by the management based on information form and discussion with representatives of investee companies and based on the latest available audited and unaudited financial statements. The basis of valuation has been reviewed by the management in terms of the appropriateness of the methodology, soundness of assumptions and correctness of calculations and have been approved by the board of directors for inclusion in the consolidated financial statements.

 

5          JUDGEMENTS AND ESTIMATES IN APPLYING ACCOUNTING POLICIES (continued)

 

Valuation of equity investments are measured at fair value through equity which involves judgment and is normally based on one of the following:

-    Valuation by independent external value for underlying properties / projects;

-    Recent arms-length market transaction;

-    Current fair value of another contract that is substantially similar;

-    Present value of expected cash flows at current rates applicable for items with similar terms and risk characteristics; or

-    Application of other valuation models.

 

(iii)  Impairment of investment property

The Group conducts impairment assessment of investment property periodically using external independent property valuers to value the property. The fair value is determined based on the market value of the property using either sales comparable approach, the residual value basis, replacement cost or the market value of the property considering its current physical condition. The Group's investment properties are situated in Bahrain, UAE and Morocco. Given the dislocation in the property market and infrequent property transactions, it is reasonably possible, based on existing knowledge, that the current assessment of impairment could require a material adjustment to the carrying amount of these assets within the next financial year due to significant changes in assumptions underlying such assessments.

 

(iv)   Impairment of other non-financial assets and cash generating units

Investment in associates and recognised goodwill are subject to an impairment based on indicators of performance and market conditions. Cash generating units include the Group's investments in certain subsidiaries and equity-accounted investees and investment property that generate cash flows that are largely independent from other assets and activities of the Group. The basis of impairment assessment for such cash generating units is described in accounting policy note 4 (s). For equity-accounted investees with indicators of impairment, the recoverable amounts is determined based on higher of fair value less costs to sell (FVLCTS); and value in use.

 

The recoverable amount for the equity-accounted investees was determined using a combination of income and market approaches of valuations. The objective of valuation techniques is to determine whether the recoverable amount is greater than the carrying amount.

 

 

(v)    Estimating net realisable value of development property

Development property is stated at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less estimated selling expenses. The board of directors of the Group has forecasted the cost of completion of development property and has engaged independent valuers to estimate the residual value of the development property based on estimated market selling prices for similar properties. Net realisable value estimates are made at a specific point in time, based on market conditions and information about the expected use of development property. These estimates involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. There is no certainty about future events. It is reasonably possible, based on existing knowledge, that outcomes within the next financial year that are different from assumptions could require a material adjustment to the carrying amount of the development property.

 

 

 

6          CASH AND BANK BALANCES

	31 December 2023		31 December 2022
Cash	8,193		9,098
Balances with banks	185,857		714,968
Balances with Central Bank of Bahrain:
-     Current account	107,524		65,751
-     Reserve account*	75,310		68,422
	376,884		858,239

 

*The reserve account with the Central Bank of Bahrain are not available for day-to-day operational purposes. The cash and bank balances are net of ECL of US$ 27 thousand (2022: US$ 11 thousand).

 

7          TREASURY PORTFOLIO

 

	31 December 2023		31 December 2022
Placements with financial institutions	1,458,368		729,311
Profit rate swap and foreign currency forwards (a)	2,195		2,675
Equity type investments
At fair value through equity
-     Quoted sukuk (b)	33,326		32,966
At fair value through income statement -     Structured notes  (a) -     Quoted fund   (a)	404,839 27,099		371,978 -
Debt type investments
At fair value through equity
-     Quoted sukuk (b)	784,300		846,205
At amortised cost
-     Quoted sukuk *	2,447,489		2,240,354
-     Unquoted sukuk	3,494		3,494
Less: Impairment allowances (note 23)	(26,078)		(16,963)
	5,135,032		4,210,020

 

* Short-term and medium-term facilities of US$ 1,857,388 thousand (31 December 2022: US$ 1,653,875 thousand) are secured by quoted sukuk of US$ 2,762,506 thousand (31 December 2022: US$ 2,506,041 thousand), structured notes of US$ 404,839 thousand (31 December 2022: US$ 371,928  thousand). Additionally this amount is net of restatement of US$ 7,482 thousands (refer note 38).

 

7     TREASURY PORTFOLIO (continued)

 

a)     Investments - At fair value through income statement

	2023		2022
At 1 January	374,653		445,183
Additions	102,857		52,602
Disposals	(86,547)		(74,734)
Fair value changes, net	43,170		(48,398)
At 31 December	434,133		374,653

 

b)     Investments - At fair value through equity

	2023		2022
At 1 January	879,171		1,656,088
Additions	9,951		319,192
Disposals / Transfers	(69,273)		(123,495)
Amortization	(1,346)		(7,192)
Reclassification to amortized cost	-		(935,514)
Restatement Impact (note 38)	(15,271)		-
Fair value changes	14,394		(29,908)
At 31 December	817,626		879,171

8          FINANCING CONTRACTS

	31 December 2023		31 December 2022
Murabaha	1,029,324		982,170
Wakala	-		239
Mudharaba	20,564		17,336
Ijarah assets	559,409		499,865
	1,609,297		1,499,610
Less: Impairment allowances	(71,983)		(64,372)
	1,537,314		1,435,238

 

Murabaha financing receivables are net of deferred profits of US$ 41,727 thousand                                                           (2022: US$ 50,133 thousand).

 

31 December 2023	Stage 1	Stage 2	Stage 3	Total
Financing contracts (gross)	1,192,748	284,047	132,502	1,609,297
Expected credit loss	(8,091)	(23,360)	(40,532)	( 71,983)
Financing contracts (net)	1,184,657	260,687	91,970	1,537,314

 

31 December 2022	Stage 1	Stage 2	Stage 3	Total
Financing contracts (gross)	1,286,549	143,496	69,565	1,499,610
Expected credit loss	(18,046)	(11,990)	(34,336)	(64,372)
Financing contracts (net)	1,268,503	131,506	35,229	1,435,238

8     FINANCING CONTRACTS (continued)

 

The movement on impairment allowances is as follows:

 

Impairment allowances	Stage 1	Stage 2	Stage 3	Total
Balance at 1 January 2023	18,046	11,990	34,336	64,372
Net transfers	(3,576)	3,130	446	-
Net charge for the year (note 23)	(6,379)	8,240	8,349	10,210
Write-off	-	-	(2,599)	(2,599)
At 31 December 2023	8,091	23,360	40,532	71,983

 

Impairment allowances	Stage 1	Stage 2	Stage 3	Total
Balance at 1 January 2022	19,995	7,109	44,345	71,449
Net transfers	2,403	(1,411)	(992)	-
Net charge for the year (note 23)	(4,352)	6,292	4,995	6,935
Write-off	-	-	(14,012)	(14,012)
At 31 December 2022	18,046	11,990	34,336	64,372

 

9          INVESTMENT IN REAL ESTATE

	31 December 2023		31 December 2022
Investment Property
-     Land	483,685		556,215
-     Building	141,471		194,050
	625,156		750,265
Development Property
-     Land	165,565		147,393
-     Building	581,211		389,427
	746,776		536,820
	1,371,932		1,287,085

 

(i)   Investment property

Investment property includes land plots and buildings in GCC, Europe and North Africa. Investment property of carrying amount of US$ Nil million (2022: US$ 39.9 million) is pledged against Wakala facilities and Ijarah facility (note 15).

 

The fair value of the Group's investment property at 31 December 2023 was US$ 746,496 thousand
(31 December 2022: US$ 931,291 thousand) based on a valuation carried out by an independent external property valuers who have recent experience in the location and category of the asset being valued. These are level 3 valuations in fair value hierarchy.

 

	2023		2022
At 1 January	750,265		592,834
Additions during the year	69,737		195,008
Depreciation	(3,271)		(2,805)
Disposals / transfers	(191,575)		(34,772)
At 31 December	625,156		750,265

9     INVESTMENTS IN REAL ESTATE (continued)

 

(ii)   Development properties

 

This represent properties under development for sale.

 

	2023		2022
At 1 January	536,820		1,312,764
Additions	227,823		70,849
Disposals / transfers	(17,867)		(846,793)
At 31 December	746,776		536,820

 

10         PROPRIETARY INVESTMENTS

	31 December 2023		31 December 2022
Equity type investments
At fair value through income statement (i)
-     Unquoted securities	2,942		9,480
-     Listed securities	14,252		-
	17,194		9,480
At fair value through equity
-     Equity type Sukuk	827,012		836,251
-     Unquoted equity securities (iii)	64,045		55,893
	891,057		892,144
Equity-accounted investees (iv)	137,390		103,471
Impairment allowance	(914)		(42)
	1,044,727		1,005,053

 

(i)         Equity type investments - At fair value through income statement

 

	2023		2022
At 1 January	9,480		10,000
Disposals,net	(6,538)		(520)
At 31 December	2,942		9,480

 

(ii)         Listed equity securities at fair value through equity

	2023		2022
At 1 January	-		13
Additions	16,619		-
Fair value	(2,367)		(13)
At 31 December	14,252		-

 

10   PROPRIETARY INVESTMENTS (continued)

(iii)        Unquoted equity securities fair value through equity

	2023		2022
At 1 January	55,893		91,425
Additions	9,319		6,050
Disposal / Transfers	(1,167)		(41,582)
At 31 December	64,045		55,893

 

(iv)        Equity-accounted investees

Equity-accounted investees represents investments in the following material entities:

 

Name	Country of incorporation	% Holding		Nature of business
		2023	2022
Capital Real Estate Projects Company B.S.C. (c)	Kingdom of Bahrain	30%	30%	Real estate holding and development
Enshaa Development Real Estate B.S.C. (c)	Kingdom of Bahrain	33.33%	33.33%	Holding plot of land in Kingdom of Bahrain.
Infracorp B.S.C. (c)	Kingdom of Bahrain	40%	40%	Management of Real Estate
LPOD and Domina*	Kingdom of Bahrain	28.14%	-	Real estate holding and development

 

	2023		2022
At 1 January	103,471		69,003
Additions	37,024		80,000
Disposals	-		(57,437)
Other reserves of equity accounted investee	(13,612)		-0
Share of profit for the year, net	10,507		11,905
At 31 December 2023	137,390		103,471

 

Summarised financial information of entities that have been equity-accounted investments not adjusted for the percentage ownership held by the Group (based on most recent management accounts):

 

Infracorp B.S.C. (c)	2023		2022
Total assets	1,645,707		1,687,534
Total liabilities	402,983		418,012
Equity type sukuk	900,000		900,000
Total revenues	216,075		130,360
Total profit (attributable to shareholders)	45,466		33,190

 

Other equity-accounted investees	2023		2022
Total assets	211,202		286,223
Total liabilities	63,172		20,647
Total revenues	5,955		12,097
Total loss	(4,223)		(4,630)

 

11         CO-INVESTMENTS

	31 December 2023		31 December 2022
At fair value through equity
-     Unquoted equity securities	247,048		131,553
At fair value through income statement
-     Unquoted equity securities	9,168		10,498
Provision	(1,606)		-
	254,610		142,051

 

	2023		2022
At 1 January	142,051		171,877
Additions	116,214		58,751
Disposals	(915)		(92,195)
Impairment allowance	(1,606)		-
Fair value change	(1,134)		3,618
At 31 December	254,610		142,051

 

12         RECEIVABLES AND OTHER ASSETS

	31 December 2023		31 December 2022
Investment banking receivables	307,597		193,923
Receivable from equity-accounted investee	72,923		62,000
Financing to projects, net	12,241		26,744
Receivable on sale of development properties	16,376		16,341
Advances and deposits	62,416		61,613
Employee receivables	7,443		5,067
Profit on sukuk receivable	17,409		18,766
Lease rentals receivable	4,025		6,117
Prepayments and other receivables	295,158		208,614
Less: impairment allowance net (note 23)	(7,948)		(9,316)
	787,640		589,869

 

13         PROPERTY AND EQUIPMENT

	31 December 2023		31 December 2022
Land	73,291		86,839
Buildings and other leased assets	158,541		80,709
Others including furniture, vehicles and equipment	42,889		65,188
	274,721		232,736

Depreciation on property and equipment during the year was US$ 8,132 thousand                                                (2022: US$ 3,036 thousand).

 

 

14         PLACEMENTS FROM NON-FINANCIAL INSITUTIONS AND INDIVIDUALS

 

These comprise placements in the form of murabaha and wakala contracts with financial, non-financial institutions, and individuals part of the Group's treasury activities. This includes US$ 84.3 million             (2022: US$ 84.3 million) from a non-financial entity which is currently subject to regulatory sanctions.  

 

15         TERM FINANCING

	31 December 2023		31 December 2022
Murabaha financing	1,880,910		1,680,940
Sukuk	241,777		242,076
Ijarah financing	-		17,603
Other borrowings	1,620		1,579
	2,124,307		1,942,198

 

	31 December 2023		31 December 2022
Current portion	757,075		987,320
Non-current portion	1,367,232		954,878
	2,124,307		1,942,198

 

Murabaha financing comprise:

Short-term and medium-term facilities of US$ 1,857,388 thousand (31 December 2022: US$ 1,653,875 thousand) are secured by quoted sukuk of US$ 2,762,506 thousand (31 December 2022: US$ 2,506,041 thousand) and structured notes of US$ 404,839 thousand (31 December 2022: US$ 301,853 thousand).

 

Sukuk

During 2020, the Group raised US$ 500,000 thousand through issuance of unsecured sukuk certificates with a profit rate of 7.5% p.a. repayable by 2025 till date. The Group has repurchased cumulative sukuk of         US$ 265,610 thousand. The outstanding sukuk also includes accrued profit of US$ 8,743 thousand.

 

 

16         OTHER LIABILITIES

	31 December 2023		31 December 2022
Employee related accruals	15,764		15,544
Board member allowances and accruals	1,500		1,500
Unclaimed dividends	2,312		4,754
Mudaraba profit accrual	22,814		13,184
Provision for employees' leaving indemnities	5,127		4,125
Zakah and Charity fund	6,553		5,924
Advance received from customers	2,105		6,648
Accounts payable	236,443		127,878
Deal related payables	192,288		138,657
Other accrued expenses and payables	63,150		105,149
	548,056		423,363

 

 

17         EQUITY OF INVESTMENT ACCOUNT HOLDERS (EIAH)

	31 December 2023		31 December 2022
Placements and borrowings from financial institutions - Wakala	2,312,153		25,458
Mudaraba	1,138,853		1,188,216
	3,451,006		1,213,674

 

The funds received from investment account holders have been commingled and jointly invested with the Group in the following asset classes as at 31 December:

 

	31 December 2023		31 December 2022
Balances with banks	2,030,152		274,502
CBB reserve account	75,310		68,422
Placements with financial institutions	-		166,130
Debt type instruments - sukuk	222,448		456,310
Financing contracts	1,004,809		248,310
Investment securities	71,334		-
Investment in real estate	45,618		-
Other Assets	1,335		-
	3,451,006		1,213,674

 

As at 31 December 2023, the balance of profit equalisation reserve and investment risk reserve was Nil (2022: Nil).

 

The Group does not allocate non-performing assets to IAH pool. All the impairment allowances are allocated to owners' equity. Recoveries from non-performing financial assets are also not allocated to IAH accountholders. Only profits earned on pool of assets funded from IAH are allocated between the owners' equity and IAH. The Group did not charge any administration expenses to investment accounts.

 

17   EQUITY OF INVESTMENT ACCOUNT HOLDERS (EIAH) (continued)

 

Following is the average percentage for profit allocation between owner's equity and investment accountholders.

	2023			2022
	Mudarib share	IAH shares		Mudarib share	IAH shares
1 month Mudharaba *	50.36%	49.64%		65.01%	34.99%
3 months Mudharaba	14.08%	85.92%		52.56%	47.44%
6 months Mudharaba	10.48%	89.52%		52.53%	47.47%
12 months Mudharaba	20.63%	79.37%		42.04%	57.96%
18 months Mudharaba	22.74%	77.26%		53.58%	46.42%
24 months Mudharaba	1.81%	98.19%		24.67%	75.33%
36 months Mudharaba	23.12%	76.88%		38.08%	61.92%

* Includes savings, Al Waffer and Call Mudaraba accounts.

 

The investors' share of the return on jointly invested assets and distribution to investment account holders were as follows:

	2023		2022
Returns from jointly invested assets	(75,236)		(79,210)
Banks share as Mudarib	18,053		41,159
Return to investment account holders	(57,183)		(38,051)

 

The above returns as the Mudarib are forming part of Income from commercial banking in the statement of income. During the year, average mudarib share as a percentage of total income allocated to IAH was 28.13% (2022: 45.06%) as against the average mudarib share contractually agreed with IAH. Hence the Group sacrificed average mudarib fees of 38.44% (2022: 23.50%).

 

The Group does not share profits resulting from the assets funded through current accounts and other funds received on the basis other than mudarba contract and wakala contract.

The funds raised from IAH are deployed in the assets on a priority basis after setting aside certain amount in cash and placement with Banks for liquidity management purposes.

 

 

18   SHARE CAPITAL

Authorised:	31 December 2023		31 December 2022
9,433,962,264 shares of US$ 0.265 each (2022: 9,433,962,264 shares of US$ 0.265 each)	2,500,000		2,500,000
Issued and fully paid up:
3,832,593,838 shares of US$ 0.265 each (2022: 3,832,593,838 shares of US$ 0.265 each)	1,015,637		1,015,637

 

The movement in the share capital during the year is as follows:

	2023		2022
At 1 January	1,015,637		1,000,637
Issue of bonus shares	-		15,000
At 31 December	1,015,637		1,015,637

 

As at 31 December 2023, the Bank held 353,456,810 (31 December 2022: 341,150,768) treasury shares..

 

Additional information on shareholding pattern

(i)         The Bank has only one class of equity shares and the holders of these shares have equal voting rights.

(ii)           Distribution schedule of equity shares, setting out the number of holders and percentage in the following categories:

31 December 2023 Categories*	Number of shares	Number of Shareholders	% of total outstanding shares
Less than 1%	2,344,580,087	8,632	61.17%
1% up to less than 5%	1,239,114,234	17	32.33%
5% to less than 10%	248,899,517	1	6.50%
Total	3,832,593,838	8,650	100%

           

31 December 2022 Categories*	Number of shares	Number of Shareholders	% of total outstanding shares
Less than 1%	2,260,705,577	8,304	58.98%
1% up to less than 5%	1,023,998,191	14	26.72%
5% to less than 10%	547,890,070	2	14.30%
Total	3,832,593,838	8,320	100%

 

                * Expressed as a percentage of total outstanding shares of the Bank.

           

Appropriations and changes in capital structure

Appropriations, if any, are made when approved by the shareholders.

 

18  SHARE CAPITAL (continued)

 

Proposed appropriations

 

The Board of Directors proposes the following appropriations for 2023 subject to shareholders' and regulatory approval:

 

·      Cash dividend of 6.2% of the paid-up share capital net of treasury shares;

·      To allocate an amount of US$ 2,000,000 to charity activities and civil society organizations;

·      Transfer of US$ 10,522,700 to statutory reserve; and;

·      Board remuneration of US$ 1,750,000,

·     

 

19   SHARE GRANT RESERVE

 

The Bank operates a share-based incentive scheme for its employees (the "Scheme") whereby employee are granted the Bank's shares as compensation on achievement of certain non-market based performance conditions and service conditions (the 'vesting conditions'). The grant date fair value of equity instruments granted to employees is recognised as an employee expense, with a corresponding increase in equity over the period in which the employees become unconditionally entitled to the share awards. During the year the Bank has recognized US$ 1,000 thousands.

 

20   OTHER INCOME

 

Other income includes write back of liabilities no longer required of US$ 4.35 million (2022: US$ 10.31 million) after settlement arrangements were concluded for some of the non-banking subsidiaries and income of non-financial subsidiaries of US$ 9 million (2022: US$ 9.6 million).

 

21   STAFF COST

	2023		2022
Salaries and benefits	74,009		60,232
Social insurance and end of service benefits	2,728		3,253
Share-based payments	1,000		6,930
	77,737		70,415

 

 

21      STAFF COST (continued)

 

As per the Group's Variable Incentive Policy, a portion of the annual performance bonus is issued in the form of share awards to its senior management employees. These awards include deferred incentives in the form of shares, share purchase plans and long-term incentive plans with different conditions.  The terms of the award, including the type of plan, extent of funding, pricing and deferral period is determined for each year by the Board Nomination, Remuneration and Governance Committee of the Bank.

 

Performance year	Nature of award	Staff coverage	Summary of deferral and vesting conditions
Annual Awards	Employee Share Purchase Plan & Deferred Annual Bonus (DAB)	Covered persons in business and control functions who exceed total compensation thresholds as per CBB Remuneration Regulations and Bank's Variable Remuneration policy.	A portioned of the annual incentive is issued in form of shares / awards and released rateably over the 3 year deferral period. The issue price is determined based on a defined adjustment to market price on the date of the award. No future performance conditions or service conditions associated with the DAB shares.  DAB Shares are entitled for dividends, if any, but released over the deferral period.
2020 - 2022	Long term incentive plan (LTIP) share awards	Select Senior Management	Under the future performance awards structure of the Bank, an LTIP scheme was introduced where the employees are compensated in form of shares on achievement of certain pre-determined performance conditions.  The LTIP sets performance and service conditions and has a rateable vesting schedule over a period of 3 - 6 years. Accelerated vesting may occur on exceeding performance conditions leading to true up of share-based payment charges. The issue price is determined based on a defined adjustment to market price on the date of the award. The LTIP shares include leverage features and are entitled to dividends, if any, released along with the vested shares.

 

 

	2023		2022
	No. of Shares	US$ 000's	No. of Shares	US$ 000's
Opening balance	203,507,210	28,657	184,325,599	17,082
Awarded during the year	43,845,042	16,950	145,490,734	22,532
Bonus shares			4,461,209	-
Forfeiture and other adjustments	(1,300,687)		-	-
Transfer to employees / settlement	(96,976,385)	(12,398)	(130,770,332)	(10,957)
Closing balance	149,075,180	33,209	203,507,210	28,657

 

 

In case of the employee share purchase plans including LTIP, the US$ amounts reported in the table above represents the gross vesting charge of the respective schemes as determined under IFRS 2 - Share-based payments at the date of the award and not the value of the shares.  The release of these shares are subject to future retention, performance and service conditions.  The number of shares included in the table above refer to the total employee participation in the various plans that remain unvested and undelivered as at the reporting date.

 

 

22   OTHER OPERATING EXPENSES

	2023		2022
Investment advisory expenses	18,895		18,571
Rent	5,629		2,925
Professional and consultancy fees	12,510		13,213
Legal expenses	2,593		2,183
Depreciation	11,244		5,841
Expenses relating to non-banking subsidiaries	5,850		11,570
Other operating expenses	46,915		23,229
	103,636		77,532

 

23   IMPAIRMENT ALLOWANCES

	2023		2022
Bank balances	16		(13)
Treasury portfolio (note 7)	9,115		2,836
Financing contracts (note 8)	10,210		6,935
Co-investments (note 11)	1,606		-
Proprietary investments (note 10)	872		(82)
Other receivables (note 12)	(1,368)		(6,320)
Commitments and financial guarantees	8		(46)
	20,459		3,310

 

 

 

24   RELATED PARTY TRANSACTIONS

 

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties include entities over which the Group exercises significant influence, major shareholders, directors and executive management of the Group. A significant portion of the Group's management fees are from entities over which the Group exercises influence (assets under management). Although these entities are considered related parties, the Group administers and manages these entities on behalf of its clients, who are by and large third parties and are the economic beneficiaries of the underlying investments. The transactions with these entities are based on agreed terms.

 

The significant related party transactions during the year and balances as at year end included in these consolidated financial statements are as follows:

 

	Related parties
2023	Associates / Joint venture	Key management personnel	Significant shareholders / entities in which directors are interested	Assets under management including special purpose and other entities	Total
Assets
Cash and bank balances
Treasury portfolio				70,546	70,546
Financing contracts	-	11,202	85,055	19,489	115,746
Proprietary investment	827,161	-	7,686	13,667	848,514
Co investment	-	-	-	243,393	243,393
Receivables and other assets	190,505	6,731	1,507	330,038	528,781
Liabilities
Current account	2,971	16	29,233	19,122	51,342
Placements from financial, non-financial institutions and individuals	-	5,602	8,622	-	14,224
Payables and accruals	96,115	7,196	-	198,943	302,254
Equity of investment account holders	2,485	5,027	44,145	14,422	66,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24      RELATED PARTY TRANSACTIONS (continued)

 

	Related parties
2023	Associates / Joint venture	Key management personnel	Significant shareholders / entities in which directors are interested	Assets under management including special purpose and other entities	Total
Income
Income from investment banking	-	-	-	182,173	182,173
Income from commercial banking
-           Income from financing	-	790	8,536	-	9,326
-           Less: Return to investment account holders	(37)	(249)	(14,257)	(16)	(14,559)
- Less: Finance expense	-	(271)	(11,655)	-	(11,926)
Treasury and other income	35,069	-	-	6,333	41,402
Expenses
Operating expenses	-	(1,180)	-	(151)	(1,331)
Staff Cost	-	(18,206)	-	-	(18,206)
Finance Cost	-	-	-	(3,188)	(3,188)

 

24      RELATED PARTY TRANSACTIONS (continued)

 

	Related parties
2022	Associates / Joint venture	Key management personnel	Significant shareholders / entities in which directors are interested	Assets under management including special purpose and other entities	Total
Assets
Cash and bank balances	-	-	-	12,777	12,777
Treasury portfolio				70,656	70,656
Financing contracts	-	8,411	38,181	18,201	64,793
Proprietary investment	836,251	-	6,058	-	842,309
Co investment	-	-	-	142,665	142,665
Receivables and other assets	62,045	5,326	721	198,231	266,323
Liabilities
Current account	1,918	183	2,003	13,973	18,077
Placements from financial, non-financial institutions and individuals	-	3,379	22,697	24,077	50,153
Payables and accruals	36,009	1,565	-	139,529	177,103
Equity of investment account holders	3,239	2,875	33,328	148,114	187,556

 

 

	Related parties
2022	Associates / Joint venture	Key management personnel	Significant shareholders / entities in which directors are interested	Assets under management including special purpose and other entities	Total
Income
Income from investment banking	-	-	-	124,244	124,244
Income from commercial banking	-	-	-	-	-
-           Income from financing	-	525	1,263	-	1,788
-           Fee and other income	-	-	-	-	-
-           Less: Return to investment account holders	27	101	8,631	11	8,770
- Less: Finance expense	-	-	-	-	-
Income from proprietary and co-investments	27,246	-	1,932	25,154	54,332
Treasury and other income	8	-	-	797	805
Expenses
Operating expenses
Staff Cost	-	(8,116)*	-	-	(8,116)
Finance Cost	-	(6)	(3,989)	-	(3,995)

* The amount presented excluded bonus to key management personnel for 2022 as allocation has not been finalized at the date of approval of these consolidated financial statements.

 

24      RELATED PARTY TRANSACTIONS (continued)

 

 

Key management personnel

Key management personnel of the Group comprise of the Board of Directors and key members of management having authority and responsibility for planning, directing and controlling the activities of the Group and its significant banking subsidiary.

 

During the year, there were no direct participation of directors in investments promoted by the Group.

 

The key management personnel compensation is as follows:

	2023		2022
Board members' remuneration, fees and allowance	2,944		2,981
Salaries, other short-term benefits and expenses	17,811		15,203
Post-employment benefits	1,028		289

 

25   ASSETS UNDER MANAGEMENT AND CUSTODIAL ASSETS

 

i.   The Group provides corporate administration, investment management and advisory services to its project companies, which involve the Group making decisions on behalf of such entities. Assets that are held in such capacity are not included in these consolidated financial statements.  At the reporting date, the Group had assets under management of US$ 10,028 million (31 December 2022: US$ 7,845 million). During the year, the Group had charged management fees and performance fee amounting to US$ 18,652 thousand (31 December 2022: US$ 33,536 thousand).

 

ii.  Custodial assets comprise assets of the discretionary portfolio management ('DPM') accounts amounting to US$ 3,351,184 thousand, of which US$ 1,040,768 thousand related to the Bank's investment products.

 

 

 

26   EARNINGS PER SHARE

 

Basic earnings per share

Basic earnings per share is calculated by dividing the profit for the year by the weighted average number of equity shares outstanding during the year.

 

The weighted average number of ordinary equity shares for the comparative periods presented are adjusted for the issue of shares during the year without corresponding change in resources.

 

	2023		2022
In thousands of shares
Weighted average number of shares for basic and diluted earnings	3,493,154		3,426,503

 

Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Potential ordinary shares are considered to be dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase the loss per share.

 

27   ZAKAH AND SOCIAL RESPONSIBILITY

 

Zakah is directly borne by the shareholders on distributed profits and investors in restricted investment accounts. The Bank does not collect or pay Zakah on behalf of its shareholders and investors in restricted investment accounts. Zakah payable by the shareholders is computed by the Bank on the basis of the method prescribed (net assets method) by the Bank's Shari'a Supervisory Board and notified to shareholders annually.

 

The Group discharges its social responsibilities through donations to charitable causes and social organisations.  

 

28   EARNINGS PROHIBITED BY SHARI'A

 

The Group is committed to avoid recognising any income generated from non-sharia sources.  Accordingly, all non-sharia income is credited to a charity account where the Group uses these funds for charitable means.  Movements in non-sharia funds are shown in the statement of sources and uses of charity funds. The Group receives interest from deposits placed with the CBB and other incidental or required deposits. These earnings are utilised exclusively for charitable purposes and amount to US$ 278 thousand (2022: US$ 88 thousand).

 

29   SHARI'A SUPERVISORY BOARD

 

The Group's Shari'a Supervisory Board comprise four Islamic scholars who review the Group's compliance with general Shari'a principles and specific fatwas, rulings and guidelines issued. Their review includes examination of evidence relating to the documentation and procedures adopted by the Group to ensure that its activities are conducted in accordance with Islamic Shari'a principles.

 

 

30   MATURITY PROFILE

 

The table below shows the maturity profile of the Group's assets and unrecognised commitments on the basis of their contractual maturity. Where such contractual maturity is not available, the Group has considered expected realisation / settlement profile for assets and liabilities respectively. For undiscounted contractual maturity of financial liabilities, refer note 36.

 

31 December 2023	Up to 3 months	3 to 6 months	6 months to 1 year	1 to 3 years	Over 3 years	Total
Assets
Cash and bank balances	343,314	8,660	22,976	1,934		376,884
Treasury portfolio	2,490,581	68,210	62,469	787,230	1,726,542	5,135,032
Financing contracts	182,611	48,429	185,568	315,080	805,626	1,537,314
Real estate investment	-	-		-	1,371,932	1,371,932
Proprietary investments	-	-		967,123	77,604	1,044,727
Co-investments	-	-		254,610	-	254,610
Receivables and prepayments	99,635	10,548	244,732	69,265	363,460	787,640
Property and equipment	-	-			274,721	274,721
Asset held for sale	338,619	-	-	-	-	338,619
Total assets	3,454,760	135,847	515,745	2,395,242	4,619,885	11,121,479
Liabilities
Client's funds	145,221	-	61,001	-	-	206,222
Placements from financial institutions	1,512,670	302,464	311,295	160,780	36,008	2,323,217
Placements from non-financial institutions and individuals	209,240	86,071	243,599	121,703	299,437	960,050
Current account	11,517	25,408	-	13,902	152,870	203,697
Term financing	606,741	149,239	1,095	1,089,757	277,475	2,124,307
Payables and accruals	206,274	137,068	14,519	85,524	104,671	548,056
Liabilities held for sale	230,562	-	-	-	-	230,562
Total liabilities	2,922,225	700,250	631,509	1,471,666	870,461	6,596,111
Equity of investment account holders	2,031,934	272,393	656,972	395,218	94,489	3,451,006
Off-balance sheet items
Commitments	92,478	18,366	33,483	59,232	138	203,697
Restricted investment accounts	-	-	-	4,208	-	4,208

 

 

 

30  MATURITY PROFILE (continued)

 

31 December 2022	Up to 3 months	3 to 6 months	6 months to 1 year	1 to 3 years	Over 3 years	Total
Assets
Cash and bank balances	826,393	7,374	13,552	10,920	-	858,239
Treasury portfolio	1,291,520	249,557	447,769	417,228	1,803,946	4,210,020
Financing contracts	156,765	56,091	164,272	291,676	766,434	1,435,238
Real estate investment	-	-	-	-	1,287,085	1,287,085
Proprietary investments	-	-	-	927,704	77,349	1,005,053
Co-investments	-	1,852	-	140,199	-	142,051
Receivables and prepayments	213,908	105,435	56,540	50,526	163,460	589,869
Property and equipment	-	-	-	-	232,736	232,736
Total assets	2,488,586	420,309	682,133	1,838,253	4,331,010	9,760,291
Liabilities
Client's funds	87,488	-	35,812	-	-	123,300
Placements from financial institutions	2,361,964	516,253	639,419	210,554	62,680	3,790,870
Placements from non-financial institutions and individuals	159,739	121,865	251,034	423,025	108,595	1,064,258
Current account	5,497	16,623	-	54,557	54,557	131,234
Term financing	519,046	192,074	276,200	649,172	305,706	1,942,198
Payables and accruals	227,764	116,763	36,390	42,446	-	423,363
Total liabilities	3,361,498	963,578	1,238,855	1,379,754	531,538	7,475,223
Equity of investment account holders	99,588	35,406	86,546	288,470	703,664	1,213,674
Off-balance sheet items
Commitments	56,565	4,098	48,923	95,664	234	205,484
Restricted investment accounts	-	-	-	4,162	-	4,162