Bahrain Flour Mills Company B.S.C.

Financial statements

31 December 2020
 
Bahrain Flour Mills Company B.S.C.

FINANCIAL STATEMENTS
For the year ended 31 December 2020

CONTENTS Page

General information 1

Board of directors’ report 2-4

Independent auditors’ report to the shareholders 5-7

Financial statements
Statement of financial position 8
Statement of profit or loss and comprehensive income 9
Statement of changes in equity 10
Statement of cash flows 11
Notes to the financial statements 12 – 38

Supplementary information (unaudited)

Supplementary disclosure related to the impact of COVID-19 39 – 40

 
 
Bahrain Flour Mills Company B.S.C.
General information

Commercial registration 1170 (Bahrain Joint Stock Company)

Board of directors Mr. Marwan Khaled Tabbara (Chairman)

Mr. Salah Mohamed Al Kulaib (Vice chairman)
Mr. Ayman A. Hameed Zainal
Mr. Eyad Redha Faraj
Mr.Jasim Salman Abdulla Alshaikh
Mr. Khalid Abdulaziz Abdulla Aljassim
Dr. Marwa Khalid Al Sabbagh
Ms. Raghdan Saleh Qasim Abdulrasool

Audit, compliance, governance, and risk

committee Mr. Khalid Abdulaziz Abdulla Aljassim (Chairman)
Mr. Eyad Redha Faraj (Vice chairman)
Mr. Ayman A. Hameed Zainal
Ms. Raghdan Saleh Qasim Abdulrasool

Nomination and remuneration committee Mr. Marwan Khaled Tabbara (Chairman)

Dr. Marwa Khalid Al Sabbagh (Vice chairman)
Mr.Jasim Salman Abdulla Alshaikh
Mr. Khalid Abdulaziz Abdulla Aljassim

Purchasing and projects committee Mr. Salah Mohamed Al Kulaib (Chairman)

Dr. Marwa Khalid Al Sabbagh
Mr. Eyad Redha Faraj
Mr.Jasim Salman Abdulla Alshaikh

Chief executive officer Wayne Henry Craig

Office and plant Building No. 1773, Road No. 4236, Block No. 342
P.O. Box 26787 Manama, Kingdom of Bahrain
Telephone 17729984, Fax 17729312
E-Mail: [email protected]

Bankers Bank of Bahrain and Kuwait BSC

Ahli United Bank BSC
National Bank of Bahrain BSC
Arab Bank
National Bank of Kuwait

Auditors KPMG Fakhro

Shares registrar Bahrain Clear B.S.C (closed)

  1 
 Bahrain Flour Mills Company B.S.C (Al-Matahin)

Board of Directors Report for the year ending 31 December 2020

Dear Shareholders,
On behalf of the Board of Directors of Bahrain Flour Mills Company B.S.C. (Al-Matahin), I am pleased
to present to you the annual report for the fiscal year ending 31 December 2020.

Company Performance

Last year was marked by an international health crisis that impacted the entire world at an economic,
social, and political level. Al-Matahin acknowledged the seriousness of the pandemic early on and from
the outset was quick to react and take proactive measures to help stem the impact of Covid-19 across
its many stakeholders. The company quickly adopted a series of precautionary and preventive health
and safety measures aimed at reducing the spread of Coronavirus and preserving the safety of its
employees, ensuring the continuity of work at its manufacturing facilities, and meeting the daily needs
of the local market. Collectively, these measures were successful in protecting the company and its
stakeholders against undue risk and reinforced Al-Matahin’s role as a trusted and dependable supplier.

In addition to its routine daily production, the company also played a key role in implementing the
government’s stockpile directives with respect to importing and maintaining a 6-month strategic
wheat stock for the benefit of the Kingdom of Bahrain and its residents. This strategic inventory was
held by Al-Matahin on behalf of the government to mitigate against potential global supply chain
interruptions and other obstacles related to sourcing and transporting wheat to the Kingdom of
Bahrain from international grain markets during this volatile period.

Although demand for flour in the local market had softened during the year because of Covid-19
related closures and precautionary measures, Al-Matahin maintained good cost control on its
operational expenses and managed to achieve an operating profit of BD 305,240 for the year.

Overall, Al-Matahin achieved a net profit for the year amounting to BD 1,086,159. In line with the
results achieved, the Board of Directors has made the following recommendations to the shareholders
for the year ending 31 December 2020:

▪ Distribute cash dividends to shareholders at the rate of 15 fils per share (or 15% of the paid-up
capital) totaling BD 372,384.

▪ Allocate an amount of BD 60,000 as a remuneration for the members of the Board of Directors
(already provided for in the net profit figure stated above).

▪ Allocate an amount of BD 20,000 for charitable works.

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 Bahrain Flour Mills Company B.S.C (Al-Matahin)

Board of Directors Report for the year ending 31 December 2020

▪ Transfer an amount of BD 693,775 to the Retained Earnings Account.

The fees paid to Board Members for attending Board and committee meetings during the year ending
31 December 2020 amounted to BD 92,800, and is already provided for in the net profit figure stated
above).

Salaries and benefits received by the senior management of the company during the year ending 31
December 2020 amounted to BD 175,872.

Company Directions and Future Plans:

During the last 50-years of its history, Al-Matahin has faced and successfully overcome many
challenges. Today, the company is regarded as a trusted supplier in the local marketplace and its
commercial relationships have expanded to include global multi-national corporations such as
Mondelez, where Al-Matahin flour is being successfully used in the production and global export of
one of the world’s most famous biscuits (Oreo).

The Board of Directors and the Executive Management of Al-Matahin assure you of their
determination to develop and expand the company's activities while adhering to the highest standards
in governance, the implementation of control policies and internal systems, and the application of
quality across the company’s health and safety systems. The collective aim of which is to ensure the
preservation of the company's leading market position and fulfil its commitment to maintaining ample
flour supply for our beloved Kingdom. The company also remains committed to implementing its plans
to modernize its manufacturing facility despite delays and postponements arising from the
Coronavirus pandemic. By remaining steadfast in this mission, Al-Matahin aims to maintain the high
quality of its products, expand its product portfolio, and retain its leading position in the Bahrain
marketplace.

Social Responsibility:

Our priorities focused on supporting the community that we are a part of. These priorities included
the annual contribution of the company in cooperation with the Royal Charitable Organization to
distribute 8,000 Ramadan baskets to needy families during the holy month of Ramadan. We also
participated in "Fina Khair" campaign in order to support the national efforts in our beloved kingdom.
In addition, we provided 4,000 bags of flour to support expatriate workers affected by the pandemic

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 Bahrain Flour Mills Company B.S.C (Al-Matahin)

Board of Directors Report for the year ending 31 December 2020

through one of their charities, which in turn distributed it to the largest possible number of those
affected.

Thanks, and Gratitude.

On behalf of myself and the Board of Directors and the Shareholders, I would like to express our
greatest and most sincere appreciation to His Majesty King Hamad bin Isa Al Khalifa, The King of the
Kingdom of Bahrain, and His Royal Highness Prince Salman bin Hamad Al Khalifa, The Crown Prince,
Deputy Supreme Commander and Prime Minister for their tremendous leadership, wisdom, and
support during these unprecedented times.

We also would like to extend our thanks to the Ministers, agents, managers, and heads of departments
in the Ministries and Government organizations of the Kingdom for their wise guidance, cooperation,
and continuous support.

We also assure you that the company’s success is not possible without the hard work and dedication
of its management and staff, and extend our many thanks, appreciation, and gratitude to the
management of the company and all its employees for their dedication and hard work which has led
to these achievements and assured the best possible results for 2020. We are fortunate to have such
a committed and outstanding team and we are confident that this organization will continue to achieve
success in the future.

With the Grace of God,

Marwan Khaled Tabbara

Chairman
February 2021

4
Bahrain Flour Mills Company B.S.C.

STATEMENT OF FINANCIAL POSITION

as at 31 December 2020 Bahraini Dinars

2020 2019
Note
ASSETS
Non-current assets
Property, plant and equipment 5 6,091,403 3,873,578

Total non-current assets 6,091,403 3,873,578

Current assets
Investment at fair value through profit or loss 6 10,456,304 10,079,952
Inventory 7 8,656,020 6,673,259
Receivables and other assets 8 2,313,450 3,315,394
Cash and bank balances 9 1,854,034 2,036,677
Fixed deposit 752,325 -

Total current assets 24,032,133 22,105,282

Total assets 30,123,536 25,978,860

EQUITY AND LIABILITIES

Equity
Share capital 10 2,481,877 2,481,877
Share premium 1,350,000 1,350,000
Statutory reserve 1,241,625 1,241,625
Other reserves 3,463,628 3,463,628
Retained earnings 12,347,307 11,529,404

Total equity 20,884,437 20,066,534

Non-current liabilities
Lease liabilities 21 351,343 121,083
Employee benefits 11 83,923 64,870

Total non-current liabilities 435,266 185,953

Current liabilities
Lease Liabilities 21 67,380 67,380
Trade payables and other liabilities 12 3,351,469 3,256,403
Import finance loans 13 4,893,829 2,402,590
Bank overdraft 9 491,155 -

Total current liabilities 8,803,833 5,726,373

Total liabilities 9,239,099 5,912,326

Total equity and liabilities 30,123,536 25,978,860

Marwan Khaled Tabbara Salah Mohamed Al Kulaib Wayne Henry Craig

Chairman Vice Chairman Chief Executive Officer

The accompanying notes 1 to 28 are an integral part of these financial statements.

8 
Bahrain
  Flour Mills Company B.S.C.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2020 Bahraini Dinars

Note 2020 2019

Sales 14 7,054,632 7,075,011

Cost of sales 15 (15,178,296) (16,039,046)

Gross loss before government subsidy (8,123,664) (8,964,035)

Government subsidy 16 9,810,358 10,605,978

Gross profit 1,686,694 1,641,943

Other operating expenses 17 (1,381,454) (1,228,501)

Impairment loss on receivables 8 - (94,475)

Operating profit 305,240 318,967

Other income 18 467,714 83,097

Finance cost 19 (63,147) (86,594)
Change in fair value of investment at fair value through
profit or loss 6 376,352 1,535,265

Profit for the year 1,086,159 1,850,735

Other comprehensive income for the year - -

Total comprehensive income for the year 1,086,159 1,850,735

Basic and diluted earnings per share 20 44 fils 75 fils

Marwan Khaled Tabbara Salah Mohamed Al Kulaib Wayne Henry Craig

Chairman Vice Chairman Chief Executive Officer

The accompanying notes 1 to 28 are an integral part of these financial statements.

9 
Bahrain
  Flour Mills Company B.S.C.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020 Bahraini Dinars

Share Share Reserves Retained Total

capital premium earnings
2020 Statutory Other
reserve reserves

At 1 January 2020 2,481,877 1,350,000 1,241,625 3,463,628 11,529,404 20,066,534

Total comprehensive
income for the year - - - - 1,086,159 1,086,159

Dividends approved and

paid for 2019 - - - - (248,256) (248,256)
Charity contributions
approved for 2019 - - - - (20,000) (20,000)

At 31 December 2020 2,481,877 1,350,000 1,241,625 3,463,628 12,347,307 20,884,437

Share Share Reserves Retained Total

capital premium earnings
2019 Statutory Other
reserve reserves

At 1 January 2019 2,481,877 1,350,000 1,241,625 3,463,628 10,448,669 18,985,799

Total comprehensive
income for the year - - - - 1,850,735 1,850,735

Dividends approved and

paid for 2018 - - - - (750,000) (750,000)
Charity contributions
approved for 2018 - - - - (20,000) (20,000)

At 31 December 2019 2,481,877 1,350,000 1,241,625 3,463,628 11,529,404 20,066,534

The accompanying notes 1 to 28 are an integral part of these financial statements.

  10 
  
 
Bahrain Flour Mills Company B.S.C.

STATEMENT OF CASH FLOWS

For the year ended 31 December 2020 Bahraini Dinars

Note 2020 2019

CASH FLOW FROM OPERATING ACTIVITIES

Profit for the year 1,086,159 1,850,735

Adjustments for:
Depreciation / amortisation 5 604,453 638,073
Net change in investments at fair value through profit or loss 6 (376,352) (1,535,265)
Finance cost 63,147 86,594
Interest income (34,978) (13,994)
Government subsidy – Expense reimbursement (72,576) -

Change in working capital:

Inventories (1,982,761) (448,236)
Receivables and other assets 1,041,154 (237,122)
Trade payables and other liabilities 272,121 2,668,587
Provision for employees’ indemnities 19,053 15,698

Net cash generated from operating activities 619,420 3,025,070

CASH FLOWS FROM INVESTING ACTIVITIES

Fixed deposit placed during the year (2,000,000) -
Fixed deposit matured during the year 1,247,675 -
Interest income received 32,057 13,994
Purchase of property, plant and equipment (2,529,767) (540,956)

Net cash used in investing activities (3,250,035) (526,962)

CASH FLOWS FROM FINANCING ACTIVITIES

Import finance loans availed 17,352,368 11,358,960
Repayment of import finance loans (14,861,129) (13,965,001)
Dividends paid (445,311) (766,956)
Finance cost paid (27,731) (77,998)
Lease liability paid (61,380) (67,380)

Net cash generated from / (used in) financing activities 1,956,817 (3,518,375)

Net decrease in cash and cash equivalents during the year (673,798) (1,020,267)

CASH AND CASH EQUIVALENTS AT 1 JANUARY 2,036,677 3,056,944

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 9 1,362,879 2,036,677

The accompanying notes 1 to 28 are an integral part of these financial statements.

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  Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

1 REPORTING ENTITY

Bahrain Flour Mills Company B.S.C. (the “Company”) is a Bahraini public shareholding company
registered with the Ministry of Industry, Commerce and Tourism in the Kingdom of Bahrain under
commercial registration number 1170 obtained on 16 July 1970 and listed in Bahrain Bourse. The
Company was incorporated by an Amiri Charter dated 9 May 1970 and commenced commercial
operations on 1 May 1972.

The principal activities of the Company are the production of flour and related products which are sold in
the local market.

The Company's majority shareholder is Bahrain Mumtalakat Holding Company B.S.C.

(c) ("Mumtalakat"), a company wholly owned by the Government of the Kingdom of Bahrain, which holds
65.73% of the Company's share capital.

The financial statements of the Company were authorised for issue in accordance with a resolution of
the Directors on 28 February 2021.

2 BASIS OF PREPARATION

a) Basis of accounting
The financial statements of the Company have been prepared in accordance with International Financial
Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and in
conformity with the Commercial Companies Law, of 2001 (as amended).

b) Basis of measurement
The financial statements have been drawn up from the accounting records of the Company under the
historical cost convention, except for investment securities which are stated at fair value.

c) Impact of Covid-19
On 11 March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization
(WHO) and has rapidly evolved globally. This has resulted in a global economic slowdown with uncertainties
in the economic environment. Global commodity markets have also experienced great volatility and a
significant drop in prices. Authorities have taken various measures to contain the spread including
implementation of travel restrictions and quarantine measures. The pandemic as well as the resulting
measures and policies have had some impact on the Company. The Company is actively monitoring the
COVID-19 situation, and in response to this outbreak, has activated its business continuity plan and various
other risk management practices to manage the potential business disruption on its operations and financial
performance.

Governments and central banks across the world have responded with monetary and fiscal interventions to
stabilize economic conditions. The Government of Kingdom of Bahrain has announced various economic
stimulus programmes (“Packages”) to support businesses in these challenging times. The Company has
received certain benefits from these Packages mainly in the form of partial waiver of Electricity and Water
Authority utility bills, reimbursement of salaries of national employees from the Unemployment Fund and
exemption of government-owned industrial land rental fees for three months from April 2020 to June 2020.
The financial impact of these Packages have been included under other income (note 18)."

The Company has also made a one-off donation of BD 20 thousand to National Taskforce for combating
COVID-19.

The management and the Board of Directors (BOD) have been closely monitoring the potential impact of the
COVID-19 developments on the Company’s operations and financial position; including possible loss of
revenue, impact on asset valuations, review of onerous contracts and outsourcing arrangements etc. The
Company has also put in place contingency measures, which include but are not limited to enhancing and
testing of business continuity plans including its liquidity requirements. Based on their overall assessment,
the BOD is confident of the view that the Company will continue as a going concern entity for the next 12
months from the date of the financial statements.

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 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
2 BASIS OF PREPARATION (continued)

d) Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates, assumptions and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.

Significant areas where management has used estimates, assumptions or exercised judgments are as
disclosed in note 4.

e) New standards, amendments and interpretations effective from 1 January 2020

The following standards, amendments and interpretations, which became effective as of 1 January 2020,
are relevant to the Company:

(i) Amendments to References to Conceptual Framework in IFRS Standards

The IASB has issued a revised Conceptual Framework which will be used in standard-setting decisions
with immediate effect. No changes will be made to any of the current accounting standards. However,
entities that rely on the Framework in determining their accounting policies for transactions, events or
conditions that are not otherwise dealt with under the accounting standards will need to apply the revised
Framework from 1 January 2020.

The amendments are effective for annual reporting periods beginning on or after 1 January 2020.

The adoption of this amendment had no significant impact on the financial statements.

e) New standards, amendments and interpretations effective from 1 January 2020

(ii) Definition of Material (Amendments to IAS 1 and IAS 8)

The IASB has made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors which use a consistent definition of materiality
throughout International Financial Reporting Standards and the Conceptual Framework for Financial
Reporting, clarify when information is material and incorporate some of the guidance in IAS 1 about
immaterial information. In particular, the amendments clarify:

 that the reference to obscuring information addresses situations in which the effect is similar to
omitting or misstating that information, and that an entity assesses materiality in the context of the
financial statements as a whole, and

 the meaning of ‘primary users of general- purpose financial statements’ to whom those financial
statements are directed, by defining them as ‘existing and potential investors, lenders and other
creditors’ that must rely on general purpose financial statements for much of the financial information
they need.

The amendments are effective for annual reporting periods beginning on or after 1 January 2020.

The adoption of this amendment had no significant impact on the financial statements.

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 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
2 BASIS OF PREPARATION (continued)

(iii) COVID-19-Related Rent Concessions (Amendment to IFRS 16):

In response to the COVID-19 coronavirus pandemic, the Board has issued amendments to IFRS 16
Leases to allow lessees not to account for rent concessions as lease modifications if they are a direct
consequence of COVID-19 and meet certain conditions. The rent concessions could be in various forms
and may include one-off rent reductions, rent waivers or deferrals of lease payments. If the concession
is in the form of a one-off reduction in rent, it will be accounted for as a variable lease payment and be
recognized in profit or loss.

The practical expedient will only apply if:

(1) the revised consideration is substantially the same or less than the original consideration;
(2) the reduction in lease payments relates to payments due on or before 30 June 2021; and
(3) no other substantive changes have been made to the terms of the lease.

Lessees applying the practical expedient are required to disclose:

(i) that fact, if they have applied the practical expedient to all eligible rent concessions and, if not, the
nature of the contracts to which they have applied the practical expedient; and
(ii) the amount recognized in profit or loss for the reporting period arising from application of the practical
expedient.
No practical expedient is provided for lessors. Lessors are required to continue to assess if the rent
concessions are lease modifications and account for them accordingly.

The amendments are effective for annual reporting periods beginning on or after 1 January 2020.

The Company does not expect to have a significant impact on its financial statements.

f) New standards, amendments and interpretations issued but not yet effective

A number of new standards and amendments to standards are effective for annual periods beginning after
1 January 2020 and earlier application is permitted; however; the Company has not early applied the
following new or amended standards in preparing these financial statements.

The following new and amended standards that are relevant to the Company are not expected to have a
significant impact on the Company's financial statements.

- Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16).
- COVID-19 - Related Rent Concessions (Amendments to IFRS 16)
- Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

3 SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of these financial statements are set
below. These accounting policies have been consistently applied by the Company and are consistent
with those used in the previous year.

a) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, net of discounts, and
represents amounts receivable for goods supplied or services performed. The Company recognises
revenues when the amount of revenue can be reliably measured, when it is probable that future economic
benefits will flow to the Company; and when specific criteria has been met for each of the Company’s
activities, as described below:

(i) Revenue from flour sales

Revenue is measured based on the consideration specified in a contract with customer. The
Company recognises revenue when it transfers control over goods or services to the customer.

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 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

(ii) Dividend income

Dividend income is recognized on the declaration date which is the date when the right to receive is
established.

(iii) Interest income

Interest income is recognised as it accrues, using the effective interest rate method.

b) Government grant and subsidy

i. Government subsidy represents the amounts received from the Government of the Kingdom of
Bahrain through Ministry of Finance and National Economy, to enable the Company to sell products
at a controlled price as fixed by the Government. The subsidy is recorded on an accrual basis and is
calculated as the difference between the actual cost of wheat used for local sales products plus an
agreed rate per ton sold for all other related costs of flour sold locally, and the total local sales made
during the year. This subsidy is recognised as income in the statement of profit or loss and other
comprehensive income in the period in which the sales are made to customers.

ii. The Company recognises an unconditional government grant that compensate the Company for
expense incurred in the statement of profit or loss and other comprehensive income as other income
when the grants become receivable.

c) Inventories
These are stated at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business less estimated selling expenses. The cost of the inventory
is based on weighted average principle. Cost includes purchases price, freight, custom duty and direct
labour charge and other incidental costs. Where necessary, provision is made for obsolete, slow-moving
and defective inventories.

d) Foreign currency

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary
economic environment in which the Company operates (‘the functional currency’). The financial
statements have been presented in Bahraini Dinars (BD). Unless otherwise stated, all financial
information presented has been rounded off to the nearest dinar.

(ii) Transactions and balances

Monetary assets and liabilities are translated into Bahraini Dinars at exchange rates ruling at the reporting
date. Transactions in foreign currencies during the year are converted at the rate ruling at that time.
Foreign exchange gains and losses are recognized in the statement of profit or loss and other
comprehensive income.

e) Leases
At inception of a contract, the Company assesses whether a contract is, or contains a lease. A contract
is or contains a lease if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration. To assess whether a contract conveys the right to control the use
of an identified asset, the Company uses the definition of a lease in IFRS 16.

At commencement or on modification of a contract that contains a lease component, the Company

allocates the consideration in the contract to each lease component on the basis of its relative stand-
alone prices. However, for the leases of property the Company has elected not to separate non-lease
components and account for the lease and non-lease components as a single lease component.

The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located. less any lease incentives received.

  15
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

e) Leases (continued)

The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term, unless the lease transfers ownership of the underlying
asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the
Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the
useful life of the underlying asset. which is determined on the same basis as those of property and
equipment. In addition. the right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or if that rate cannot be
readily determined, the Company's incremental borrowing rate. Generally, the Company uses its
incremental borrowing rate as the discount rate.

The Company determines its incremental borrowing rate by obtaining interest rates from various external
financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset
leased.

Lease payments included in the measurement of the lease liability comprise the following:

- fixed payments, including in-substance fixed payments;

- variable lease payments that depend on an index or a rate, initially measured using the index or rate
as at the commencement date;
- amounts expected to be payable under a residual value guarantee; and
- the exercise price under a purchase option that the Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Company is reasonably certain not
to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there is a
change in the Company's estimate of the amount expected to be payable under a residual value
guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or
termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use
asset has been reduced to zero.

The Company presents right-of-use assets that do not meet the definition of investment property in
property, plant and equipment' and lease liabilities in 'trade payables and other liabilities' in the statement
of financial position.

Extension and termination options

In determining the lease term, management considers all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated).

The assessment is reviewed if a significant event or a significant change in circumstances occurs which
affects this assessment and that is within the control of the lessee.

The assessment is reviewed if a significant event or a significant change in circumstances occurs which
affects this assessment and that is within the control of the lessee.

Short-term leases and leases of low-value assets

The Company has elected not to recognise right-of-use assets and lease liabilities for leases of low-value
assets and short-term leases. The Company recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
  16
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Financial instruments
Financial instruments in these financial statements include financial assets and financial liabilities that
are recognized and measured under the requirement of IFRS 9 Financial Instruments. Financial assets
mainly comprise of investment at fair value through profit or loss, cash and cash equivalents, fixed
deposit, receivables and other assets. Financial liabilities comprise trade payables and other liabilities,
import finance loans, bank overdraft, advance to and from customers that would be settled by transfer of
non-financial items are not considered financial instruments. Liabilities and assets that are not contractual
(such as those that are created as a result of statutory requirements imposed by the government) are not
financial assets or liabilities under IFRS 9.

(i) Classification

Financial assets

Financial assets are classified into one of the following three categories:-
• Financial assets at amortised cost;
• Financial assets at fair value through other comprehensive income (FVTOCI); and
• Financial assets at fair value through the profit or loss (FVTPL)

Financial liabilities

Financial liabilities are classified into one of the following two categories:
• Financial liabilities at amortised cost;
• Financial liabilities at fair value through the profit or loss (FVTPL)

(ii) Initial recognition and measurement

The Company recognises financial assets and liabilities in the statement of financial position when, and
only when, the Company becomes party to the contractual provisions of the instrument.

Financial assets (other than trade receivables) are initially recognised at fair value, including transaction
costs that are directly attributable to the acquisition of the financial asset except transaction costs on
financial instruments measured at FVTPL which are expensed in profit or loss. A trade receivable without
a significant financing component is initially measured at the transaction price.

All regular way purchases and sales of listed and/ or quoted financial assets are recognised on the trade
date. All regular way purchases and sales of other financial assets are recognized on the settlement date.

Regular way purchases or sales are purchases or sales of financial assets that require delivery within
the time frame generally established by regulation or convention in the market place.

Financial liabilities are initially recognised at fair value, representing the proceeds received net of
premiums, discounts and transaction costs that are directly attributable to the financial liability.

All regular way purchases and sales of other financial assets and liabilities are recognised on the
settlement date, i.e. the date on which the asset or liability is received from or delivered to the
counterparty.

  17
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Financial instruments (continued)

Financial instruments

(iii) Subsequent measurement

Financial assets

Subsequent to initial measurement, financial assets are measured at either amortised cost or fair value.
The classification and the basis for measurement are subject to the Company's business model for
managing the financial assets and the contractual cash flow characteristics of the financial assets, as
detailed below:

a) Financial assets are measured at amortised cost using the effective interest rate method if:

1) the assets are held within a business model whose objective is to hold assets in order to collect
contractual cash flows; and

2) the contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

If the objective of the business model is to both hold to collect and sell debt instrument, it is classified at
fair value through other comprehensive income.

If either of these two classification criteria is not met, the financial assets are classified and measured at
fair value, either through the profit or loss (FVTPL) or through other comprehensive income (FVTOCI).

Additionally, even if a financial asset meets the amortised cost criteria, the entity may choose to designate
the financial asset at FVTPL. Such an election is irrevocable and applicable only if the FVTPL
classification significantly reduces a measurement or recognition inconsistency.

Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial
recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic
lending risks and costs ( e.g. liquidity risk and administrative costs), as well as profit margin.
If the business model under which the Company holds financial assets changes, the financial assets
affected are reclassified. The classification and measured requirements related to the new category apply
prospectively from the first day of the first reporting period following the change in business model that
results in reclassifying the Company's financial assets.

b) Financial assets at fair value through other comprehensive income (FVTOCI)

At initial recognition, the Company can make an irrevocable election to classify an equity investment that
is not held for trading as FVTOCI.
For this purpose, a financial asset is deemed to be held for trading if the equity investment meets any of
the following conditions:
1) it has been acquired principally for the purpose of selling in the near term;

2) on initial recognition, it is part of a portfolio of identified financial instruments that are managed
together and for which there is evidence of a recent actual pattern of short-term profitability; or

3) it is a derivative and not designated and effective as a hedging instrument or a financial guarantee.

The irrevocable election is on an instrument-by-instrument basis. If an equity investment is designated

as FVTOCI, all gains and losses, except for dividend income, are recognised in other comprehensive
income and are not subsequently included in the statement of income.

  18
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Financial instruments (continued)

c) Financial assets at fair value through the profit or loss (FVTPL)

Financial assets not otherwise classified above are classified and measured as FVTPL and changes
therein, including any interest or dividend income, are recognized in the profit or loss.

Financial liabilities
All financial liabilities, other than those classified and measured as financial liabilities at FVTPL, are
classified as financial liabilities at amortised cost and are measured at amortised cost using the effective
interest rate method as described in note (ii) above.

Financial liabilities classified as financial liabilities at FVTPL includes derivatives.

(iv) Derecognition of financial assets and liabilities

Financial assets are derecognised and removed from the statement of financial position when the right
to receive cash flows from the assets has expired; the Company has transferred its contractual right to
receive the cash flows from the assets, and substantially all the risks and rewards of ownership; or where
control is not retained.

Financial liabilities are derecognised and removed from the statement of financial position when the
obligation is discharged, cancelled, or expires. The Company also derecognises a financial liability when
its terms are modified and the cash flows of the modified liability are substantially different, in which case
a new financial liability based on the modified terms is recognised at fair value. On derecognition of a
financial liability, the difference between the carrying amount extinguished and the consideration paid
(including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.

(v) Fair value measurement

Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence, the
most advantageous market to which the Company has access at that date. The fair value of a liability
reflects its non-performance risk.

When available, the Company measures the fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if transactions for the asset or liability
take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximise
the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation
technique incorporates all of the factors that market participants would take into account in pricing a
transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction
price – i.e. the fair value of the consideration given or received. If the Company determines that the fair
value at initial recognition differs from the transaction price and the fair value is evidenced neither by a
quoted price in an active market for an identical asset or liability nor based on a valuation technique that
uses only data from observable markets, then the financial instrument is initially measured at fair value,
adjusted to defer the difference between the fair value at initial recognition and the transaction price.

Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the
instrument but no later than when the valuation is wholly supported by observable market data or the
transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Company
measures assets and long positions at a bid price and liabilities and short positions at an ask price. If the
bid-ask spread for a specific asset or liability is wide, then the Company uses the price within the bid-ask
spread that is most representative of fair value in the circumstances.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that
are managed by the Company on the basis of the net exposure to either market or credit risk are
measured on the basis of a price that would be received to sell a net long position (or paid to transfer a
net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the
  19
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

f) Financial instruments (continued)

individual assets and liabilities on the basis of the relative risk adjustment of each of the individual
instruments in the portfolio.

The Company recognises transfers between levels of the fair value hierarchy as of the end of the
reporting period during which the change has occurred.

(vi) Impairment of financial assets

The Company recognises loss allowance for Expected Credit Loss (ECL) on financial assets measured
at amortized cost. Loss allowance for trade receivables is measured at an amount equal to lifetime ECLs.

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets carried at amortised cost are
credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer;

- a breach of contract such as a default or being more than 90 days past due;
- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
- the disappearance of an active market for a security because of financial difficulties.

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying
amount of the assets.

(vii) Offsetting financial assets and liabilities

Financial assets and financial liabilities are only offset and the net amount reported in the statement of
financial position if, and only if, when there is a legally enforceable right to set off the recognised amounts
and there is an intention to settle on a net basis, or to realise the asset and settle the liability
simultaneously.

g) Trade and other receivables

Trade and other receivables are initially measured at fair value and subsequently carried at amortised
cost less provision for impairment.

h) Property, plant and equipment

Property, plant and equipment held for operational purposes are carried at cost less accumulated
depreciation and any impairment losses. The cost of the property, plant and equipment includes the
cost of bringing them to their present location and condition. Direct costs are capitalized until assets
are ready for use. Capital work-in-progress comprises the cost of assets that are not yet ready for their
intended use as at the reporting date. The cost of additions and major improvements are capitalised.
All other repairs and maintenance costs are recognized in the statement of profit or loss as incurred.

(i) Subsequent cost

The Company recognises in the carrying amount of an item of property, plant and equipment, and the
cost of replacing part of such an item when that cost is incurred if it is probable that the future economic
benefits embodied with the item will flow to the Company and the cost of the item can be measured
reliably. All other costs are recognised in statement of profit or loss and other comprehensive income
as an expense as incurred.

  20
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

3 SIGNIFICANT ACCOUNTING POLICIES (continued)

h) Property, plant and equipment (continued)

(ii) Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each
part of an item of property, plant and equipment as follows:

Building (on leased land) 20 years

Plant and machinery 10 years
Capital spares 10 years
Motor vehicles 4- 10 years
Furniture and office equipment 2-5 years
Right-of-use assets Over the period of the lease

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
reporting date. When an item under property, plant and equipment is sold or discarded, the respective
cost and accumulated depreciation relating thereto are eliminated from the statement of financial
position, the resulting gain or loss being recognized in statement of profit or loss and other
comprehensive income.

Capital spares
The Company capitalises the spare parts of machines that are high in value, critical to the plant
operations and have a life equal to the life of the machine. These spare parts are depreciated over
the life of the related machine.

i) Impairment of non-financial assets:

The carrying amount of the Company’s assets or its cash generating unit, other than financial assets,
are reviewed at each reporting date to determine whether there is any indication of impairment. A cash
generating unit is the smallest identifiable asset group that generates cash flows that largely are
independent from other asset and groups. If any such indication exists, the asset's recoverable amount
is estimated. The recoverable amount of an asset or a cash generating unit is the greater of its value in
use or fair value less costs to sell. An impairment loss is recognised whenever the carrying amount of an
asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are
recognised in the statement of profit or loss and other comprehensive income. Impairment losses are
reversed only if there is an indication that the impairment loss may no longer exist and there has been a
change in the estimates used to determine the recoverable amount.

j) Value added tax (VAT)

Expenses and assets are recognised net of the amount of VAT, except:

- When the VAT incurred on a purchase of assets or services is not recoverable from the taxation
authority, in which case, the sales tax is recognised as part of the cost of acquisition of the asset or
as part of the expense item, as applicable.
- When receivables and payables are stated with the amount of VAT included.

The gross amount of VAT recoverable from, or payable to, the taxation authority are included as part
of receivables and payables in the statement of financial position.

k) Treasury shares
Treasury shares are stated at acquisition cost and are shown as a deduction to equity. No gain or loss
is recognised in the statement of profit or loss on the purchase, sale, issue or cancellation of the
treasury shares. Gain or loss arising from the subsequent resale of treasury shares is included in the
retained earnings in the statement of changes in equity. Net movement from repurchase and resales
of treasury shares is booked under the treasury shares.

  21
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

l) Share Capital
Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction
from equity.

m) Dividend distribution
Dividends are recognised as a liability in the period in which they are approved by the shareholders.

n) Statutory reserve
In accordance with the Bahrain Commercial Companies Law 2001, 10% of the net profit is
appropriated to a statutory reserve, until it reaches 50% of the paid-up share capital. This reserve is
distributable only in accordance with the provisions of the law.

o) Employee benefits

(i) Bahraini employees

Pension rights (and other social benefits) for Bahraini employees are covered by the Social Insurance
Organisation scheme to which employees and employers contribute monthly on a fixed-percentage-
of-salaries basis. The Company’s share of contributions to this funded scheme, which is a defined
contribution scheme under IAS 19, is recognised as an expense in profit or loss.

(ii) Expatriate employees

Employees are entitled to leaving indemnities payable under the Bahraini Labour Law for the Private
Sector, based on length of service and final salary. Provision for this, which is unfunded, and which
represents a defined benefit plan under International Accounting Standard 19 – Employee Benefits
has been made by calculating the notional liability had all employees left at the reporting date.

Terminal and other employee’s benefits, entitlements to annual leaves, air passage or others are
recognized as they accrue to the employees.

p) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and bank balances and deposits with original
maturity of 90 days or less and are subject to insignificant risk of changes in their fair value.

q) Trade payables and other liabilities

Trade payables and other liabilities are recognised initially at fair value and subsequently measured
at amortized cost using the effective interest method.

r) Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised
as part of the cost of the asset. All other borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest, realised losses resulted from settlement of interest rate
swaps (excluding unrealised fair value changes) and other costs that an entity incurs in connection
with the borrowing of funds.

Import finance loans are recognised initially at the proceeds received as borrowings, net of transaction
costs incurred. In subsequent periods, these are stated at amortised cost using the effective interest
method. Any differences between proceeds (net of transaction costs) and the redemption value is
recognised in the statement of profit or loss and other comprehensive income over the period of the
borrowings.

s) Board members’ remuneration

Board members’ remuneration is recognized in the statement of profit or loss and other comprehensive
income on an accrual basis.

  22
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
3 SIGNIFICANT ACCOUNTING POLICIES (continued)

t) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Company expects some or all of a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognised as a separate asset, but only when the
reimbursement is virtually certain. The expense relating to a provision is presented in the statement
of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax
rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as a finance cost.

4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company financial statements requires the Board of Directors to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the
carrying amount of the asset or liability affected in future periods.

Judgements
In the process of applying the Company’s accounting policies, the Board of Directors has made the
following judgments after taking into consideration the impacts of COVID-19 outbreak as explained in
note 2b, which have the most significant effect on the amounts recognised in the financial statements:

Going concern
The Company’s Board of Directors has made an assessment of the Company’s ability to continue as a
going concern and is satisfied that the Company has the resources to continue in business for the
foreseeable future. Furthermore, the Board of Directors is not aware of any material uncertainties that
may cast significant doubt upon the Company’s ability to continue as a going concern. Therefore, the
financial statements continue to be prepared on the going concern basis.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are described below. The Company based its
assumptions and estimates on parameters available when the financial statements were prepared and
have considered the impacts of COVID-19 outbreak as explained in note 2b. Existing circumstances and
assumptions about future developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Company. Such changes are reflected in the assumptions when
they occur.

Classification of investments
Upon acquisition of an investment, management decides whether it should be classified as measured
at amortised cost; at fair value through other comprehensive income; or at fair value through profit or
loss (FVTPL). The classification of each investment reflects Company’s business model in relation to
each investment and is subject to different accounting treatments based on such classification.

Impairment of inventories
The Company reviews the carrying amounts of the inventories at each reporting date to determine
whether the inventories have been impaired. The Company identifies the inventories, which have been
impaired based on the age of the inventory and their estimate of the future demand for various items in
the inventory. If any impairment indication exists, the inventories recoverable amount is estimated based
on past experience and prevalent market conditions.

  23
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)

Impairment of inventories (continued)

As at 31 December 2020, gross inventories of spares was BD 967,559 (2019: BD 949,342) with
provisions for slow moving spares of BD 509,932 (2019: BD 456,668). Any difference between the
amounts actually realised in future periods and the amounts expected will be recognised in the statement
of profit and loss and other comprehensive income.

Impairment of receivables
The Company establishes provision for impairment of accounts receivables based on ‘expected credit
loss’ (“ECL”) model. The Company uses a simplified approach as allowed by the standard to determine
impairment of trade receivables.

Useful life and residual value of property, plant and equipment

The Company reviews the useful life and residual value of the property, plant and equipment at each
reporting date to determine whether an adjustment to the useful life and residual value is required. The
useful life and residual value is estimated based on the similar assets of the industry, and future economic
benefit expectations of the management.

Impairment of property, plant and equipment

The Company at each reporting date whether there is any indication that an asset may be impaired. If
any such indication exists, or when annual impairment testing for an asset is required, the Company
makes an estimate of the asset's recoverable amount. An asset’s recoverable amount is higher of an
asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or group of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

  24
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

5 PROPERTY, PLANT AND EQUIPMENT

2020 Buildings Plant, Motor Furniture Right-of- Capital Total

Machinery vehicles and office use assets Work-in-
and capital equipment progress
spares (refer note
below)

Cost
At beginning of year 8,778,485 7,896,484 160,458 827,792 210,959 413,328 18,287,506
Additions - 39,956 - 8,133 292,512 2,483,894 2,824,495
Spare parts usage - (6,570) - - - - (6,570)

At 31 December 8,778,485 7,929,870 160,458 835,925 503,471 2,897,222 21,105,431

Depreciation
At beginning of year 6,485,900 6,977,780 118,280 777,285 54,683 - 14,413,928
Charge for the year:
- Cost of sales 236,164 256,092 8,467 18,094 - - 518,817
- Others 9,156 2,978 3,637 16,227 53,638 - 85,636
Spare parts usage - (4,353) - - - - (4,353)

At 31 December 6,731,220 7,232,497 130,384 811,606 108,321 - 15,014,028

Net carrying value

At 31 December 2,047,265 697,373 30,074 24,319 395,150 2,897,222 6,091,403

2019 Buildings Plant, Motor Furniture and Right-of-use Capital Total

Machinery and vehicles office assets Work-in-
capital spares equipment progress

Cost
At beginning of year 8,758,252 7,807,983 160,458 819,222 - - 17,545,915
Additions 20,233 98,825 - 8,570 210,959 413,328 751,915
Spare parts usage - (10,324) - - - - (10,324)

At 31 December 8,778,485 7,896,484 160,458 827,792 210,959 413,328 18,287,506

Depreciation
At beginning of year 6,240,315 6,702,411 106,209 731,866 - - 13,780,801
Charge for the year:
- Cost of sales 236,751 277,492 8,444 21,508 29,255 573,450
- Others 8,834 2,823 3,627 23,911 25,428 - 64,623
Spare parts usage - (4,946) - - - - (4,946)

At 31 December 6,485,900 6,977,780 118,280 777,285 54,683 - 14,413,928

Net carrying value

at 31 December 2,292,585 918,704 42,178 50,507 156,276 413,328 3,873,578
Note:
The land at Mina Salman on which the mill was built is leased by the Company from the Government of
Kingdom of Bahrain. The lease contract expired on 30 June 2020 and the management of the Company is
negotiating the renewal of the contact with Ministry of Finance and National Economy. The Management is
confident of obtaining the renewal of lease period for a minimum of 15 years.

During 2019, the Company has entered into an agreement with supplier to supply and install mechanical and
electrical equipment including the engineering work to upgrade cleaning house, new mill and to upgrade the
flour blending and mixing and Flour Sterilator in the lease hold property for a total consideration of BD
2,928,475 of which BD 2,897,222 has been capitalized as capital work-in-progress as at 31 December 2020.

  25
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

6 INVESTMENT AT FAIR VALUE THROUGH PROFIT OR LOSS 2020 2019

At 1 January 10,079,952 8,544,687

Net change in fair value of investment securities 376,352 1,535,265

10,456,304 10,079,952

7 INVENTORY 2020 2019

Wheat in silos 6,865,889 2,837,622

Goods in transit 7,406 2,682,134
Finished goods 1,224,163 534,021
Packing materials 100,935 126,808
Spare parts and consumables 967,559 949,342
9,165,952 7,129,927
Less: provision for obsolete and slow-moving inventories (509,932) (456,668)

8,656,020 6,673,259

The movement on provision for obsolete and slow-moving inventories is as follows:

2020 2019

At 1 January 456,668 334,658

Charges for the year 53,264 122,010

At 31 December 509,932 456,668

8 RECEIVABLES AND OTHER ASSETS 2020 2019

Trade receivables 243,871 190,389

Subsidy receivable 1,846,074 3,016,138
VAT receivables (net) 117,577 -
Advances to suppliers 39,904 159,178
Due from government (note 25) 18,394 -
Others 47,630 44,536
2,313,450 3,410,241

Less: Provision for impairment - (94,847)

2,313,450 3,315,394

The movements on provision for impairment is as follows: 2020 2019

At 1 January 94,847 372

Charge for the year - 94,475
Written off (94,847) -

- 94,847

  26
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

9 CASH AND CASH EQUIVALENTS 2020 2019

Cash on hand 1,408 729

Bank balances 1,852,626 2,035,948

Cash and bank balance 1,854,034 2,036,677

Bank overdraft (491,155) -

Cash and cash equivalents 1,362,879 2,036,677

10 SHARE CAPITAL 2020 2019

Authorised: 100,000,000 shares

Issued and fully paid: 24,832,500 shares of 100 fils each 2,483,250 2,483,250
6,930 treasury shares (2019: 6,930 shares) (1,373) (1,373)

Net shares in public issue 2,481,877 2,481,877

Performance per share 2020 2019

Earnings per 100 fils share 44 fils 75 fils

Net asset value per 100 fils share 841 fils 811 fils
Stock Exchange price per 100 fils share at 31 December 327 fils 320 fils
Stock Exchange price to earnings ratio 8:1 4:1

Total market capitalisation at 31 December (BD) 8,120,228 7,946,400

 
Additional information on shareholding pattern

(i) Names and nationalities of the major shareholders and the number of equity shares held in which
they have an interest on 5% or more of outstanding shares as at 31 December 2020 and 31
December 2019:

Nationality No. of shares % holding

Bahrain Mumtalakat Holding Company B.S.C. (c) Bahraini 16,322,806 65.73

Kuwait Flour Mills and Bakeries Company K.S.C. Kuwaiti 1,848,000 7.44
Abdulhameed Zainal Mohammed Bahraini 1,664,430 6.70

(ii) The Company has only one class of equity shares and the holders of these shares have equal voting
rights.

  27
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
10 SHARE CAPITAL (continued)

(iii) Distribution schedule of equity shares, setting out the number of holders and percentage in the following
categories:

2020 2019
Categories* Number of Number of % of total Number of Number of % of total
Shares shareholders outstanding Shares shareholders outstanding
shares shares

Less than 1% 4,749,776 1,699 19.13% 4,886,430 1,699 19.68%

1% up to less than 5% 247,488 1 1.00% 247,488 1 1.00%
5% up to less than 10% 3,512,430 2 14.14% 3,375,776 2 13.59%
10% up to less than 20% - - - - - -
20% up to less than 50% - - - - - -
50% and above 16,322,806 1 65.73% 16,322,806 1 65.73%

24,832,500 1,703 100% 24,832,500 1,703 100%

*Expressed as a percentage of total shares of the Company.

11 EMPLOYEES BENEFITS

The Company's contributions in respect of non-Bahraini employee as per Bahrain Labor Law, 2012 amounted
to BD 83,923 (2019: BD 64,870).

The movement in the provision for employees’ leaving indemnity was as follows:

2020 2019

At 1 January 64,870 49,172

Charge during the year 19,053 16,685
Paid during the year - (987)

At 31 December 83,923 64,870

12 TRADE PAYABLES AND OTHER LIABILITIES 2020 2019

Trade payables 103,646 2,717,341

Due to government (note 25) 2,807,136 -
Dividends payable * 55,146 252,201
Accrued expenses and other payables 385,541 277,007
VAT payable, net - 9,854

3,351,469 3,256,403

* Represents the dividend payable to the shareholders where the cheques issued have become stale.

  28
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

13 IMPORT FINANCE LOANS (Unsecured)

Import finance loans are used to import wheat, unsecured and generally repayable within 90 to 180 days.
Movement during the year as follows:
2020 2019

At 1 January 2,402,590 5,008,631

Loans availed during the year 17,352,368 11,358,960
Loans repaid during the year (14,861,129) (13,965,001)

At 31 December 4,893,829 2,402,590

Import finance loans are unsecured and are re-payable within six months. Interest rates imposed on these
loans range from 3.5% to 5%. Interest on these loans are recovered back through government subsidy.

14 SALES 2020 2019

Flour 4,565,181 4,710,124

Bran 1,522,848 1,470,758
Special products 966,603 894,129

7,054,632 7,075,011

15 COST OF SALES 2020 2019

Raw materials 13,062,222 13,860,537

Staff cost 778,747 731,094
Depreciation (note 5) 518,817 573,450
Packing materials 250,025 245,474
Maintenance, repairs and utilities 308,485 331,384
Others 260,000 297,107

15,178,296 16,039,046

16 GOVERNMENT SUBSIDY

Government subsidy is calculated as the difference between the actual cost of wheat purchased and used
for local sales products plus BD 31 per ton (2019: BD 31 per ton) sold, for all other related costs of flour sold
locally, and the total local sales made during the year. The following table shows the details of Government
subsidy:
2020 2019

Actual cost of wheat purchased and used 12,936,013 13,751,282

Plus: BD 31 per ton of wheat products sold locally 3,792,473 3,826,100
Expense reimbursement 72,576 -

16,801,062 17,577,382
Less: Gross sales subject to subsidy (6,990,704) (6,971,404)

9,810,358 10,605,978
Quantity sold during the year was 123,134 tons (through Subsidy 122,338 and Commercial is 796) (2019:
124,325 tons (through Subsidy 123,423 and Commercial is 902))

  29
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

17 OTHER OPERATING EXPENSES 2020 2019

Staff cost 705,255 657,987

General and administrative expenses 355,923 204,241
Depreciation (note 5) 85,636 64,623
Board of directors remunerations 60,000 60,000
Professional fees 77,708 116,514
Other 96,932 125,136

1,381,454 1,228,501

18 OTHER INCOME 2020 2019

Government grant (note 3b) 318,510 -

Wheat handling charges, net (note 25) 63,344 -
Delivery income 14,439 11,731
Income from shipments claims 31,913 34,449
Interest on bank deposit 34,978 13,994
Others 4,530 22,923

467,714 83,097

19 FINANCE COST 2020 2019

Interest on lease liabilities 35,416 8,596

Interest on bank overdraft 12,271 77,998
Interest on bank loans 15,460

63,147 86,594

20 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number
of equity shares outstanding during the year ended 31 December 2020 as follows:

2020 2019

Profit for the year 1,086,159 1,850,735

Weighted average number of equity shares in issue 24,832,500 24,832,500

Basic and diluted earnings per share 44 fils 75 fils

Diluted earnings per share is the same as basic earnings per share as the Company has no instruments
convertible into ordinary shares that would dilute earnings per share.

  30
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

21 LEASES AS LEASEE

The Company leases industrial lands. The leases typically run for a period ranging from 2 years to 15 years,
with an option to renew the lease after that date except. Lease payments are subject to negotiation every 5
years for to reflect market rentals. No leases provide for additional rent payments that are based on changes
in local price index.

Information about leases for which the Group is a lessee is presented below.

i. Right-of-use assets
Right-of-use assets related to leased properties that do not meet the definition of investment property are
presented as property, plant and equipment.

2020 2019

Balance at 1 January 156,276 -

Addition to right-of-use assets 292,512 210,959
Depreciation charge for the year (53,638) (54,683)

Balance at 31 December 395,150 156,276

ii. Lease liabilities under IFRS 16 2020 2019

Non-current portion 351,343 121,083

Current portion 67,380 67,380

Balance at 31 December 418,723 188,463

Effective interest on lease liabilities is 5% (2019: 5%).

iii. Amount recognised in profit or loss 2020 2019

Interest on lease liabilities 35,416 8,596

Depreciation 53,638 54,683
Expense related to short-term lease 58,886 -

Balance at 31 December 147,940 63,279

iv. Amounts recognized in statement of cash flows

2020 2019

Total cash outflow for lease liabilities 61,380 67,380

Where practicable, the Company seeks to include extension options in new leases to provide operational
flexibility. The extension options held are exercisable only by the Company and not by the lessors. The
Company assesses at lease commencement date whether it is reasonably certain to exercise the extension
options. The Company reassesses whether it is reasonably certain to exercise the options if there is a
significant event or significant changes in circumstances within its control.

  31
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

22 SEGMENTAL ANALYSIS

A segment is a distinguishable component of the Company that is engaged either in providing products or
services (business segment) or in providing products or services within a particular environment
(geographical segment), which is subject to risks and rewards that are different from those of other segment.
The Company’s current activities are primarily the production of flour and related products which are sold in
the local market. The revenue, expenses and results are reviewed only at a Company level and therefore no
separate operating segment results and related disclosures are provided in these financial statements.

23 RELATED PARTY TRANSACTIONS

Related parties represent major shareholders, directors and key management personnel of the Company
and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms
of these transactions are approved by the Company’s Board of Directors.

Transactions with shareholders

The Company qualifies as a government related entity under the definitions provided in IAS 24. The
Company purchase Electricity, avails short-term loan and receives services from various Government and
semi-government organisation and companies in the Kingdom of Bahrain. Other than purchase of Electricity
and availing short-term loan, such other transactions are in the normal course of business and are not
considered to be individually significant in terms of size.

Transactions with other commercial non-government related parties related to the controlling shareholder
and significant transaction with government related entities included in the statement of profit or loss are as
follows:

a) Transactions and balances with related parties

2020 2019

i) Statement of profit or loss and other Relationship

comprehensive income
Finance cost on import finance loans Affiliate of parent 43,902 37,359
Other operating expenses Affiliate of parent 8,096 6,248

51,998 43,607

2020 2019

ii) Import Finance Loan Affiliate of parent

Loans Availed during the year 5,911,834 2,895,889
Repayment of import finance loans (3,479,501) (5,510,057)

2020 2019

iii) Statement of financial position Relationship

Import finance loans Affiliate of parent 2,920,536 488,203
Accrued interest on import finance loans Affiliate of parent 30,848 1,873

2,951,384 490,076

b) Transactions with key management personnel

Key management personnel of the Company comprise of the Board of Directors and key members of
management having authority and responsibility for planning, directing and controlling the activities of
the Company.

  32
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

23 RELATED PARTY TRANSACTIONS (continued)

The key management personnel compensation is as follows:

2020 2019

Board of Directors' remunerations 60,000 60,000

Directors' sitting fees 92,800 83,050
Other board of directors’ expenses 15,405 16,612
Salaries and other benefits 175,872 130,599

Total compensation 344,077 290,261

24 FINANCIAL INSTRUMENTS - RISK MANAGEMENT AND FAIR VALUES

Financial instruments consist of financial assets and financial liabilities.

Financial assets of the Company include cash and bank balances, receivables and investment securities

Financial liabilities of the Company include payables and import finance loans.

a) Risk management:

The Company has exposure to the following risks from the use of financial instruments:
 Credit risk
 Liquidity risk
 Market risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s
objectives, policies and processes for measuring and managing risks. Further quantitative disclosures are
included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk
management framework. Day to day monitoring of the Company’s activities and risks is performed by the
Board Committees and the Chief Executive Officer.

The Company’s risk management policies are established to identify and analyse the risks faced by the
Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and the
Company’s activities.

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract will fail to discharge an obligation and cause the other party to incur a financial loss. The
Company is exposed to credit risk from its operating activities and from its finance activities, including from
trade receivables, deposit with banks, foreign exchange transactions.

The Company seeks to limit its credit risk with respect to customers by means of the following policies:

 Credit risk is actively managed and rigorously monitored in accordance with well-defined credit
policies and procedures laid down by the Company.
 Credit review procedures are designed to identify at an early stage exposure, which require more
detailed monitoring and review.
 Cash is placed with banks with good credit ratings.

  33
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars
24 FINANCIAL INSTRUMENTS - RISK MANAGEMENT AND FAIR VALUES (continued)

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
2020 2019

Bank balances 1,852,626 2,035,948

Fixed deposit 752,325 -
Receivables and other assets 2,225,916 3,111,680

4,830,867 5,147,628

The maximum exposure to credit risk from receivables at the reporting date by segment was:

2020 2019

Government 1,864,468 2,921,663

Non-government 361,448 190,017

2,225,916 3,111,680

The Company does not hold any collateral against the above receivables.

The ageing of receivables at the reporting date was:

2020 2019
Exposure Loss Exposure Loss
allowance allowance
Neither past due nor impaired 1,212,530 - 1,013,800 -
Past due not impaired:
Past due 1-30 days 863,957 - 830,877 -
Past due 31-90 days 31,704 - 890,595 -
Past due 91-365 days 62,325 - 57,008 -
Over 365days 55,400 - 35,392 -
Past due and impaired:
Over 120 days - - 378,855 94,847

2,225,916 - 3,206,527 94,847

Credit risk Concentration

The Company sells its products to a large number of customers. Its five largest customers, which account for
61% of the outstanding trade receivables at 31 December 2020 (2019: 76%).

Liquidity risk, also referred to as funding risk, is the risk the Company will encounter difficulty in raising funds
to meet obligations associated with its financial liabilities. Liquidity risk may result from an inability to sell a
financial asset quickly at close to its fair value.

Liquidity requirements are monitored on a daily basis and the management ensures that sufficient funds are
available to meet any future commitments. In the normal course of business, the Company does not resort to
borrowings but has the ability to raise funds from banks at short notice.

The Company’s terms of sale requires cash and carry and for some trade receivables amounts to be paid
within 30 to 60 days of the date of sale. Trade payables are non-interest bearing and are normally settled
within 30 days terms.

  34
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

24 FINANCIAL INSTRUMENTS - RISK MANAGEMENT AND FAIR VALUES (continued)

The following are the contractual maturities of financial liabilities:

Carrying Gross 0 up to 3 3 up to 6 6 months 1 up to over 5

  value contractual months months up to 1 5 years years
cash flow year
2020

Trade payables and other

liabilities 3,296,323 3,296,323 3,296,323 - - - -
Lease liability 418,723 539,781 40,164 9,072 18,144 218,964 253,437
Import finance loans 4,893,829 4,970,152 3,494,653 1,475,499 - - -
Bank overdraft 491,155 491,155 491,155 - - - -
Dividend payable 55,146 55,146 55,146 - - - -

9,155,176 9,352,557 7,377,441 1,484,571 18,144 218,964 253,437

Carrying Gross 0 up to 3 3 up to 6 6 months 1 up to 5 over 5

  value contractual months months up to 1 years years
cash flow year
2019

Trade payables and other

liabilities 2,994,348 2,994,348 2,994,348 - - - -
Lease liability 188,463 253,716 67,380 9,072 18,144 152,730 6,390
Import finance loans 2,402,590 2,402,590 1,925,628 476,962 - - -
Dividend payable 252,201 252,201 252,201 - - - -

5,837,602 5,902,855 5,239,557 486,034 18,144 152,730 6,390

Market risk is the risk that that changes in market prices will affect the Company’s income or the value of its
financial instruments; whether those changes are caused by factors specific to the individual security or its
issuer or factors affecting all investments traded in the market. The Company is exposed to market risk with
respect to its investments.

Interest rate risk is the risk that the Company's earnings will be affected as a result of fluctuations in the
value of financial instruments due to changes in market interest rates.

Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the
Company processes, personnel, technology and infrastructure, and from external factors other than credit,
market and liquidity risks such as those arising from legal and regulatory requirements and generally
accepted standards of corporate behaviour. Operational risks arise from all of the Company operations.

The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses
and damage to the Company’s reputation with overall cost effectiveness and to avoid control procedures that
restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is
assigned to Board Committees within each business unit. This responsibility is supported by the
development of overall Company standards for the management of operational risk in the following areas:
- requirements for appropriate segregation of duties, including the independent authorisation of transactions;
- requirements for the reconciliation and monitoring of transactions;
- compliance with regulatory and other legal requirements; and
- documentation of controls and procedures.

  35
  Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

24 FINANCIAL INSTRUMENTS - RISK MANAGEMENT AND FAIR VALUES (continued)

Compliance with the Company’s standards is supported by a program of periodic reviews undertaken by
Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit
to which they relate, with summaries submitted to the Audit Committee and Board committees of the
Company.

b) Classification and fair values of financial instruments

The fair values of financial assets and liabilities, together with the carrying amounts shown at the reporting
date, are as follows:

2020 FVTPL Amortised cost Total carrying

amount

Cash and cash balances - 1,854,034 1,854,034

Fixed deposit - 752,325 752,325
Receivable and other assets - 2,225,916 2,225,916
Investment securities 10,456,304 - 10,456,304

10,456,304 4,832,275 15,288,579

Trade payables and other liabilities - 3,296,323 3,296,323

Lease liability - 418,723 418,723
Import finance loans - 4,893,829 4,893,829
Dividends payable - 55,146 55,146
Bank overdraft - 491,155 491,155

- 9,155,176 9,155,176

2019 FVTPL Amortised cost Total carrying

amount

Cash and cash balances - 2,036,677 2,036,677

Receivable and other assets - 3,154,227 3,154,227
Investment securities 10,079,952 - 10,079,952

10,079,952 5,190,904 15,270,856

Trade payables and other liabilities - 2,994,348 2,994,348
Lease liability - 188,463 188,463
Import finance loans - 2,402,590 2,402,590
Dividends payable - 252,201 252,201

- 5,837,602 5,837,602

Fair value hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence, the most
advantageous market to which the Company has access at that date. The fair value of a liability reflects its
non-performance risk.

The Company measures fair value using the following fair value hierarchy that reflects the significance of the
inputs used in making the measurements:

  36
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

24 FINANCIAL INSTRUMENTS - RISK MANAGEMENT AND FAIR VALUES (continued)

 Level 1 quoted prices (unadjusted) in active markets for identical assets and liabilities.
 Level 2 inputs other than quoted prices included within Level 1 that are observable either directly
(i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using:
quoted market prices in active markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other valuation techniques in which
all significant inputs are directly or indirectly observable from market data.
 Level 3 inputs that are unobservable. This category includes all instruments for which the valuation
technique includes inputs not based on observable data and the unobservable inputs have a
significant effect on the instrument’s valuation. This category includes instruments that are valued
based on quoted prices for similar instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the instruments.

This hierarchy requires the use of observable market data when available. The Company considers relevant
and observable market prices in its valuations where possible.

2020
Level 1 Level 2 Level 3 Total

Investment securities at fair value through

profit or loss:
Managed funds 10,456,304 - - 10,456,304

10,456,304 - - 10,456,304

2019
Level 1 Level 2 Level 3 Total

Investment securities at fair value through

profit or loss:
Managed funds 10,079,952 - - 10,079,952

10,079,952 - - 10,079,952

There were no transfers between the levels during the year. The Company has not disclosed the fair value
for other financial instruments because their carrying amounts are a reasonable approximation of fair values.

Capital management

The Company manages its capital structure and makes adjustments to it in light of changes in economic
conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to
shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives,
policies or processes for managing capital during the years ended 31 December 2020 and 31 December
2019. The primary objective of the Company's capital management is to ensure that it maintains a healthy
capital base in order to support its business and maximise shareholders' value.

The Company is not subject to externally imposed capital requirements.

25 SUPPLY OF STRATEGIC WHEAT

The Company signed a contract with Government of the Kingdom of Bahrain on 30 April 2020 to supply and
store additional 26,838 tons of grain for total cost of BD 3,227,991 as a strategic stock (comprising of BD
2,807,145 for cost of wheat and BD 420,846 for wheat handling charges). The duration of the contract is for
six months and subject to renewal. The Contract lapsed on 31 October 2020.

  37
 Bahrain Flour Mills Company B.S.C.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020 Bahraini Dinars

25 SUPPLY OF STRATEGIC WHEAT (continued)

As per the contract the value of the stock to be transferred to the Company as advance subsidy against
wheat to be used in future production. In addition, the Government will pay rental, transportation and
Insurance cost for three months post contract termination.

As result of this transaction the company recognised additional inventory of BD 2,807,145 and corresponding
liability as due to Government. The remaining balance of BD 63,344 net of expense incurred and to be
incurred, recognized as handling charges income.

26 COMMITMENTS AND CONTINGENCIES

(i) Commitments

Pending capital commitment

Estimated capital expenditure contracted for at the reporting date amounted to BD 296,015
(2019: BD 1,998,552). The commitments are expected to be settled within 1 to 5 years from the reporting
date.

Letters of credit
At 31 December 2020, the Company had outstanding letters of credit to counterparties of BD 235,616
(2019: BD Nil).

(ii) Contingencies

At 31 December 2020, the Company had contingent liabilities in respect of the bank guarantees amounting
to BD 500 (2019: BD 500) from which is anticipated that no material liabilities will arise.

27 PROPOSED DIVIDENDS, REMUNERATION AND APPROPRIATIONS

The Board of Directors have proposed the following appropriations for the year which will be submitted for
formal approval at the annual general meeting:

2020 2019

Cash dividends (15 fils per share, 2019: 10 fils per share) 372,384 248,256
Board of directors’ remuneration 60,000 60,000
Charity contribution 20,000 20,000
Transfer to retained earnings 693,775 1,582,479

28 COMPARATIVES

The corresponding’s prior year figures have been regrouped, where necessary, in order to conform to
current year’s presentation. Such regroupings did not affect the previously reported net profit and
comprehensive income for the year, total assets or total equity.

  38
 Bahrain Flour Mills Company B.S.C.

Supplementary information (unaudited)

SUPPLEMENTARY DISCLOSURE RELATED TO THE IMPACT OF COVID-19

Further to the CBB letter dated 14 July 2020 (ref. OG/259/2020), Bahrain Flour Mills Company B.S.C.
provides the following information:
 
A. The overall impact on the financial statements  
The overall impact on the financial statements of BFM as at 31 December 2020 has been assessed by
Management and is described as per below: 

 
 
B. The impact on Income Statement  
There was no significant impact on food industry and
demand was sustainable. During the Covid-19 pandemic,
BFM gained some additional commercial business other
than the subsidised business. In general, we have
observed no material revenue impact in 2020.
Revenues  
In addition to that BFM received Government support for
BD 318,510 that was classified as other income. The
support was for salaries BD 266,732 Rent of BD 7,773 and
Utilities of BD 44,005. 
BFM incurred additional expenses of BD 134,832 up to 31
December 2020 in relation to COVID. 
Expenses  

The company holds financial assets at fair value through

profit or loss, the change in the fair value/reported profit for
2020 is BD 376,352 as compared to fair value gain of BD
Investment Income
1,535,265 last year mainly due to the market reaction in
COVID pandemic.

As mentioned in this disclosure above. 

Net income  

 
 
C. The impact on Balance Sheet  
Assets    

We have unused facilities available from Banks. Our

liquidity position is strong, and we have not noticed any
material reduction in our cash collection. Further, the
company has liquid investment on balance sheet.
We have strong cash flow from customers, and we
anticipate this to continue and we anticipate the
government subsidy to remain the same. There is no
Cash and cash equivalents
material impact on any other assets of the Company as
at 31 December 2020.

Investment at fair value through profit and loss has

increased in value by 3.7% from BD 10,079,952 as of
31 December 2019 to BD10,456,304 as at 31 December
2020. 
 
 
 
  39
 Bahrain Flour Mills Company B.S.C.

Supplementary information (unaudited)

SUPPLEMENTARY DISCLOSURE RELATED TO THE IMPACT OF COVID-19 (continued)
 
  We have strong cash flow from customers, and we
anticipate this to continue and we anticipate the
government subsidy to remain the same. There is no
material impact on any other assets of the Company as
at 31 December 2020.

Investment at fair value through profit and loss has

increased in value by 3.7% from BD 10,079,952 as of
31 December 2019 to BD10,456,304 as at 31
December 2020. 
Liabilities    

BFM currently carries debt for the normal course of

business and the only transaction related COVID
pandemic was a purchase of strategic wheat on behalf of
Import finance loans/strategic wheat stockpile
the government of BD 2,807,135 that is reflected as a
payable
payable to government on BFM’s statement of financial
position. The last wheat shipment in December 2020 is
financed
  by import finance loan of BD 2,920,536.
The net equity has improved by BD 817,903 a net result
Net equity attributable to shareholders   of current comprehensive income less dividend paid, and
charity
  contribution set aside and paid from 2019 income.
No other impact 
Other material impact on the Balance Sheet  

 
D. The impact on the company’s ability to continue as going concern  
The Company has performed an assessment of its going concern in the light of current economic conditions
and all available information about future risks and uncertainties. The projections have been prepared
covering the Company’s future performance, capital, and liquidity. The impact of COVID-19 may continue
to evolve, and the projections show that the company has ample resources to continue its operational
existence and based on this assessment, BFM Board of Directors are of the view that the going concern
position remains largely unaffected and unchanged as at 31 December 2020. Considering the above, this
Financial Statements have been appropriately prepared on a going concern basis. 

  40