Page 39 - Agib Bank Limited Annual Report 2021
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FVTPL all gains and losses are recognised in exchange is accounted for as an
profit or loss. extinguishment of the original financial liability
and the recognition of a new financial liability.
In making the determination of whether
recognising changes in the liability’s credit risk Similarly, the Bank accounts for substantial
in OCI will create or enlarge an accounting modification of terms of an existing liability or
mismatch in profit or loss, the Bank assesses part of it as an extinguishment of the original
whether it expects that the effects of changes financial liability and the recognition of a new
in the liability’s credit risk will be offset in profit liability. It is assumed that the terms are
or loss by a change in the fair value of another substantially different if the discounted present
financial instrument measured at FVTPL. This value of the cash flows under the new terms,
determination is made at initial recognition." including any fees paid net of any fees received
and discounted using the original effective rate
is at least 10 per cent different from the
4.15.2 Other financial liabilities discounted present value of the remaining cash
flows of the original financial liability or current
liabilities.
Deposit (Profit sharing accounts) are based on
the principle of Mudaraba whereby the 4.16 Key sources of estimation
Company and the customer share an agreed uncertainty
percentage of any profit earned on the
customer’s deposit. The customer’s share of
profit is paid in accordance with the terms and The following are key estimations that the
conditions of the account. The profit calculation directors have used in the process of applying
is undertaken at the end of each calendar the Bank’s accounting policies and that have
month. the most significant effect on the amounts
recognised in financial statements:
Customer Murabaha deposits consist of an
Islamic financing transaction involving the • Establishing the number and relative
Company arranging the purchase of an asset weightings of forward-looking scenarios for
on behalf of the customer and the purchase each type of product/market and determining
thereof from the same customer by the the forward looking information relevant to
Company at cost plus an agreed profit (mark- each scenario: When measuring ECL the Bank
up) with settlement on a deferred payment uses reasonable and supportable forward
basis. Customer Murabaha deposit balances looking information, which is based on
are included in the statement of financial assumptions for the future movement of
position under deposits from customers and different economic drivers and how these
the accrued returns payable to the customer drivers will affect each other.
are classified under other liabilities. Returns • Probability of default: PD constitutes a key
payable on customer Murabaha deposits are input in measuring ECL. PD is an estimate of
recognised on an effective yield basis over the
period of the contract. the likelihood of default over a given time
horizon, the calculation of which includes
historical data, assumptions and expectations
4.15.3 Derecognition of financial liabilities of future conditions.
• Loss Given Default: LGD is an estimate of the
loss arising on default. It is based on the
The Bank derecognises financial liabilities difference between the contractual cash flows
when, and only when, the Bank’s obligations due and those that the lender would expect to
are discharged, cancelled or have expired. The receive, taking into account cash flows from
difference between the carrying amount of the collateral and integral credit enhancements,
financial liability derecognised and the including analysis of the sensitivity of the
consideration paid and payable is recognised reported ECL to changes in LGD resulting from Annual Report and IFRS Financial Statements
in profit or loss. changes in economic drivers.
When the Bank exchanges with the existing • Fair value measurement and valuation
lender one debt instrument into another one process: In estimating the fair value of a
with substantially different terms, such financial asset or a liability, the Bank uses
Agib Bank Annual Report 2021 www.agib.gm 39
