IIG Prospectus - London Stock Exchange

-2-As per the revised IAS 39, unrealized gains and losses from investments available for sale are nowrecognized under ‘Cumulative changes in fair value’ under equity. This has resulted in change inaccounting policy since previously unrealized gains and losses from available for sale investments wererecognized in income statement.The opening balance of accumulated losses and comparative figures are not restated since theunrealized gain from available for sale investments recognized in prior years represent reversal ofimpairment losses.IFRS 3, IAS 36, IAS 38Effective January 1, 2005, the Company has implemented the IFRS 3 ‘Business Combinations’, IAS 36‘Impairment of Assets (revised)’, and IAS 38 ‘Intangible Assets (revised)’ prospectively.As a result, goodwill relating to past business combinations is not amortized and is carried at the netamount after setting off accumulated amortization against gross goodwill amount less accumulatedimpairment. This has resulted in increasing the net profit for the year ended December 31, 2005 withKD 135,615.The accounting policy for goodwill is mentioned in Note 2(h).b) Cash and cash equivalentsCash and cash equivalents includes cash on hand and at banks, deposits held at call with banks andother short-term highly liquid investments with original maturities of three months or less that are readilyconvertible to a known amount of cash and are subject to an insignificant risk of changes in value.c) Murabaha receivablesReceivables from murabaha relate to the sale of commodities at cost plus an agreed upon profit margin,whereby the seller informs the buyer of the price at which the deal will be completed and also the amountof profit to be recognized. These receivables are stated at amortized cost.d) Investment in MudarabaMudaraba is a contract between the Company and a client, whereby the Company extends a certainamount of money to the client to be invested in a project or certain activity against a fixed share of theprofit representing the total profit for the project less the client’s share as a Mudarib. Balances relating tothese contracts are stated net of provisions for impairment losses if any.e) InvestmentsThe Company classifies its investments in the following categories: financial assets at fair value throughincome statement, and available-for-sale financial assets. The classification depends on the purpose forwhich the investments were acquired and is determined at initial recognition by the management.(i) Financial assets at fair value through income statementThis category has two sub-categories: financial assets held for trading, and those designated at fair valuethrough profit or loss at inception. A financial asset is classified in this category if acquired principally forthe purpose of selling in the short term or if so designated by management. Derivatives are alsocategorized as held for trading unless they are designated as hedges. Assets in this category areclassified as current assets if they are either held for trading or are expected to be realized within 12months of the balance sheet date.F-43