Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

Notes to theConsolidated Financial Statements (Contd.)3 ACCOUNTING POLICIES (continued)3.3 Summary of significant accounting policies (continued)(h) Hedge accounting (continued)For hedges which do not qualify for hedge accounting, any gains or losses arising from changes in the fair value of thehedging instrument are taken directly to the consolidated statement of income for the year.Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longerqualifies for hedge accounting. In the case of cash flow hedges, the cumulative gain or loss on the hedging instrumentrecognised in equity remains in equity until the forecasted transaction occurs, unless the hedged transaction is no longerexpected to occur, in which case the net cumulative gain or loss recognised in equity is transferred to the consolidatedstatement of income for the year.(i) Offsetting financial instrumentsFinancial assets and financial liabilities are only offset and the net amount reported in the consolidated balance sheet whenthere is a currently enforceable legal right to offset the recognised amounts and the Group intends to settle on a net basis.(j) Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue canbe reliably measured. The following specific recognition criteria must also be met before revenue is recognised:(i)(ii)Interest incomeInterest income is recognised using the effective interest method, taking account of the principal outstanding and therate applicable. Interest that is 90 days or more overdue is excluded from income. Notional interest is recognised onimpaired loans and advances and other financial assets based on the rate used to discount future cash flows to their netpresent values.Fees and commissions incomeCredit origination fees are treated as an integral part of the effective interest rate of financial instruments and arerecognised over their lives, except when the underlying risk is sold to a third party at which time it is recognisedimmediately. Other fees and commissions income are recognised when earned.(iii) Dividend incomeDividend income is recognised when the right to receive payment is established.(k) Business combination, goodwill and other intangible assetsBusiness combinations are accounted for using the purchase method of accounting. Assets and liabilities acquired arerecognised at the acquisition date fair values with any excess of the cost of acquisition over the net assets acquired isrecognised as goodwill.Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the businesscombination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilitiesacquired. Following initial recognition, goodwill is reviewed for impairment annually or more frequently if events or changesin circumstances indicate that the carrying value may be impaired. After initial recognition, goodwill is measured at cost lessany accumulated impairment losses.Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of cash-generatingunits), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating60 AUB Annual Report 2009

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