Page 224 - Bank Muamalat_AR24

222 BANK MUAMALAT MALAYSIA BERHAD

NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2024 (29 JAMADIL AKHIR 1446H)

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)

(g) Leases (cont’d.)
(b) Recognition and initial measurement (cont’d.)

(i) The Group and the Bank as lessee (cont’d.)
Short-term leases and leases of low-value assets

The Group and the Bank applies the short-term lease recognition exemption to its short-term leases of
office building (i.e. those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption
to leases of office building that are considered to be low value. Lease payments on short-term leases and
leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
(ii) The Group and the Bank as lessor

Leases in which the Group and the Bank does not transfer substantially all the risks and rewards incidental
to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a
straight-line basis over the lease terms and is included in revenue in the statements of profit or loss due to
its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the period in which they are earned.
(h) Foreign currencies

(i) Functional and presentation currency
The individual financial statements of each entity in the Group 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 Ringgit Malaysia (“RM”), which is also the Bank’s functional currency.
(ii) Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Bank and its
subsidiaries, and are recorded on initial recognition in the functional currencies at exchange rates approximating
those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign
currencies that are measured at historical cost are translated using the exchange rates as at the date of the initial
transactions. Nonmonetary items denominated in foreign currencies measured at fair value are translated using
the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the
reporting date are recognised in statements of profit or loss except for exchange differences arising on monetary
items that form part of the Group’s net investment in foreign operations, which are recognised initially in other
comprehensive income and accumulated under exchange fluctuation reserve in equity.

The exchange fluctuation reserve is reclassified from equity to statements of profit or loss of the Group and of the
Bank on disposal of the foreign operations.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in
statements of profit or loss for the period except for the differences arising on the translation of non-monetary
items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such
non-monetary items are also recognised directly in equity.