Page 225 - Bank Muamalat_AR24

ANNUAL REPORT 2024 1 2 3 4 5 6 7 Our Numbers 8 223

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)

(h) Foreign currencies (cont’d.)
(iii) Foreign operations

The results and financial position of the Group’s and the Bank’s foreign operations, whose functional currencies
are not the presentation currency, are translated into the presentation currency at average exchange rates for the
year, which approximates the exchange rates at the date of the transaction, and at the closing exchange rate as at
reporting date respectively. All resulting exchange differences are taken directly to other comprehensive income
and are subsequently recognised in the statements of profit or loss upon disposal of the foreign operations.
(i) Provision for liabilities

Provisions are recognised when the Group and the Bank have a present obligation as a result of a past event and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate. Where the effect of time value of money is material, provisions are discounted using a current
pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognised as finance cost.
(j) Impairment of non-financial assets

The Group and the Bank assess at each reporting date whether there is an indication that an asset may be impaired.
If any such indication exists, or when an annual impairment assessment for an asset is required, the Group and the
Bank make an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value-in-use. For the purpose
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units (“CGU”)).
In assessing value-in-use, the estimated future cash flows expected to be generated by the asset are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written
down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated
first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the
carrying amount of the other assets in the unit or groups of units on a pro-rata basis.
Impairment losses are recognised in the statements of profit or loss. An assessment is made at each reporting date
as to whether there is any indication that previously recognised impairment losses may no longer exist or may have
decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to
determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying
amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is
recognised in statements of profit or loss. Impairment loss on goodwill is not reversed in a subsequent period.
(k) Cash and cash equivalents

Cash and cash equivalents consist of cash and bank balances with banks and other financial institutions, and short-term
deposits with originc!I maturity tenor of less than three (3) months that are readily convertible to known amount of cash
and which are subject to an insignificant risk of changes in value.