Annual Report 2011 - Jordan Investment and Finance bank

52-TheNotes to the consolidtaed financial statementsreporting currency of the consolidated financial statements is theJordanian Dinar, which is also the functional currency of the Bank.- The accounting policies for the current year are consistent with those usedin the year ended December 31, 2010, expect for the effect of adoption of thenew and modified standard as in note (53 – a) and the effect of the adoption ofthe following:IFRS 9 Financial Instruments Issued in November 2009 and Amended inOctober 2010The Bank and its subsidiaries have early adopted the first stage for (IFRS9) in the preparation of the consolidated financial statements as of January1, 2011 in accordance with the requirements of the Securities ExchangeCommission, the Central Bank of Jordan and the transitional provisions ofthe standard. Therefore the comparative figures for the previous year have notbeen adjusted, which is permitted by the standard. Therefore, the beginningbalance, for retained earnings, cumulative change in fair value and deferredtax liabilities have been reclassified as of January 1, 2011.The effects of applying the IFRS (9) on the consolidated financial statementsare detailed in note (52).The followings are the significant new and revised IFRSs adopted during theyear ended December 31, 2011:a. Financial Assets at Amortized CostInternational Financial Reporting Standards).b. Financial Assets at Fair Value through Profit or Loss- It is the financial assets held by the Bank for the purpose of trading in thenear future and achieving gains from the fluctuations in market prices in theshort term or trading margins.- Financial assets at fair value through profit or loss are initially stated atfair value at acquisition date (purchase costs are recorded at the consolidatedstatement of income upon acquisition) and subsequently measured at fairvalue. Moreover, changes in fair value are recorded in the consolidatedstatement of income including the change in fair value resulting fromtranslation of non monetary assets stated at foreign currency. Gains or lossesresulting from the sale of these financial assets are taken to the consolidatedstatement of income.- Dividends and interests from these financial assets are recorded in theconsolidated statement of income.- It is not allowed to reclassify any financial assets to / from this categoryexcept for the cases specified in International Financial Reporting Standards.- It is not allowed to classify any financial assets that do not have prices inactive markets and active dealings in this items.c. Financial Assets at Fair Value through Other Comprehensive Income- Those financial assets represent the investments in equity instruments heldfor long term.53Notes to the consolidtaed financial statements- Financial assets at amortized cost are the financial assets which the Bank’smanagement intends according to its business model to hold for the purposeof collecting the contractual cash flows which comprise the contractualcash flows that are solely payments of principal and interest on the principaloutstanding.- Financial assets are recorded at cost upon purchase plus acquisitionexpenses. Moreover, the issue premium \ discount is amortized using theeffective interest rate method, and recorded to interest account. Provisionsassociated with the decline in value of these investments leading to the inabilityto recover the investment or parts thereof are deducted. Any impairment isregistered in the consolidated statement of income and should be presentedsubsequently at amortized cost less any impairment losses.- Financial assets at fair value through other comprehensive income areinitially stated at fair value plus transaction costs. Subsequently, they aremeasured at fair value with gains and losses arising from changes in fair valuerecognized in the consolidated statement of other comprehensive incomeand within owner’s equity, including the changes in fair value resulting fromtranslation of non monetary assets stated at foreign currency. Gain or lossfrom the sale of these investments should be recognized in the consolidatedstatement of comprehensive income and within owner’s equity, and the balanceof the evaluation reserve for these assets should be transferred directly to theretained earnings not to the consolidated statement of income.- No impairment testing is required for those assets.- Dividends are recorded in the consolidated statement of income.- The amount of the impairment loss recognised is the difference between theasset’s carrying amount and the present value of estimated future cash flowsdiscounted at the original effective interest rate.- It is not allowed to reclassify any financial assets from / to this category exceptfor certain cases specified at the International Financial Reporting Standards(and in the case of selling those assets before its maturity date, the resultsshould be recorded in a separate account in the consolidated statement ofincome, disclosures should be made in accordance to the requirements ofIAS 24 Related party disclosures - Amended- IAS 24: Related Party Disclosures simplifies disclosures for related entitiesto simplify the determination of a related party and reduce the discrepanciesupon implementation.- There was no impact on the consolidated financial position or financialperformance upon the implementation of the amended standard.IAS 32 financial instruments – Classification of Rights Issues - Amended- IAS 32 financial instruments – Classification and presentation of RightsIssues: The amendment on IAS 32 for the classification of rights issues. For