Page 214 - Bank Muamalat_AR24

212 BANK MUAMALAT MALAYSIA BERHAD

NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2024 (29 JAMADIL AKHIR 1446H)

2. MATERIAL ACCOUNTING POLICIES

(a) Investment in subsidiaries
Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as
to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether the Group has such power over another entity.
In the Bank’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses.
On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is
recognised in statement of profit or loss.
(b) Financial assets

(i) Initial recognition and subsequent measurement
The Group and the Bank classify all of their financial assets based on the business model for managing the
assets and the assets’ contractual cash flow characteristics.
All financial assets are recognised initially at fair value plus directly attributable transaction costs, except in the
case of financial assets recorded at fair value through profit or loss.
The categories of financial assets under MFRS 9 Financial Instruments are as follows:

• Amortised cost;
• Fair value through other comprehensive income (“FVOCI”); and
• Fair value through profit or loss (“FVTPL”)
(1) Financial assets at amortised cost

The Group and the Bank measure financial assets at amortised cost if both of the following conditions
are met:

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and profit (“SPPP”) on the principal amount outstanding; and
• The financial asset is held within a business model with the objective to hold financial assets in order to
collect contractual cash flows.

The details of these conditions are outlined below:
(i) The SPPP test

As a first step of its classification process, the Group and the Bank assess the contractual terms of
financial assets to identify whether they meet the SPPP test.

‘Principal’ for the purpose of this test is defined as the fair value of the financial asset at initial
recognition and may change over the life of the financial asset (for example, if there were payments of
principal or amortisation of the premium/discount).

The most significant elements of profit within a financing arrangement are typically the consideration
for the time value of money and credit risk. To make the SPPP assessment, the Group and the
Bank apply judgement and consider relevant factors such as the currency in which the financial asset
is denominated, and the period for which the profit rate is set.