NIG Prospectus - London Stock Exchange

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Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cLeasing and hire purchaseAssets acquired under finance leases and hire purchase arrangements are capitalised and therelated liabilities, excluding finance charges, are included in liabilities. Finance charges in respectof such liabilities are charged to the consolidated statement of income. Operating lease rentals arewritten off on a straight-line basis over the lease period.Tawarruq facilities and wakala payablesTawarruq facilities and wakala payables represent Islamic financing arrangements, whereby thegroup receives funds for the purpose of financing its investment activities and they are stated atamortised cost.ProvisionsProvisions are recognised when the group has a present obligation (legal or constructive) resultingfrom a past event and the costs to settle the obligation are both probable and reliably measurable.For the parent company and the local subsidiaries the provision for staff indemnity is computedbased on employees’ accumulated periods of service at the balance sheet date in accordance withthe Kuwait labour law for the private sector and the companies’ bye-laws.Provision for land fill expensesProvision for land fill expenses is calculated based on the expected cost which is required torestore the leased sites, used by the group for extracting raw materials for its operations, to itsoriginal condition.PensionsContributions are paid to both defined benefit and defined contribution pension schemes inaccordance with the recommendations of independent actuaries and advisers.Defined contribution schemesContributions to defined contribution schemes are charged to the consolidated statement ofincome on an accrual basis.Defined benefit schemesIn respect of defined benefit schemes a defined benefit liability (or asset) is recognised in theconsolidated balance sheet and it is calculated as the present value of the defined benefitobligation using the projected unit credit method plus any unrecognised actuarial gains or lossesless any past service cost not recognised less the market value of the plan assets.Pension expense is charged to the consolidated statement of income and is calculated as theaggregate of current service cost (using the projected unit credit method), an interest cost on thediscounted defined benefit obligation, the expected return on plan assets, recognised actuarialgains and losses, recognised past service costs and the effect of curtailments or settlements.Actuarial gains or losses are recognised as income or expense if the net cumulative unrecognisedactuarial gains or losses at the end of the previous reporting period exceeded the greater of:– 10% of the present value of the defined benefit obligations; and– 10% of the fair value of plan assets.The portion of actuarial gains and losses recognised, is the excess determined above, divided bythe expected average remaining service lives of scheme employees of 18 years.F-61
Level: 8 – From: 8 – Thursday, August 9, 2007 – 2:20 pm – mac5 – 3776 Section 10c : 3776 Section 10cFiduciary assetsAssets held in a trust or fiduciary capacity are not treated as assets of the group and, accordingly,they are not included in these consolidated financial statements.Foreign currenciesThe assets and liabilities of overseas subsidiary undertakings are translated into Kuwaiti Dinars atthe closing exchange rates on the balance sheet date. Gains and losses arising on thesetranslations are taken to reserves, net of exchange differences arising on related foreign currencyborrowings. The income statements of overseas subsidiary undertakings are consolidated at theaverage rates of exchange for the year.Foreign currency transactions of the Kuwaiti companies are translated into Kuwaiti Dinars at therates ruling when they occurred. Monetary assets and liabilities of Kuwaiti companiesdenominated in foreign currencies are translated into Kuwaiti Dinars using the rate of exchangeruling at the balance sheet date, and exchange differences arising are dealt with in theconsolidated 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 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 inshare price for quoted equities and the future cash flows and the discount factors for unquotedequities.Estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below:F-62
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NIG Prospectus - London Stock Exchange

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