NIG Prospectus - London Stock Exchange

Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10b : 3776 Section 10bTransactions and balancesTransactions in foreign currencies are initially recorded in the functional currency rate of exchangeruling at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies are retranslated at the functionalcurrency rate of exchange ruling at the balance sheet date. All differences are taken to “foreignexchange gain/loss” in the consolidated statement of income.Non-monetary items that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rates as at the dates of the initial transactions. Non-monetary itemsmeasured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value was determined. Any goodwill arising on the acquisition of a foreign operationand any fair value adjustments to the carrying amounts of assets and liabilities arising on theacquisition are treated as assets and liabilities of the foreign operations and translated at closingrate.Group companiesAs at the reporting date, the assets and liabilities of foreign subsidiaries are translated into theparent company’s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at thebalance sheet date, and their statements of income are translated at the weighted averageexchange rates for the year. Exchange differences arising on translation are taken directly toforeign exchange translation reserve within equity. On disposal of a foreign entity, the deferredcumulative amount recognised in equity relating to the particular foreign operation is recognisedin the consolidated statement of income.JudgmentsIn the process of applying the group’s accounting polices, management has made the followingjudgements, apart from those involving estimations, which have the most significant effect in theamounts recognised in the consolidated financial statements:Classification of investmentsManagement decides on acquisition of an investment whether it should be classified as held fortrading, designated as at fair value through statement of income or available for sale.The group classifies investments as trading if they are acquired primarily for the purpose of makinga short term profit by the dealers.Classification of investments (continued)Classification of investments as designated at fair value through statement of income depends onhow management monitor the performance of these investments. When they are not classifiedas held for trading but have readily available reliable fair values and the changes in fair values arereported as part of statement of income in the management accounts, they are classified asdesignated at fair value through statement of income.All other investments are classified as available for sale.Impairment of investmentsThe group treats available for sale equity investments as impaired when there has been asignificant or prolonged decline in the fair value below its cost or where other objective evidenceof impairment exists. The determination of what is “significant” or “prolonged” requiresconsiderable judgement. The group treats “significant” generally as 25% and “prolonged” asgreater than one year. In addition, the group evaluates other factors, including normal volatility inF-29