Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

3 ACCOUNTING POLICIES (continued)3.3 Summary of significant accounting policies (continued)(a) Investments in associates and joint venture (continued)when it is a party to a contractual joint venture agreement. Investments in associated companies and joint ventures areaccounted for using the equity method.The reporting dates of the associates and joint venture and the Group are identical and the associates’ and joint ventures’accounting policies materially conform to those used by the Group for like transactions and events in similar circumstances.Adjustments are made to bring into line any dissimilar accounting policies that may exist.(b) Foreign currency translation(i)Transactions and balancesTransactions in foreign currencies are initially recorded in the relevant functional currency rate of exchange ruling at thedate of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated at the relevant functional currencyrate of exchange ruling at the balance sheet date. All differences are taken to “trading income - net” in the consolidatedstatement of income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchangerates as at the dates of the initial transactions. Non-monetary available-for-sale items measured at fair value in a foreigncurrency are translated using the exchange rates at the date when the fair value was determined and the differencesare included in equity as part of the fair value adjustment of the respective items, unless these items are part of tradingsecurities as explained in note 3.3(c)(iii) or are part of an effective hedging strategy, in which case it is recorded in theconsolidated statement of income.(ii)Group companiesAssets and liabilities of foreign subsidiaries are translated into US Dollars at the rates of exchange prevailing at the balancesheet date. Income and expense items are translated at average exchange rates prevailing for the period. Any exchangedifferences arising on translation are taken to “foreign exchange translation reserve” forming part of equity.(c) Financial instrumentsThe classification of financial instruments at initial recognition depends on the purpose for which the financial instrumentswere acquired and their characteristics. All financial instruments are initially recognised at the fair value of consideration given,including acquisition costs associated with the investment, except in the case of trading securities, the acquisition costs ofwhich are expensed. Premiums and discounts are amortised on a systematic basis to maturity using the effective interestmethod and taken to interest income or interest expense as appropriate.(i)Date of recognitionAll “regular way” purchases and sales of financial assets are recognised on the settlement date, i.e. the date that the Groupreceives or delivers the asset. Regular way purchases or sales are purchases or sales of financial assets that require deliveryof assets within the time frame generally established by regulation or convention in the market place.The Group accounts for any changes in the fair value of the asset to be received during the period between the trade dateand the settlement date in the same way as it accounts for the acquired asset. The change in fair value is recognised inthe consolidated statement of income for assets classified as “trading securities” and it is recognised in equity for assetsclassified as available-for-sale. The change in value is not recognised for assets carried at cost or amortised cost.AUB Annual Report 200955

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