Page 53 - Inegrated Annual Report 2020-Eng

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 31 DECEMBER 2020

assumptions related to expectations of future taxable income. Estimates of future taxable income are based on
forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent
that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the
net deferred tax assets recorded at the reporting date could be impacted. As of 31 December 2020, the Group
has recognised a balance of AED 3,715 thousand as a deferred tax asset (2019: AED 2,623). The uncertain tax
positions, for example tax disputes, have been accounted for by the applying the most likely amount. The most
likely amount is the single most likely amount in a range of realistically possible options.

Fair value of assets classified as held for sale

Assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less
costs to sell. Fair value less cost to sell for these assets is generally derived from valuation assessment carried
out by a third party and/or prices agreed with potential buyers less cost. For the assessment carried out by a
third party or by the management, a degree of judgement is required in establishing fair values. The judgements
include consideration of market demand for these assets and nature of the assets. Changes in assumptions
about these factors could affect the reported fair value of the assets classified as held for sale.

Legal claims and contingencies

When assessing the possible outcomes of legal claims and contingencies, the Group rely on the opinions of
the legal counsel. The opinions of the Group’s legal counsel are based on their professional judgment and take
into consideration the current stage of proceedings and legal experience accumulated with respect to various
matters. As the results of the claims may ultimately be determined by courts or otherwise settled, they may be
different from such estimates.

Discount rate used for initial measurement of lease liability

The Group, as a lessee, measures the lease liability at the present value of the unpaid lease payments at the
commencement date. The lease payments are discounted using the interest rate implicit in the lease, if that rate
can be readily determined. If that rate cannot be readily determined, the Group, on initial recognition of the lease,
uses its incremental borrowing rate. Incremental borrowing rate is the rate of interest that the Group would have
to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use assets in similar economic environment. The Group determined its incremental
borrowing rate at 4.5% in respect of the lease liability.

2020 Integrated Annual Report 53