Page 228 - Bank Muamalat_AR24

226 BANK MUAMALAT MALAYSIA BERHAD

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

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)

(n) Income recognition (cont’d.)
(i) Profit and income from financing (cont’d.)

(7) lstisna’
lstisna’ contract can be established between a Bank and contractor, developer, or producer that allows the
Bank to make progress payments as construction progresses. lstisna’ financing is provided in the form of
advance progress payments to the customer who builds, manufactures, constructs or develops the object
of sale. Upon completion of the project, the asset is delivered to parties who have earlier on agreed to take
delivery of the asset. Financing income is recognised on effective profit rate basis over the period of the
contract based on the principal amount outstanding.
(8) Qard

Oard is a contract of loan between two (2) parties on the basis of social welfare or to fulfil a short-term
financial need of the borrower. The amount of payment must be equivalent to the amount borrowed.
It is, however, legitimate for a borrower to pay more than the amount borrowed as long as it is not stated
or agreed at the point of contract. As such, no accrual of income is recognised for this contract.
(9) Murabahah to the Purchase Orderer

Murabahah to the Purchase Orderer is a financing arrangement whereby the Bank purchases goods upon
the customer’s request and subsequently sells them to the customer at a predetermined profit margin,
with payment on a deferred basis.

Financing income from Murabahah transactions is recognised when the significant risks and rewards
of ownership have been transferred to the customer, which typically occurs upon execution of the
Murabahah sale contract. The profit margin is recognised over the financing period using the effective
profit rate method.

(10) Musyarakah Mutanaqisah
In Musyarakah Mutanaqisah contract, the customer and the Bank jointly acquire and own the asset.
The Bank then leases its equity or share of asset to the customer on the basis of ljarah. The customer is given
the right to acquire the Bank’s equity in the asset periodically. Financing income is accounted for on the basis
of reducing balance on a time apportioned basis that reflects the effective yield of the asset.
Financing income under this contract is recognised on effective profit rate basis over the period of the
contract based on the principal amount outstanding.
(ii) Fee and other income recognition

Financing arrangement, management and participation fees, underwriting commissions, guarantee fees and
brokerage fees are recognised as income based on accrual on time apportionment method. Fees from advisory
and corporate finance activities are recognised at net of service taxes and discounts on completion of each stage
of the assignment.
Dividend income from securities is recognised when the Bank’s right to receive payment is established.