Page 229 - Bank Muamalat_AR24

ANNUAL REPORT 2024 1 2 3 4 5 6 7 Our Numbers 8 227

2. MATERIAL ACCOUNTING POLICIES (CONT’D.)

(o) Income and deferred taxes
Income tax for the year comprises current and deferred tax. Current tax is the expected amount of income taxes
payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the
reporting date.
Deferred tax is provided for using the liability method. In principle, deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax
losses and unused tax credits to the extent that it is probable that taxable profits will be available against which the
deductible temporary differences, unused tax losses and unused tax credits can be utilised.
Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial
recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction,
affects neither accounting profit nor taxable profit.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the
liability is settled, based on tax rates that have been enacted or substantively enacted at the financial position date.
Deferred tax is recognised as income or expense and included in the statements of profit or loss for the period, except
when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised
directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax
is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(p) Zakat
The Bank pays zakat on its business to the state zakat authorities, based on the growth model method as approved by
the Shariah Committee. The Bank does not pay zakat on behalf of the shareholders or depositors, unless upon request
by the shareholders or depositors.
(q) Fair value measurement

The Group and the Bank measure financial instruments such as financial assets at FVTPL, financial investments at FVOCI
and derivatives, and non-financial assets such as investment properties at fair value at each statement of financial
position date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group and the Bank.
The fair value of an asset or a liability is measured using the assumptions that market participants would be willing to use
when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by selling it to another market participant that would use the
asset in its highest and best use.
The Group and the Bank use valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.