Page 38 - Agib Bank Ltd Annual Report and IFRS Financial statements 2020

4.8 Investment Properties
Investment properties are held to earn rentals, or for capital appreciation, or both. These properties are
measured at fair value. Investment properties are re-measured at the end of two reporting periods. Fair value
is disclosed. Gains and losses on disposal are recognised in profit or loss.

4.9 Profit stabilisation reserve

The profit stabilisation reserve is used to maintain returns payable to customers on Mudaraba based
savings accounts. Returns payable on these profit sharing accounts are credited to customers in
accordance with the terms and conditions of the account. Any surplus returns arising from the investment
of funds are then credited to this reserve. In the case of inadequate returns generated by these funds, the
Company will maintain the return to depositors by utilising this reserve.

4.10 Cash and cash equivalents

Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central bank
and highly liquid financial assets with original maturities of less than three months, which are subject to
insignificant risk of changes in their fair value, and are used by the Bank in the management of its short-
term commitments.

4.11 Account receivables

Account receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and that the Bank does not intend to sell immediately or in the near term.

4.12 Financial instruments

4.12.1 Initial Recognition

Financial assets and financial liabilities are recognised in the Bank’s balance sheet when the Bank
becomes a party to the contractual provisions of the instrument.

4.12.2 Initial Measurement

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL
are recognised immediately in profit or loss. If the transaction price differs from fair value at initial recognition,
the Bank will account for such difference as follows:

• if fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on
a valuation technique that uses only data from observable markets, then the difference is recognised in
profit or loss on initial recognition (i.e. day 1 profit or loss);

• in all other cases, the fair value will be adjusted to bring it in line with the transaction price (i.e. day 1 profit
or loss will be deferred by including it in the initial carrying amount of the asset or liability).

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Annual Report and IFRS Financial Statements for the year ended 31 December 2020 37