Finance Policies Manual

Finance Department

Classification: Public
i Document Authorisation
This document is authorised for issue.

Approved by Reviewed by

Name: Name:

Date: Date:

Signature: Signature:

ii Version Control
Version Control

Name of
Summary of Changes Designation Approving Date Ver.
Authority

Adjustments to CGC template 31 Jan 21 1.0

(Note: Version Control is used to track and manage the revisions made to the document. Whenever the
document is updated, the Document Custodian shall update the above table, with the new version number
and summary of the changes made. Superseded versions of the document shall be stamped as ‘This
document has been superseded’ and filed for future reference purposes.)

Classification: Public
Contents
i Document Authorisation................................................................................................ 2
ii Version Control.............................................................................................................. 2
1. Document Custodian and Maintenance.........................................................................4
2. Introduction.................................................................................................................... 5
3. General Principles....................................................................................................... 10
4. Property and Equipment (P&E)...................................................................................14
5. Intangible assets.......................................................................................................... 19
6. Impairment................................................................................................................... 22
7. Leases……………….................................................................................................... 25
8. Investment Properties/ Properties Held for Sale..........................................................31
9. Investments................................................................................................................. 33
10. Inventories……………………………………………………………………………………38
11. Tax and Zakat.............................................................................................................. 40
12. Accounts and Other Receivabls..................................................................................42
13. Cash and Cash Equivalent.......................................................................................... 44
14. Pension and Post-Employment Benefits......................................................................45
15. Accounts and Other Payables.....................................................................................47
16. Revenue…................................................................................................................... 48
17. Government grants...................................................................................................... 51
18. Financial reporting....................................................................................................... 53
19. Budget…….................................................................................................................. 57
20. Other Policies.............................................................................................................. 57
21. Finance & Accounting Processes................................................................................62

Classification: Public
1. Document Custodian and Maintenance
All policies defined in this document are owned by THE COMPANY Finance department having ultimate
responsibility to enforce these upon staff of Finance division for the execution of the defined policies. All
defined policies shall be reviewed annually by the management of THE COMPANY to ensure applicability
and continuity. Update to existing policies and introduction of new policies will be authorised by the
management of THE COMPANY for implementation after obtaining approvals as per DoA based on the
following guidelines:

 There is a consensus that change is needed, a new policy direction is required, and that old
strategies are not working as well as they could

 A situation develops which is represented in a widely accepted scenario or narrative as a ‘risk’,

requiring rapid action to avoid crisis

 Lessons learned from practical experience which defines a problem and clarifies appropriate
courses of action to remedy it

 There is a code of conduct or best practice regarding an issue

 A problem is analysed in an academic & technical way, producing tangible data that offer
something concrete to act on

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2. Introduction
2.1 Objective
The Accounting Policies Manual sets out the fundamental accounting guidelines and principles that must
be approved and consistently followed by THE COMPANY in accordance with their scope of operations,
best industry practices, International Financial Reporting Standards (“IFRS”). The objectives of the
Accounting Policies Manual are the following:

 Ensure that THE COMPANY’s accounting policies are formalized and documented and serve as a
single point of reference to the management and staff at THE COMPANY.
 Ensure that all staff at THE COMPANY consistently apply approved policies in line with the
organizational needs and defined practices; and
 Set out general accounting assumptions, concepts, conventions and policies for consistent
application.

2.2 Scope
The Accounting Policies Manual defines the policy guidelines on all major areas of accounting and
financial management processes aiming to guide the Finance Department in achieving its overall
objective of providing meaningful and accurate information as well as complying with applicable statutes
and regulations.

2.3 Distribution and Target Audience

The Accounting Policies Manual aims to assist the Finance Function at THE COMPANY in implementing
accounting policies within this manual consistently. It should be ensured that all employees within THE
COMPANY understand the operational implications of these policies on THE COMPANY. All employees
should be fully briefed with the details of the manual. The Finance Function should take appropriate
action to ensure they are implemented within the Finance Function.

2.4 Enhancing the Manual

The Accounting Policies Manual is intended to be an evolving document with additional updates and
section being added when necessary. As THE COMPANY evolves, it is anticipated that new accounting
policies may need to be introduced. All changes and updates should be directed for approval from the
Finance Function.

2.5 Definitions
The following are some of the key terms used throughout the manual and their definitions:
Terminology Definition
Accounting Policies The specific policies and procedures used by a company to prepare its financial
statements. These include any methods, measurement systems and procedures
for presenting disclosures.

Accounting A broad term without a precise definition, but generally taken to refer to both the
Principles underlying concepts found in the conceptual framework and the basic accounting
rules found in individual standards. The use of principles implies a significant role
for the professional judgment of accountants.
Accounting Technical accounting rules of recognition, measurement and disclosure.

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Terminology Definition
Standards

Accounts Payable Expression for creditors and unpaid suppliers.

Accounts Receivable Expression for debtors and amounts due from customers.

Asset A resource that due to a past event is controlled and expected to give future
benefits. It is not necessary to own an asset to control it. Therefore, a leased item
can be the asset of the lessee.

Balance Sheet A snapshot of the accounting records of assets, liabilities and equity of a business
at a particular moment.
Cash Equivalents Short-term investments readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. Some limit on the length of
the investment is presumed such as three months. Examples of cash equivalents
are time deposits, Murabaha Deposits etc.
Cash Flow This statement uses the cash basis principle of accounting rather than the accrual
Statement basis. It presents separately the cash flows related to operations, financing,
investments and it reconciles to a wide total including cash and cash equivalents.
Current Asset An asset that is expected to be used or sold within the company’s operating cycle
or within one year.
Current Liabilities Those amounts on a balance sheet that are expected to be paid by the company
within one year or within an operating cycle.
Deferred Costs These are costs which do not result in the acquisition of a tangible asset but the
benefits of which are derived over more than one accounting period. One example
of such costs is license fee on acquiring user rights on software.
Depreciation The systematic allocation of the cost (or up-dated cost) of an asset over its useful
economic life.
Earnings Amount of profit (normally for a calendar year) available to the ordinary
shareholders / owners. That is, it is the profit after all operating expenses,
interest charges, taxes and dividends on preference shares.
Equity An element of the balance sheet being the interest of the Company’s owners that
equals to the total assets less total liabilities.
Fair Value The amount for which an asset could be exchanged, or a liability settled, between
knowledgeable and willing parties at arm’s length.
Foreign Currency
A currency other than the Company’s own functional currency.

Freehold Land The term freehold land is used in this manual to describe land over which the
company has complete rights of ownership, construction, development &
possession for indefinite period.

Functional Currency Functional currency is the currency of the primary economic environment in
which the entity operates.
Leasehold Building This term is used in this manual to describe those buildings on which the
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Terminology Definition
Company has acquired leasehold rights from the owners at a fixed lump sum
payment for a fixed period. Under the lease agreement, the Company has the
rights of renovation, decoration, alterations etc. At the end of the lease, the
property reverts to the owner with all the changes.

Leasehold Land The term leasehold land is used in this manual to refer to the land on which the
Company has acquired leasehold rights from the owners at a fixed period for an
agreed lump sum payment. The Company does not have ownership rights on such
land and its other rights are restricted by the terms of the lease deed. On
leasehold land, the Company has rights to construct but at the end of lease term,
all the structures will revert to the land’s owner.

Major Repairs The term major repairs are used in this manual to define the repairs that increase
the remaining estimated useful life of the asset when the repair is carried out.
Example is installing new engine on a motor vehicle.
Minor Equipment These are assets that have an acquisition cost below SAR 1,000 individually or
collectively if the asset is composite. Normally, these items are not capitalized and
are booked to general expenses unless they are part of a specialized system e.g.
monitors, keyboard parts of PCs.
Presentation Presentation currency is the currency in which the financial statements are
Currency presented

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2.6 Glossary and Acronyms

Description Abbreviation

Chief Finance Officer CFO

Delegation of Authority DoA

Expected Credit Loss ECL

Effective Interest Method EIR

End of Service Benefits EOSB

First-in-First-Out FIFO

Financial Statements FS

Fair Value Through OCI FVTOCI

Fair Value Through Profit and Loss FVTPL

General Authority of Zakat and Tax GAZT

Gulf Cooperation Council GCC

International Accounting Standard IAS

International Financial Reporting Standard IFRS

Kingdom of Saudi Arabia KSA

Net Realizable Value NRV

Other Comprehensive Income OCI

Property and Equipment P&E

Right-of-Use ROU

Saudi Organization for Certified Public Accountants SOCPA

Solely Payments of Principal and Interest SPPI

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 Description Abbreviation

Value Added Tax VAT

Withholding Tax WHT

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3. General Principles
3.1 Accounting policies
 The financial accounting policies described in the manual will be applicable to THE COMPANY.
Accounting policies are the fundamental accounting guidelines and principles that shall be approved
and consistently followed by THE COMPANY in accordance with the scope of operations, best
industry practices and IFRS as interpreted by SOCPA (as applicable).

 In the absence of IFRS that specifically applies to a transaction, other event or condition,
management shall use its judgement in developing and applying an accounting policy that results in
information that is reliable and relevant to the decision-making needs of users.

 Where circumstances permit more than one accounting basis, the choice of policy can significantly
affect THE COMPANY’s reported results and financial position. Management shall therefore ensure
that:
o The view presented can be properly appreciated by clarifying the policies followed in
dealing with significant items; and
o The choice and disclosure of accounting policies are carefully made to promote the
appreciation by users of the FS.

 The objectives of defining accounting policies are to:

o Ensure that THE COMPANY’s accounting policies are formalized and documented. Also,
these policies should serve as a single point of reference to the management and staff at
THE COMPANY
o Ensure that all concerned/relevant staff at THE COMPANY consistently apply approved
policies in line with the organizational needs and defined practices;
o General accounting assumptions, concepts, conventions and policies are set out in one
destination manual for easy reference.

3.2 Accounting principles and assumptions

Going concern

 The FS shall be prepared on the assumption that THE COMPANY is a going concern and would
continue in operation into the foreseeable future.

 It is assumed that THE COMPANY has neither the intention nor the need to liquidate or curtail
materially the scale of its activities unless there is an intention to liquidate the entity.

 If the intention to liquidate the entity exists, the FS may have to be prepared on different basis and,
if so, the basis used shall be disclosed.

Matching principle

 The matching principle states that income is recorded when earned and expenses are charged as
incurred and should be matched against revenue, even if no cash outflow has occurred.

Prudence

 Prudence is the inclusion of a degree of caution in the exercise of judgements needed in making the
estimates required under conditions of uncertainty, such that assets or funds received are not
overstated and liabilities or expenses are not understated.

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  The prudence concept states that revenue and income are not anticipated but are recognized by
inclusion in the income statement only when realized in the form of cash or other assets or when the
ultimate cash realization can be assessed with a reasonable degree of certainty.

 All known liabilities are provided for whether their amounts are known with certainty or are a best
estimate in the light of the information available.

 When the matching concept is inconsistent with prudence concept, the latter shall prevail.

Accrual principle

 Accrual Principle states that:

o Income of THE COMPANY is recorded in the accounting periods in which it is
recognized, regardless of when cash is received; and

o Recording of expenses of THE COMPANY in the accounting periods in which they are
incurred, regardless of when cash payments are made.

Historical cost principle

 The FS of THE COMPANY would be prepared under historical cost convention in accordance with
IFRS.

 Historical cost implies that the carrying value of assets is based on their purchase price. When the
historical cost convention is departed from, it should be stated in the accounting policies specifying
the nature of departure.

Fair value principle

 Fair value is the amount at which asset could be bought or sold in a current transaction between
willing parties.

 Prevailing market prices are also used to determine fair value.

Disclosure principle

 This requires the presentation of sufficient information to permit the reader to reach an informed
understanding of the FS in accordance with approved applicable reporting standard i.e. IFRS.

Offsetting

 THE COMPANY shall not offset assets and liabilities or income and expenses, unless required or
permitted by an IFRS.

 THE COMPANY shall separately report both assets and liabilities, and income and expenses.

 Offsetting in the statement(s) of profit or loss and OCI or financial position, except when offsetting
reflects the substance of the transaction or other event, detracts from the ability of users both to
understand the transactions, other events and conditions that have occurred and to assess THE
COMPANY 's future cash flows.

 Measuring assets net of valuation allowances; for instance, obsolescence allowances on inventories
and doubtful debts allowances on receivables is not offsetting.

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3.3 Accounting concepts
 Accounting concepts identify the objective of general purpose financial reporting as the disclosure
of information useful in the decision-making process of THE COMPANY.

 The purpose of these concepts is to identify the attributes (hereinafter referred to as "qualitative
characteristics") that financial information should possess if it is to serve the specified objective.

 The qualitative characteristics will provide assistance when choices must be made between
reporting policies and to act as an indication of the quality that users can expect of the financial
information provided.

 If accounts are prepared based on assumptions or concepts, which differ in materiality from any of
the generally accepted fundamental assumptions and concepts defined below, the facts should be
explained. In the absence of a clear statement to the contrary, it shall be assumed that the
fundamental concepts and assumptions have been observed.

 The main/core principal qualitative characteristics are explained as follows:

Description Qualitative characteristic

An essential quality of the information provided in FS is that it is readily Understandability

understandable by users.

Information must be relevant to the decision-making needs of users. Relevance

Information is relevant when it influences the economic decisions of
users by helping them evaluate past, present or future events or
confirming, or correcting, their past evaluations.

The relevance of information is affected by its nature and materiality. Materiality

Information is material if its omission or misstatement could influence
the economic decisions of users that are taken based on such
information.

Information is reliable when it is free from material error, bias and Reliability
dependency. The following are the characteristics of reliable
information:

 Faithful representation: To be reliable, information either must

represent faithfully the transactions and other events it purports to
represent or could reasonably be expected to represent.
 Substance over form: Transactions should be accounted for and
presented in accordance with their substance and economic reality
and not merely their legal form.
 Neutrality: Neutral means free from bias. FS are not neutral if, by
the selection or presentation of information, they influence the
making of a decision or judgment in order to achieve a
predetermined result or outcome.

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 Description Qualitative characteristic

The measurement and display of the financial effect of transactions and Comparability
other events must be carried out in a consistent way throughout THE
COMPANY. The FS should show corresponding information for the
preceding periods to comply with the accounting standards.

FS should present fairly, the financial position, performance and changes True and fair presentation
in financial position of THE COMPANY.

The consistency concept explains the fact that there shall be consistency Consistency
in the methods and bases for the treatment of similar accounting
variables:

 Within each accounting period; and

 From one period to other.

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4. Property and Equipment (P&E)
Purpose
 Policies in this section establish and provide guidelines for appropriate and consistent accounting
treatment relating to THE COMPANY’s P&E.

 The purpose of the fixed assets policy is to prescribe the guiding principles for all fixed asset related
transactions within THE COMPANY in accordance with IFRS for identifying, accounting and
reporting fixed assets as well as to ensure that acquisition; record, transfer and disposal of fixed
assets are according to IFRS.

 The main guidelines of this policy include:

o The recognition criteria to determine what expenditure is to be capitalized and when it
should be capitalized;
o The measurement criteria to determine the cost elements to be included in the value of
fixed assets;
o The method and rates to be used for depreciation for different classes of fixed assets;
o The accounting treatment of fixed assets acquisitions, transfers, impairments and
disposals;
o The criteria on when a capital work in progress asset is ready for transfer to the
appropriate asset categories.

Applicable IFRSs
 IAS 16 Property, Plant and Equipment;

 IAS 23 Borrowing Costs;

 IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities; and

 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Policies
Recognition criteria

 An item shall be recognized as an asset only if it is probable that future economic benefits associated
with the item will flow to THE COMPANY and the cost of the item can be reliably measured.

 Environmental and safety assets such as fire alarm systems, sprinkler systems etc. shall be
recognized as assets although not directly increasing the future economic benefits of any existing
item of P&E.

 Borrowing costs that are directly attributable to the acquisition, of a qualifying asset shall form part
of the cost of that asset. Other borrowing costs are recognized as an expense.

 All cost associated with the CWIP are transferred to the appropriate category of property, plant and
equipment when the asset is ready and available for use.

Measurement at recognition

 An item of P&E that qualifies for recognition as an asset shall be measured at its cost.

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 Considering the materiality and the nature of the business, any expense less than or equal to SR
1,000 shall be expensed as incurred.

 The cost of an acquired item of P&E shall comprise of:

o Purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates; and
o Any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management such
as:
 Costs of employee benefits (as defined in IAS 19 Employee Benefits) arising
directly from the construction or acquisition of the item of P&E;
 Initial delivery and handling costs;
 Installation and assembly costs;
 Costs of testing whether the asset is functioning properly, after deducting the
net proceeds from selling any items produced while bringing the asset to that
location and condition (such as samples produced when testing equipment);
and
 Professional fees.

 General administrative costs that are not directly attributable to the acquisition, construction or
commissioning of the asset shall be expensed as incurred.

 The cost of a self-constructed asset shall be determined using the same principles as for an acquired
asset.

 Self-constructed assets for sale in the normal course of business the cost of the asset is usually the
same as the cost of constructing an asset for sale (IAS 2 Inventories). Therefore, any internal profits
shall be eliminated in arriving at such costs. Similarly, the cost of abnormal amounts of wasted
material, labor, or other resources incurred in self-constructing an asset shall not be included in the
cost of the asset.

Subsequent expenditure

 Subsequent expenditure relating to an item of P&E that has already been incurred shall be included
in the carrying amount of the asset or recognized as a separate asset as appropriate, only when:
o It is probable that future economic benefits will flow to THE COMPANY and
o The cost can be measured reliably.

 Subsequent expenditure shall consist of:

o Additions: Costs incurred for extensions, enlargements or expansions made to an
existing asset.
o Improvements: Costs incurred on P&E with the intention of making the asset “better”
than its present condition. These are alterations and structural changes made to
existing P&E or substitution of facilities of lesser quality with superior facilities.
o Replacements: Costs incurred to substitute a complete unit or only a component part of
an existing item of P&E with the same unit or component of comparable performance
capabilities.

 All other subsequent expenditures shall be recognized as an expense in the statement of income and
expenditure in the corresponding period.

Measurement after recognition

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 Cost model: THE COMPANY shall use the cost model to value P&E i.e. after recognition of an asset,
an item of P&E shall be carried at its cost less any accumulated depreciation and any accumulated
impairment losses.

 Revaluation Model: IAS 16 also allows the use of revaluation model (The asset is carried at a
revalued amount, being its fair value at the date of revaluation less subsequent depreciation and
impairment, provided that fair value can be measured reliably).

Depreciation

 All items of P&E that has a limited useful economic life, shall be depreciated monthly on a systematic
basis across the useful life of the asset (i.e. from the date, which the asset is first put to effective use
and shall continue until the asset has been fully depreciated or sold).

 Assets with an unlimited useful life (such as land) shall not be depreciated.

 Assets under capital lease agreements shall be depreciated in accordance with this policy.

 Depreciation of an asset shall commence when it is:

o Available for use; and
o In its location and condition necessary for it to be capable of operating in the manner
intended by management.

 All assets shall be depreciated using a straight-line method unless the straight-line method does not
represent the pattern in which asset’s future economic benefits are expected to be consumed by
THE COMPANY.

 Original cost less the residual value of all fixed assets shall be depreciated over the estimated useful
life of the asset.

 The depreciation charge for each period shall be recognized in the statement of income and
expenditure unless it qualifies to be capitalized as a part of the carrying amount of another asset.

 The following table shows the categories of P&E along with the depreciation rates:

Useful life in years Category

9 to 50 Buildings

4 to 30 Plant, Machinery and equipment

5 to 20 Freehold property

4 to 10 Furniture and fittings

3 to 10 Electrical and other equipment

4 to 10 Vehicles and heavy equipment

3 to 30 Telecommunication network and equipment

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 Useful life in years Category

5 to 40 Transmission and distribution network

5 to 25 Capital spare parts

 Depreciation of an asset will cease at the earlier of the date that an asset is:
o Classified as held for sale (or included in a disposal group that is classified as held for
sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations; or
o Derecognized.

 Depreciation shall not cease when the asset becomes idle or is retired from active use unless the
asset is fully depreciated.

 Fully depreciated assets shall be recorded in the fixed assets register at the book value of SAR one,
before they are disposed / retired / or written off.

Review of useful life and residual value

 The residual value and the useful life of an asset shall be reviewed at least at each financial year-end
and, if expectations differ from previous estimates, the change(s) shall be accounted for as a change
in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors.

Disposal/De-recognition of P&E

 Disposal of P&E
o An asset shall be considered for disposal (i.e. sale, write off or abandonment) when it
becomes obsolete, non-economical / non-productive and cease to provide economic
benefits to the entity.
o Disposal of P&E shall be processed, in accordance with the approved DoA matrix.

 De-recognition of P&E
o The carrying amount of an item of P&E shall be derecognized:
 On disposal; or
 When no future economic benefits are expected from its use or disposal. Asset
retirement shall take place i.e., when an asset is permanently removed from
service, permanent transfer, exchanges, trade-ins, donations, abandonment,
scrapping, lost or stolen, etc.
o The gain or loss resulting from de-recognition of an item of P&E shall be included in the
statement of income and expenditure when the item is derecognized. Such gains shall
not be classified as operating income. The gain or loss shall be determined as the
difference between the net proceeds from the sale and the carrying amount of the asset
derecognized.
o If the cost of replacement of a part or an item needs to be included in the carrying
amount of an item of the P&E, then the carrying amount of the replaced part, regardless
of whether the replaced part had been depreciated separately, shall be derecognized. If
it is not practicable to determine the carrying amount of the replaced part, the cost of
the replacement may be used as an indication of what the cost of the replaced part was
at the time it was acquired or constructed.
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Changes in existing decommissioning, restoration and similar liabilities

 IFRIC 1 applies to changes in the measurement of any existing decommissioning, restoration or

similar liability that is both:
o Recognized as part of the cost of an item of P&E in accordance with IAS 16; and
o Recognized as a liability in accordance with IAS 37.

 IFRIC 1 addresses how the effect of the following events that change the measurement of an existing
decommissioning, restoration or similar liability should be accounted for:
o A change in the estimated outflow of resources embodying economic benefits (e.g. cash
flows) required to settle the obligation;
o A change in the current market-based discount rate; and
o An increase that reflects the passage of time (also referred to as the unwinding of the
discount).

 The related asset is measured using the cost model:

o Changes in the liability shall be added to, or deducted from, the cost of the related asset
in the current period; and
o The amount deducted from the cost of the asset shall not exceed its carrying amount. If
a decrease in the liability exceeds the carrying amount of the asset, the excess shall be
recognized immediately in profit or loss;
o If the adjustment results in an addition to the cost of an asset, THE COMPANY shall
consider whether this is an indication that the new carrying amount of the asset may
not be recoverable. If it is such an indication, THE COMPANY shall test the asset for
impairment by estimating its recoverable amount, and shall account for any
impairment loss, in accordance with IAS 36.

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5. Intangible assets
Purpose
 Policies in this section establish and provide guidelines for appropriate and consistent accounting
treatment of THE COMPANY 's intangible assets.

 The purpose of the policies is to prescribe the guiding principles for all intangible assets and related
transactions within THE COMPANY for identifying, accounting and reporting intangible assets as
well as to ensure that acquisition, record; transfer and disposal of intangible assets are according to
relevant IFRS.

 The important guidelines of this policy are:

o The recognition criteria to determine what expenditure and when it should be
capitalized as an intangible asset;
o The measurement criteria to determine the cost elements to be included in the value of
intangible assets;
o The accounting treatment of intangible assets with respect to acquisition, amortization,
impairment and disposal.

Applicable IFRS
 IAS 38 Intangible Assets
 IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Policies
Recognition criteria

 An identifiable non-monetary asset without physical substance shall be recognized as an intangible

asset if:
o It is probable that the expected future economic benefits attributable to the asset will
flow to THE COMPANY and
o The cost of the asset can be measured reliably.

 An intangible asset is identifiable when:

o It is separable (capable of being separated and sold, transferred, licensed, rented, or
exchanged, either individually or together with a related contract); or
o It arises from contractual or other legal rights, regardless of whether those rights are
transferable or separable from the entity or from other rights and obligations.

 THE COMPANY shall assess the probability of expected future economic benefits using reasonable
and supportable assumptions that represent management's best estimate of the set of economic
conditions that will exist over the useful life of the asset.

 No intangible asset arising from research (or from the research phase of an internal project) shall be
recognized. Expenditure on research (or on the research phase of an internal project) shall be
recognized as an expense when it is incurred.

 An intangible asset arising from a development project (or from the development phase, for
example pre-operating expenses and professional fees for the services received by THE COMPANY
from its consultants, of an internal project) shall be recognized if, and only if, THE COMPANY can
demonstrate all the following:
o The technical feasibility of completing the intangible asset so that it will be available for
use or sale;
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 o Its intention to complete the intangible asset and use or sell it;
o Its ability to use or sell the intangible asset;
o How the intangible asset will generate probable future economic benefits. Among other
things, THE COMPANY can demonstrate the existence of a market for the output of the
intangible asset or the intangible asset itself or, if it is to be used internally, the
usefulness of the intangible asset;
o The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset; and
o Its ability to reliably measure the expenditure attributable to the intangible asset
during its development.

 Following is a comprehensive, however, not exhaustive list of expenditures that should not be
capitalized as an intangible asset:
o Activities aimed at obtaining new knowledge;
o The search for, evaluation and final selection of, applications of research findings or
other knowledge;
o The formulation, design, evaluation and final selection of possible alternatives for new
or improved systems or services; and

Measurement at recognition

 An intangible asset would either be:

o Separately acquired; or
o Internally generated.

 The cost of a separately acquired intangible asset comprises:

o Its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates; and
o Any directly attributable cost of preparing the asset for its intended use.

 The cost of generating an intangible asset internally is often difficult to distinguish from the cost of
maintaining or enhancing the entity’s operations or goodwill.
o For this reason, internally generated brands (for example, name of township and legal
expenses and other expenses related to registering a logo), mastheads, publishing titles,
customer lists and similar items are not recognized as intangible assets.
o The costs of generating other internally generated intangible assets are classified into
whether they arise in a research phase or a development phase. Research expenditure
is recognized as an expense. Development expenditure that meets the above mentioned
criteria is recognized as the cost of an intangible asset.

 THE COMPANY shall use judgment to assess which element is more significant, in the case an asset
incorporates both tangible and intangible elements, and accounts as per those IFRSs i.e. under IAS
16 or IAS 38. THE COMPANY shall account purchased software as well as customized software
bought from third parties which do not form as an integral part of hardware as intangible assets.

Subsequent measurement

 After initial recognition, an intangible asset shall be carried at its cost less any accumulated
amortization and any accumulated impairment losses.

 Intangible assets may be carried at a revalued amount (based on fair value) less any subsequent
amortization and impairment losses only if fair value can be determined by reference to an active
market.

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Residual value

 The residual value of an intangible asset with a finite useful life shall be assumed to be nullified
unless:
o There is a commitment by a third party to purchase the asset at the end of its useful life;
or
o There is an active market (A market in which transactions for the asset or liability take
place with sufficient frequency and volume to provide pricing information on an
ongoing basis. as defined in IFRS 13) for the asset;
o Residual value can be determined by reference to that market; and
o It is probable that such a market will exist at the end of the asset's useful life.

Amortization

 The cost less residual value of an intangible asset with a finite useful life shall be amortized on a
systematic basis over the life of such asset.

 The amortization method shall reflect the pattern of benefits. If the pattern of benefits cannot be
determined reliably, amortization shall be by the straight-line method over the estimated useful life
of the asset which is based on expected usage of asset by THE COMPANY, the period of control over
the asset and technological and technical obsolescence.

 The amortization charge shall be recognized in statement of income and expenditure unless another
IFRS requires that it be included in the cost of another asset.

 The amortization period shall be reviewed at least annually.

 The asset shall also be assessed for impairment in accordance with IAS 36. (Refer section 6 of the
manual for guidance on impairment of assets).

 An intangible asset with an indefinite useful life shall not be amortized. Its useful life shall be
reviewed each reporting period to determine whether events and circumstances continue to
support an indefinite useful life assessment for that asset. If they do not, the change in the useful life
assessment from indefinite to finite shall be accounted for as a change in an accounting estimate in
accordance with IAS 8.

 The following table shows the categories of intangible assets along with the amortization rates:

Useful life in years Category

4 to 10 Computer Software

15 to 25 Telecommunication License

35 Infrastructure (contractual right of use)

Review of useful life and amortization method

 THE COMPANY shall review the amortization period and amortization method for any intangible
asset with a finite useful life at least at each financial year-end.

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 If the expected useful life of the asset is different from previous estimates, THE COMPANY shall
change the amortization period accordingly.
 If there has been a change in the expected pattern of consumption of the future economic benefits
embodied in the asset, THE COMPANY shall change the amortization method to reflect the changed
pattern. Such changes shall be accounted for as changes in accounting estimates in accordance with
IAS 8.

Retirement and disposals

 An intangible asset shall be derecognized:

o On disposal; or
o When no future economic benefits are expected from its use or disposal.

 Gain or loss arising from derecognizing an intangible asset shall be determined as the difference
between the net disposal proceeds, if any, and the carrying amount of the asset. The corresponding
gain or loss shall be recognized in statement of income and expenditure when the asset is
derecognized.

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6. Impairment
Purpose
 The objective of this policy is to establish the guidelines to identify indicators of impairment,
measuring and recording the impairment loss and recording impairment reversals, if any.

Applicable IFRS
 IAS 36 Impairment of assets

Policies
Identifying assets for impairment

 Impairment arises when the carrying amount (net book value) of an asset or cash-generating unit is
higher than its recoverable amount. The recoverable amount is determined as the higher of:
o Fair value of the asset less costs to sell; or
o Value in use of the asset.

 THE COMPANY shall assess at each reporting period whether any indicators of impairment exist. If
any such indicators exist, THE COMPANY shall estimate the recoverable amount of asset.
Recoverable amount is the greater of an asset’s fair value less costs to sell, or its value in use.

 Irrespective of whether there is any indication of impairment, THE COMPANY shall also test an
intangible asset with an indefinite useful life or an intangible asset not yet available for use for
impairment annually by comparing it carrying amount with its recoverable amount. This
impairment test shall be performed at any time during an annual period, provided it is performed at
the same time every year. Different intangible assets shall be tested for impairment at different
times. However, if such an intangible asset was initially recognized during the current annual
period, that intangible asset shall be tested for impairment before the end of current annual period.

 In assessing whether there is any indication that an asset may be impaired, THE COMPANY shall
consider, as a minimum, following external indicators:
o There are observable indications that the asset's value has declined during the period
significantly more than would be expected as a result of the passage of time or normal
use;
o Significant changes with an adverse effect on THE COMPANY have taken place during
the period, or will take place in the near future, in the technological, market, economic
or legal environment in which it operates or in the market to which an asset is
dedicated; or
o The carrying amount of the net assets of THE COMPANY is more than its market
capitalization.

 Internal reporting that indicates impairment indicators shall include, but is not restricted to:
o Evidence of obsolescence or physical damage;
o Exceeding budget for acquiring, operating or maintaining an asset;
o Significant adverse changes in the extent to which, or way, an asset is used or is
expected to be used. These changes include the asset becoming idle, plans to
discontinue or restructure the operation to which an asset belongs, plans to dispose of
an asset before the previously expected date, and reassessing the useful life of an asset
as finite rather than indefinite; or
o Economic performance of an asset is, or will be, worse than expected.

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 If there is an indication that an asset may be impaired, this may indicate that the remaining useful
life, the depreciation (amortization) method or the residual value for the asset needs to be reviewed
and adjusted in accordance with the applicable IFRS for the asset, even if no impairment loss is
recognized for the asset.

Cash-generating units

 Recoverable amount should be determined for the individual asset, if possible. If it is not possible to
determine the recoverable amount (i.e. the higher of fair value less costs of disposal and value in
use) for the individual asset, then determine recoverable amount for the asset's cash-generating
unit (CGU). The CGU is the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups of assets.

 The impairment loss is allocated to reduce the carrying amount of the assets of the unit (group of
units) on a pro rata basis.

 The carrying amount of an asset should not be reduced below the highest of:
o Its fair value less costs of disposal (if measurable)
o Its value in use (if measurable)
o Zero.

 If the preceding rule is applied, further allocation of the impairment loss is made pro rata to the
other assets of the unit (group of units).

Fair Value

 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. Fair value can also be
estimated from the most recent purchase price paid for the asset or most recent quotation received
from supplier for the same asset or an asset of similar kind.

 Costs of disposal, other than those that have been recognized as liabilities, are deducted in
measuring fair value less costs of disposal.

Value in use

 Value in use is the present value of the future cash flows expected to be derived from an asset or a
cash-generating unit. The calculation of value in use should reflect the following elements:
o An estimate of the future cash flows THE COMPANY expects to derive from the asset;
o Expectations about possible variations in the amount or timing of those future cash
flows;
o The time value of money, represented by the current market risk-free rate of interest;
o The price for bearing the uncertainty inherent in the asset;
o Other factors, such as liquidity, that market participants would reflect in pricing the
future cash flows THE COMPANY expects to derive from the asset.

Measurement and recognition of impairment loss

 Impairment loss shall be measured as the difference between book value and market value of the
asset.

 An impairment loss shall be recognized immediately in statement of income and expenditure unless
the asset is carried at revalued amount in accordance with another standard. Any impairment loss
of a revalued asset shall be treated as a revaluation decrease in accordance with that other standard.
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 After the recognition of an impairment loss, the depreciation (amortization) charge for the asset
shall be adjusted in future periods to allocate the asset's revised carrying amount, less its residual
value (if any), on a systematic basis over its remaining useful life.

Reversing an impairment loss

 THE COMPANY shall assess at the end of each reporting period whether there is any indication that
an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist
or may have decreased. If any such indication exists, THE COMPANY shall estimate the recoverable
amount of that asset.

 In assessing whether there is any indication that an impairment loss recognized in prior periods for
an asset other than goodwill may no longer exist or may have decreased, THE COMPANY shall
consider, as a minimum, the following indications:
o There are observable indications that the asset's value has increased significantly
during the period;
o Significant changes with a favorable effect on THE COMPANY have taken place during
the period, or will take place in the near future, in the technological, market, economic
or legal environment in which THE COMPANY operates or in the market to which the
asset is dedicated;
o Significant changes with a favorable effect on THE COMPANY have taken place during
the period or are expected to take place in the near future, in the extent to which, or
manner in which, the asset is used or is expected to be used. These changes include
costs incurred during the period to improve or enhance the asset's performance or
restructure the operation to which the asset belongs;
o Evidence is available from internal reporting that indicates that the economic
performance of the asset is, or will be, better than expected.

 The increased carrying amount of an asset other than goodwill attributable to a reversal of an
impairment loss shall not exceed the carrying amount that would have been determined (net of
amortization or depreciation) had no impairment loss been recognized for the asset in prior years. A
reversal of an impairment loss for an asset other than goodwill shall be recognized immediately in
the statement of income and expenditure.

 After a reversal of an impairment loss is recognized, the depreciation (amortization) charge for the
asset shall be adjusted in future periods to allocate the asset's revised carrying amount, less its
residual value (if any), on a systematic basis over its remaining useful life.

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7. Leases
Purpose
 The objectives of this policy are to prescribe the appropriate accounting policies for THE COMPANY
in relation to leases.

Applicable IFRS
 IFRS 16 Leases. IFRS 16 was issued in January 2016 and applies to annual reporting periods
beginning on or after 1 January 2019.

Policies
Identifying a lease

 The determination of whether a contract between THE COMPANY and another party is (or contains)
a lease is based on the substance of the arrangement at the inception of the lease:
o The contract conveys the right to control the use of an identified asset;
o It should be for a fixed lease term; and
o There must be exchange of consideration.

 The lease term shall be determined based on an assessment of the non-cancellable period of lease
after considering any clause on extending/terminating the contract if it’s reasonably certain that
THE COMPANY /the lessor will exercise either of the two.

 THE COMPANY may elect to opt out of applying the requirements of IFRS 16 in case the lease
identified falls under any of the following conditions:
o Short term leases –Lease term is 12 months or lesser or
o Leases for which underlying asset is of low value i.e. USD 5,000.

 If the exemption is applied:

o THE COMPANY shall recognized the lease payments associated with those leases as an
expense on either:
 A straight-line basis over the lease term; or
 Any other systematic basis which is more representative of the pattern of THE
COMPANY’s benefit as a lessee.
o THE COMPANY shall consider this lease to be a new lease in case there is a modification
to the contract or there is a change in lease term.

Recognition and measurement of lease contract as a lessee

 At the commencement of the lease term, THE COMPANY shall recognized ROU asset and lease
liability.

 ROU asset shall be measured at cost at the beginning of the lease period. The cost shall comprise of
the following:
o The amount of initial measurement of lease liability;
o Any other lease payments made before/at the commencement date;
o Any initial direct costs incurred by the THE COMPANY as the lessee, that is directly
attributable to entering a lease contract; and
o An estimate of costs to be incurred by THE COMPANY in dismantling and removing the
underlying asset.

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 Lease liability shall be measured as the present value of the lease payments that are not paid at that
date. The following shall be included under lease payments:
o Fixed payments less any incentives receivable from the lessor;
o Variable lease payments;
o Amounts expected to be payable by THE COMPANY under residual value guarantees;
o The exercise price of a purchase option if its certain of exercising the same; and
o Payments of penalties to terminate the lease if it is certain of early termination of the
contract.

 The lease payments shall be discounted at the interest rate implicit in the contract. If the interest
rate is not evident from the contract, THE COMPANY shall use its incremental borrowing rate. THE
COMPANY shall depreciate the ROU asset, over the lease term, as per the depreciation requirements
referred in section 4 of the manual.

 After initial recognition, lease liability shall be adjusted for the following:
o Increasing the carrying amount to reflect interest on the lease liability;
o Reducing the carrying amount to reflect lease payments made; and
o Re-measurement of carrying amount for any lease modification or reassessment.

Recognition and measurement of lease contract as a lessor

 As a lessor, THE COMPANY shall classify a lease either as a finance lease or an operating lease, as
follows:
o Leases that transfer substantially all of risks and rewards incidental to ownership of the
leased asset, shall be classified as finance lease; and
o All other leases shall be classified as operating leases.

 THE COMPANY shall recognized assets held under a finance lease in their statements of financial
position and present them as a receivable at an amount equal to the net investment in the lease.

 The recognition of finance income from a finance lease, shall be based on a pattern reflecting a
constant periodic rate of return on the net investment in the lease. Costs incurred in connection
with negotiating and arranging a lease shall be recognized as an expense when the selling profit is
recognized.

 THE COMPANY shall present assets subject to operating leases in their statements of financial
position according to the nature and classification of the asset.

 Lease income from operating leases shall be recognized in income on a straight-line basis over the
lease term unless another systematic basis is more representative of the time pattern of the THE
COMPANY’s benefits as a lessor.

 Initial direct costs incurred by THE COMPANY as a lessor in negotiating and arranging an operating
lease shall be added to the carrying amount of the leased asset and recognized as an expense over
the lease term on the same basis as the lease income.

 The depreciation policy for depreciable-leased assets shall be consistent with THE COMPANY 's
normal depreciation policy for similar assets, and depreciation shall be calculated, over the lease
term, in accordance with depreciation requirements referred in section 4 of the manual.

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8. Investment Properties/ Properties Held for Sale
Purpose
 The purpose of this policy is to provide guidance on the initial measurement, valuation and
derecognition of investment property.

Applicable IFRS
 IAS 40 Investment Property

Policies
Initial measurement

 Investment property shall include any property (land or a building—or part of a building—or both)
held by THE COMPANY to earn rentals or for capital appreciation or both, rather than for:
o Use in the production or supply of goods or services or for administrative purposes; or
o Sale in the ordinary course of business.

 THE COMPANY shall recognized an asset as an investment property when it is probable that the
future economic benefits associated with the property will flow to THE COMPANY and the cost of
such asset can be reliably measured.

 THE COMPANY shall measure an investment property initially at its cost. Transaction costs shall be
included in the initial measurement. Such costs shall exclude the following:
o Start-up costs;
o Abnormal waste; or
o Initial operating losses (which is incurred before the investment property reaches its
desired level of occupancy).

Subsequent measurement

 THE COMPANY shall account for its investment property at cost or at fair value. However, under
SOCPA there is a restriction on the use of fair value model upon adoption of IFRS.

 If fair value model is opted for, fair value of the investment property shall be determined as per IFRS
13 and any gains or losses arising from changes in the fair values of investment properties shall be
included in profit or loss in the period in which they arise.

 If cost model is opted for, then the Investment property shall be measured in accordance with the
requirements set out for that model in IAS 16.

Transfers to or from investment property classification

 Transfers are made to (or from) investment property only when there is a change in use, evidenced
by one or more of the following:
o Commencement of owner-occupation;
o Commencement of development with a view to sale;
o End of owner-occupation;
o Commencement of an operating lease to another party; and/or
o End of construction or development.

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 If THE COMPANY decides to sell an investment property without development, the property shall
not be reclassified as inventory but is dealt with as investment property until it is derecognized.
The following rules apply for accounting for transfers between categories:

 The following rules shall apply for accounting for transfers between categories:
o For a transfer from investment property carried at fair value to owner-occupied
property or inventories, the fair value at the change of use shall be the 'cost' of the
property under its new classification;
o For a transfer from owner-occupied property to investment property carried at fair
value, IAS 16 shall be applied up to the date of reclassification. Any difference arising
between the carrying amount under IAS 16 at that date and the fair value shall be dealt
with as a revaluation under IAS 16;
o For a transfer from inventories to investment property at fair value, any difference
between the fair value at the date of transfer and it previous carrying amount shall be
recognized in profit or loss; and
o When THE COMPANY completes construction/development of an investment property
that will be carried at fair value, any difference between the fair value at the date of
transfer and the previous carrying amount shall be recognized in profit or loss.

 If THE COMPANY uses the cost model for investment property, transfers between categories shall
not change the carrying amount of the property transferred or the cost of the property for
measurement or disclosure purposes.

Disposal of investment property

 THE COMPANY’s investment properties are derecognized when either they have been disposed of
or when they are permanently withdrawn from use and no future economic benefit is expected from
their disposal. The difference between the net disposal proceeds and the carrying amount of the
property shall be recognized in profit or loss in the period of de-recognition.

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9. Investments
Purpose
 The policies in this section provide guidelines for appropriate and consistent accounting treatment
relating to recognition, measurement, de-recognition and impairment of THE COMPANY’s financial
instruments.

Applicable IFRS
 IFRS 9 Financial Instruments

Policies
Financial assets

 All financial instruments shall be initially measured at fair value plus or minus directly attributable
transaction costs.

 Financial assets shall be classified and measured at either:

o Amortized cost;
o Fair value through profit and loss (FVTPL);
o Fair value through OCI (FVTOCI).

 THE COMPANY shall make the classification of the financial asset at the time it is initially recognized
that is, when THE COMPANY becomes a party to the contractual provisions of the instrument.

Contractual Cash Flow Characteristics test

 For THE COMPANY to classify and measure a financial asset at amortized cost or FVTOCI it needs to
ensure that such financial asset shall give rise to cash flows that are ‘solely payments of principal
and interest’ (SPPI) on the principal amount outstanding.

 The SPPI test is performed at an instrument level. For the purposes of applying the SPPI test, ‘the
principal’ is described as ‘the fair value of the financial asset at initial recognition’ and may change
over the life of the financial asset, as there are repayments of principal and/or unwinding of any
premium or discount on acquisition. THE COMPANY shall apply the SPPI test to an entire financial
asset, even if it contains an embedded derivative.

Business Model Assessment

 In addition to the results from the SPPI test, the classification is dependent on the business model
under which THE COMPANY holds the financial asset.

 THE COMPANY’s business model shall determine whether cash flows will result from collecting
contractual cash flows, selling the financial assets or both. For example:
o A debt instrument shall normally be measured at amortized cost if it is held within a
business model whose objective is to hold assets to collect contractual cash flows,
provided it also passes the SPPI test.
o A debt instrument is normally measured at FVTOCI if it is held within a business model
in which the assets are managed to achieve an objective by both collecting contractual
cash flows and selling financial assets, provided it also pass the SPPI test.

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 Contractual cash flow
characteristics test
Fail Pass
FVTPL Amortised Held within a business model whose objective is to Business
Cost hold financial assets to collect contractual cash flows Model

FVTPL FVTOCI Held within a business model whose objective is

achieved by both collecting contractual cash flows and
(Debt) selling financial assets

FVTPL FVTPL Financial assets which are neither held at amortised

cost nor at fair value through OCI

N/A FVTPL Conditional fair value option is elected Options

(Note 1)

FVTOCI N/A Option elected to present changes in the fair value of an

equity instrument not held for trading in OCI
(Equity) (Note 2)

* Note 1: Financial assets, which fail the contractual cash flow characteristics test, are measured at
fair value through profit or loss.
* Note 2: Only debt instruments can pass the contractual cash flow characteristics test. The fair
value through OCI option does not apply to those instruments.

Equity Instruments

 THE COMPANY shall recognized all equity instruments held for trading at FVTPL.

 THE COMPANY shall recognized all equity instruments at fair value, unless it chooses, on an
instrument-by-instrument basis on initial recognition, to present fair value changes in OCI.

 THE COMPANY shall identify those investments to which it applied the FVTOCI option and disclose,
among other information, the fair value for each such investment at the end of the reporting period.

 If an equity instrument is not held for trading, THE COMPANY shall make an irrevocable election at
initial recognition to measure it at FVTOCI with only dividend income recognized in profit or loss,
only if the dividend is not representing a recovery of part of the cost of the investment.

De-recognition of Financial Assets

 THE COMPANY shall derecognize the financial asset when:

o The contractual rights to the cash flows from the financial asset expires; or
o THE COMPANY transfers the financial asset and the transfer qualifies for de-
recognition.

 To de-recognized a financial asset, THE COMPANY shall ensure that the financial asset or part of a
financial asset under consideration for de-recognition is:
o Financial asset in its entirety;

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 o Specifically identified cash flows from the financial asset (or a group of similar financial
assets);
o A fully proportionate (pro rata) share of the cash flows from the financial asset (or a
group of similar financial assets);
o A fully proportionate (pro rata) share of specifically identified cash flows from a
financial asset (or a group of similar financial assets).

 On de-recognition of a financial asset in its entirety, the difference between:

o The carrying amount (measured at the date of de-recognition); and
o The consideration received (including any new asset obtained less any new liability
assumed) shall be recognized in profit or loss.

 If a transfer does not result in de-recognition because THE COMPANY has retained substantially all
the risks and rewards of ownership of the transferred asset, THE COMPANY shall continue to
recognized the transferred asset in its entirety and shall recognized a financial liability for the
consideration received. In subsequent periods, THE COMPANY shall recognized any income on the
transferred asset and any expense incurred on the financial liability.

 If THE COMPANY neither transfers nor retains substantially all the risks and rewards of ownership
of a transferred asset, and retains control of the transferred asset, THE COMPANY continues to
recognized the transferred asset to the extent of its continuing involvement.

Re-classification

 If THE COMPANY 's business model objective for its financial assets changes and THE COMPANY’s
previous model assessment would no longer apply, then only reclassification shall be permitted.

 It must be done prospectively from the reclassification date, which is defined as the first day of the
first reporting period of THE COMPANY following the change in business model. THE COMPANY
shall not be required to restate any previously recognized gains, losses.

 Reclassification shall not be allowed for equity investments measured at FVTOCI, financial assets
classified and measured at fair value. THE COMPANY shall not reclassify any financial liability.

Impairment

 THE COMPANY should conduct impairment test as per IFRS 9 based on a forward-looking expected
credit loss (ECL) model for the following:
o Financial assets measured at amortized cost;
o Financial assets measured at FVTOCI;
o Loan commitments when there is a present obligation to extend credit (except where
these are measured at FVTPL);
o Financial guarantee contracts (except those measured at FVTPL and not covered under
IFRS 9);
o Lease receivables within the scope of IAS 17 Leases; and
o Contract assets within the scope of IFRS 15 Revenue from Contracts with Customers.

 In applying IFRS 9’s impairment requirements, THE COMPANY needs to apply one of the following
approaches:
o The general approach, which will be applied to most loans and debt securities; and
o The simplified approach, which will be applied to most accounts receivables.

Methods of impairment
 General Approach: Under the general approach, THE COMPANY must recognized ECLs in 3 stages:

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 o For credit exposures for which there has not been a significant increase in credit risk
since initial recognition (i.e., ‘good’ exposures), THE COMPANY shall provide for credit
losses that result from default events ‘that are possible’ within the next 12-months (a
12-month ECL);
o For those credit exposures for which there has been a significant increase in credit risk
since initial recognition, THE COMPANY shall provide a loss allowance for credit losses
expected over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL – Stages 2 and 3). The loss allowance shall reduce the carrying
amount of the financial asset in all three stages described above;
o If the financial asset becomes credit-impaired (Stage 3), profit shall be calculated by
applying the effective interest rate (EIR) to the amortized cost (i.e., the impaired
amount net of the loss allowance) rather than the gross carrying amount. This contrasts
with financial assets, which are in Stage 1, or 2, for which profit is recognized by
applying the EIR on the gross carrying amount. The general approach also applies to
loan commitments and financial guarantee contracts not measured at FVTPL for which
impairment was previously accounted for under IAS 37. THE COMPANY shall now have
to provide for either 12-month or lifetime ECLs in accordance with IFRS 9.

 The Simplified Approach

o The simplified approach does not require the tracking of changes in credit risk, but
instead requires the recognition of lifetime ECLs always.
o For accounts receivables or contract assets that do not contain a significant financing
component, THE COMPANY shall apply the simplified approach.
o For accounts receivables or contract assets that do contain a significant financing
component, and lease receivables, THE COMPANY shall have a policy choice to apply
the simplified approach or the general 3-stage approach.

Assessing Significant Changes in Credit Risk

 The assessment of a significant increase or decrease in credit risk is key in establishing the point of
switching between the requirement to measure an allowance based on 12-month ECLs and one that
is based on lifetime ECLs.

 At each reporting date, THE COMPANY shall assess significant increases (or decreases) in credit risk
based on the change in the risk of a default occurring over the expected life of the financial
instrument rather than the change for ECLs.

 For those credit exposures for which there has been a significant increase in credit risk since initial
recognition, a loss allowance shall be required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default.

 Significant increase in credit risk shall depend upon the following points.
o The original credit risk at initial recognition: a given percentage point change in
absolute probability of default (PD) for a financial instrument with a lower initial credit
risk will be more significant than for those with a higher initial credit risk;
o The expected life or term structure: the risk of a default occurring for financial
instruments with similar credit risk increases, the longer the expected life of the
financial instruments.

 If a financial instrument has low credit risk (equivalent to investment grade quality), then THE
COMPANY shall assume no significant increases in credit risk have occurred.

 If forward-looking information (either on an individual or collective basis) is not available, THE

COMPANY shall resort to a rebuttable presumption that credit risk has increased significantly when
contractual payments are more than 30 days past due.

Basis for Estimating ECL

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 Whichever ECL approach is applied, in measuring ECLs, THE COMPANY shall need to consider:
o The period over which to estimate ECLs: THE COMPANY shall consider the maximum
contractual period including extension options of the borrower.
o Probability-weighted outcomes: Although THE COMPANY shall not be needed to
identify every possible scenario, it will need to consider the possibility that a credit loss
occurs, no matter how low that possibility is.
o The time value of money: For financial assets, the ECL shall be discounted to the
reporting date using an approximation of the EIR that is determined at initial
recognition. For loan commitments and financial guarantee contracts, the EIR of the
resulting asset shall be applied and if this is not determinable, then the current rate
representing the risk of the cash flows shall be used.
o Reasonable and supportable information: THE COMPANY shall need to consider
reasonable and supportable information that is reasonably available as of the reporting
date about past events, current conditions and forecasts of future economic conditions.
THE COMPANY shall also consider whether estimates of ECLs should be back-tested
and re-calibrated to reduce differences between estimates losses and actual losses.

 The ECLs in respect of an amortized cost instrument shall be recognized as a loss allowance against
the gross carrying amount of the asset, with the resulting loss being recognized in profit or loss.

 For debt instruments measured at FVTOCI, the ECLs shall not reduce the carrying amount in the
statement of financial position, which remains at fair value. Instead, an amount equal to the
allowance that would arise if the asset were measured at amortized cost shall be recognized in OCI
as the ‘accumulated impairment amount’. This means that impairment losses (or reversals) are
charged to profit or loss with a corresponding entry in OCI.

 Unlike debt instruments, gains and losses in OCI shall not be recycled on disposal and there shall be
no impairment accounting.

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10. Inventories
Purpose
 The purpose of this policy is to provide the accounting treatment for inventories. It provides
guidance for determining the cost of inventories and for subsequently recognizing an expense,
including any write-down to net realizable value. It also provides guidance on the cost formulas that
are used to assign costs to inventories.

Applicable IFRS
 IAS 2 Inventories

Policies
Application and exclusions

1. THE COMPANY’s inventories include the following:

a) Assets held for sale in the ordinary course of business (i.e. housing units developed for
sale)
b) in the process of production for such sale; or
c) in the form of materials or supplies to be consumed in the production process or in the
rendering of services.

Measurement of inventories

 THE COMPANY determines whether a property is classified as investment property or inventory

property:

 Investment property comprises land and buildings (principally offices, commercial warehouse and
retail property) that are not occupied substantially for use by, or in the operations of, THE
COMPANY nor for sale in the ordinary course of business, but are held primarily to earn rental
income and capital appreciation. These buildings are substantially rented to tenants and not
intended to be sold in the ordinary course of business.

 Inventory property comprises property that is held for sale in the ordinary course of business.
Principally, this is residential property that the Group develops and intends to sell before, or on
completion of, construction.

 THE COMPANY shall value inventories at lower of cost or net realizable value (NRV).

 THE COMPANY shall include the following as part of inventory costs:

o Costs of purchase (including taxes, transport, and handling) net of trade discounts
received;
o Costs of conversion (including fixed and variable manufacturing overheads); and
o Other costs incurred in bringing the inventories to their present location and condition.

 THE COMPANY shall exclude the following from inventory costs:

o Abnormal waste;
o Storage costs;
o Administrative overheads unrelated to production;
o Selling costs;
o Foreign exchange differences arising directly on the recent acquisition of inventories
invoiced in a foreign currency; and
o Interest cost for inventories are purchased with deferred settlement terms.

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 While valuing inventories, THE COMPANY shall apply either FIFO or weighted average cost
formulas.

 THE COMPANY shall use the same cost formula for all inventories with similar characteristics i.e. in
terms of nature and use to THE COMPANY. Inventories that have different characteristics may be
valued using different cost formulas.

Write-down to net realizable value

 Estimation of net realizable value for inventory property Inventory property is stated at the lower of
cost and net realizable value (NRV). NRV for completed inventory property is assessed by reference
to market conditions and prices existing at the reporting date and is determined by THE COMPANY
based on comparable transactions identified by the THE COMPANY for properties in the same
geographical market serving the same real estate segment. NRV in respect of inventory property
under construction is assessed with reference to market prices at the reporting date for similar
completed property, less estimated costs to complete construction and the estimated costs
necessary to make the sale, taking into account the time value of money, if material.

 NRV is the estimated selling price in the ordinary course of business, less the estimated cost of
completion and the estimated costs necessary to make the sale. Any write-down to NRV should be
recognized as an expense in the period in which the write-down occurs. Any reversal should be
recognized in the income statement in the period in which the reversal occurs.

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11. Fixed assetTax and Zakat
Purpose
Applicable IFRS
 IFRS 9 Financial Instruments
 IAS 12 Income Taxes

Policies
Withholding tax

 Withholding tax is a tax amount withheld by THE COMPANY on payments made to a non-resident
for any of the following:
o Interest; or
o Technical service.

 WHT tax shall be deducted from payments made to a consultant/contractor in accordance with tax
regulations of KSA.

 THE COMPANY shall record the amount of this tax in its statement of financial position as a liability
as soon as it is withheld and shall settle the liability when it is paid to the General Authority of Zakat
and Tax (GAZT).

Value Added Tax (VAT)

 THE COMPANY shall deduct input VAT, i.e. VAT paid on services purchased from registered vendors.
The following categories and purchases are eligible for input VAT deduction:
o Taxable supplies: All services that are not specifically exempt from VAT.
o Internal Supplies: Input tax paid on imports from other GCC countries, or internal
supplies, shall be eligible for deduction.
o Taxable imports from outside the GCC: VAT paid on taxable imports from outside the
GCC shall be deductible if it is used to supply zero rated or standard rated service.

 VAT shall be calculated and accounted for in the books as and when invoices (for both services) are
received from vendors (input tax).

 VAT is only claimable on invoices that meet the requirement of VAT invoice as stipulated in the law
of KSA.

 Output VAT shall be shown in the books of account under a separate liability account, which is
ultimately reflected in the statement of financial position under other current liabilities.

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 THE COMPANY shall be eligible to claim credit of input tax paid on the supply of services received.
Such input tax shall be set off against the output VAT and any overpayment is accounted as an asset
under other current assets.

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12. Accounts and Other Receivables
Purpose
 The objective of this policy section is to establish and provide guidelines for appropriate and
consistent accounting treatment relating to THE COMPANY 's accounts receivable, prepayments and
other receivables.

 The purpose of the policy is:

o To ensure that control is maintained with respect to timely receipt of customer
payments within the agreed-upon terms and conditions;
o To maintain a complete and accurate statement of outstanding debtors; and
o To facilitate the provision of forecasts and assist in the management and reporting of
short-term cash requirements.

Applicable IFRS
 IFRS 9 Financial Instruments

Policies
Accounts receivable

 Accounts receivable shall be measured at nominal value less any provision for doubtful debts.
Accounts receivables and provision for doubtful debt shall be recognized in separate accounts but
shall be presented as a net figure in the balance sheet.

 When account receivables shall be deemed to be uncollectible (bad debt), they are written-off
against the provision for doubtful debts.

 Accounts receivable shall be stated at original invoice amount.

 Advance payments from customers shall be recorded as advances from customers.

 Credit balances within accounts receivable, if significant, should be reflected as current liabilities.

 The portion of receivables due and expected to be paid within one year or within the operating cycle
shall be classified as current assets and the remaining balance as non-current.

 Billing / Invoicing for customers shall be the responsibility of AR Team based on the data received
from the Sales & business Division and shall be raised after collecting all the relevant supporting
documents. The approved payment plan shall be predefined in the system for each project and the
invoicing shall be based on the plan for each existing customer.

 The AR Team shall ensure that the VAT amounts for invoices are calculated accurately and are in
line with the relevant regulations.

 Collections from a Customer can be performed in any of the following ways:

1. Direct bank transfer / deposit.
2. Certified Cheques.

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Prepayments

 Prepayments include items such as prepaid insurance, rent, subscriptions, and employee expense
advances. Prepayments will be recognized once the payment is processed.

 Prepayments shall be deferred and charged to operations as the benefits are realized. Prepayments
that are identifiable with specific future revenue shall be charged to expense in the periods in which
the related revenue is recognized; those that relate to specific time periods (interest or rent, for
example) shall be recognized as an expense in such periods.

 Prepayments shall be sub-classified based on their nature (i.e. prepaid rent, prepaid insurance,
advances to suppliers, etc.).

Provision for expected credit losses.

 THE COMPANY shall use the simplified approach (Refer investments section for details) for
providing for expected credit losses (ECL).

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13. Cash and Cash Equivalent
Purpose
 The policies in this section provide guidelines for identification, reconciliation and disclosure
requirements of cash and cash equivalents.

Applicable IFRS
 IAS 7 Statement of Cash Flows

Policies
Components of cash and cash equivalents

 THE COMPANY shall disclose the components of cash and cash equivalents and shall present a
reconciliation in its statement of cash flows with the equivalent items reported in the statement of
financial position.

 THE COMPANY should disclose the policy which it adopts in determining the composition of cash
and cash equivalents.

 The effect of any change in the policy for determining components of cash and cash equivalents, for
example, a change in the classification of financial instruments previously considered to be part of
THE COMPANY 's investment portfolio, shall be reported in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors.

Identification and measurement of bank facilities

 Bank facilities shall be long-term and short-term amounts borrowed by THE COMPANY including,
bank loans, obligations from finance leases, letters of credit, letters of guarantee, and overdrafts.

 Facilities and borrowings which are repayable within one year shall be regarded as short-term
facilities.

 All outstanding amounts at the period end or year-end shall be included as a liability in the
statement of financial position.

 Bank facilities and loans shall be categorized in the following categories:

o Bank loans;
o Bank overdrafts and other short-term borrowings; and
o Letter of Credits / Guarantees.

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14. Pension and Post-Employment Benefits
Purpose
 The purpose of this policy is to prescribe the accounting requirements for employee benefits,
requiring THE COMPANY to recognized a liability where an employee has provided services and an
expense when it consumes the economic benefits of employee service.

Applicable IFRS
 IAS 19 Employee Benefits

Policies
Short-term employment benefits

 When an employee has rendered a service to THE COMPANY in accordance with employment
contract during an accounting period, THE COMPANY shall recognized the undiscounted amount of
short-term employee benefits expected to be paid in exchange for that service:
o As a liability (accrued expense), after deducting any amount already paid. If the amount
already paid exceeds the undiscounted amount of the benefits, THE COMPANY shall
recognized that excess as an asset (prepaid expense) to the extent that the prepayment
will lead to, for example, a reduction in future payments or a cash refund.
o As an expense, unless another IFRS requires or permits the inclusion of the benefits in
the cost of an asset.

Post-employment benefits

 Post-employment benefit plans are classified as defined contribution plans and defined benefit
plans, depending on the economic substance of the plan as derived from its principal terms and
conditions.

 Defined benefit plans: Accounting for defined benefit plans shall be based on the following steps:
o The cost of the defined benefit pension plan and other post-employment medical
benefits and the present value of the pension obligation are determined using actuarial
valuations. An actuarial valuation involves making various assumptions that may differ
from actual developments in the future. These include the determination of the
discount rate, future salary increases, mortality rates and future pension increases. Due
to the complexities involved in the valuation and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these assumptions. All assumptions will be
reviewed by THE COMPANY at each reporting date.
o Determine the deficit or surplus using an actuarial technique i.e. the projected unit
credit method, shall make a reliable estimate of the ultimate cost to THE COMPANY of
the benefit that employees have earned in return for their service in the current and
prior periods.
o THE COMPANY should determine how much benefit is attributable to the current and
prior periods and to make estimates (actuarial assumptions) about demographic
variables (such as employee turnover and mortality) and financial variables (such as
future increases in salaries and medical costs) that will affect the cost of the benefit.
o Discount that benefit to determine the present value of the defined benefit obligation
and the current service cost.
o Deduct the fair value of any plan assets from the present value of the defined benefit
obligation.
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 o Determine the amount of the net defined benefit liability (asset) as the amount of the
deficit or surplus determined, adjusted for any effect of limiting a net defined benefit
asset to the asset ceiling.
o Determine amounts to be recognized in statement of income and expenditure:
 Current service cost;
 Any past service cost and gain or loss on settlement; and
 Net interest on the net defined benefit liability (asset).
o Determine the re-measurements of the net defined benefit liability (asset), to be
recognized in other comprehensive income, comprising:
 Actuarial gains and losses;
 Return on plan assets, excluding amounts included in net interest on the net
defined benefit liability (asset); and
 Any change in the effect of the asset ceiling, excluding amounts included in net
interest on the net defined benefit liability (asset).
o If THE COMPANY has more than one defined benefit plan, then it shall apply these
procedures for each material plan separately.
o THE COMPANY shall recognized the net defined benefit liability (asset) in the statement
of financial position.
o When THE COMPANY has a surplus in a defined benefit plan, it shall measure the net
defined benefit asset at the lower of:
 The surplus in the defined benefit plan; and
 The asset ceiling, determined using the discount rate.

 Employees’ end of service benefits (EOSB): EOSB is the amount THE COMPANY is required to pay
at completion of employment. It is based on the employee’s minimum continuous service period and
last salary drawn. EOSB is calculated in accordance with Saudi Arabian Labor Law. THE COMPANY
shall recognized EOSB as per the measurement criteria of defined benefit plan.

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15. Accounts and Other Payables
Purpose
 The purpose of this policy is to prescribe the guiding principles in accordance with IFRS and leading
practices for the recording, documentation and monitoring of:
o Payables to vendors providing services;
o Regularization of accruals/provisions.

Applicable IFRS
 IFRS 9 Financial Instruments

Policies
Recognition and measurement of accounts payables and accruals

 Liabilities shall be recognized for amounts to be paid in the future when:

o It is probable that an outflow of economic resources embodying economic benefits will
result from the settlement of a present obligation;
o The amount at which the settlement will take place can be measured reliably; and
o Goods (including stationery and other consumables), services or assets have been
received regardless of the receipt of the bill/invoice.

 Accounts payable account reflects amount owed by THE COMPANY to different vendors and service
providers.

 Accounts payables shall be recognized initially at fair value and subsequently measured at
amortized cost using the effective interest method. If the time value of money is expected to be
insignificant, the amount of liability should be identical to the accepted billed value of work done or
services received by THE COMPANY. Otherwise, the accounts payable shall be discounted to its
present value at market rate.

 The cut-off date for recognition of accounts payable is in accordance with the payment terms of the
purchase order and the vendor agreement.

 Accounts payable analysis shall be performed on regular intervals. It is to be determined that THE
COMPANY is making payments against amounts due to its vendors, at the time when such payments
become due.

 Accruals shall be measured at a realistic and prudent estimate of the amount to be paid for the
services received.

Invoice recording and Matching

 Vendor invoices shall be received (hard copy or electronically) directly from the Vendor by the AP
Team for processing.
 The invoices may be accepted in a hard or soft copy format (invoices sent directly through the
system) to initiate the payment process, however prior to payment the original hardcopy would be
required. Invoices received that are not accurate/complete shall be returned to the supplier. An
invoice from the supplier must have the following as a minimum for it to be processed by the AP
Team:

1. Supplier name and mailing address;

2. Purchase Order/Contract reference;
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3. Description of items/service provided;
4. Price/fees; and
5. Quantity of items/duration of service or milestone achieved.
6. Bank details of supplier
7. VAT Registration Number (as applicable)
8. VAT % and VAT Amount

 In addition to the Invoice, the following supporting documents should be submitted by the Vendor
for the processing of Invoices:
a) The vendor’s Saudization certificate
b) GOSI certificate
c) CR certificate
d) GAZT Certificate
e) VAT Registration Certificate
f) Practicing license (if applicable) and other documents.

 AP Team shall ensure that the invoice has not been processed before.
 A 3-way matching of the invoice, Goods Received Note (GRN)/Confirmation from the End User
Department and Purchase Order/Contract shall be performed. In case of any discrepancy, the AP
Team shall seek clarification from the relevant department. Direct (non-Purchase Order) invoices
such as utilities, shall not require 3-way matching.
 Invoices shall be recorded in the system within 10 working days of receiving them. The maker-
checker rule shall be followed for preparing and approving the entries related to the posting of the
invoice. The approver shall always be a person higher in authority to the person preparing the
entry.
 Vendor invoices related to construction and design should only be processed post approvals from
related departmental / business unit / project heads as per the DoA. This approval should be
supported by a statement of actual works/progress reports or any such relevant schedule which in
reasonable detail itemizes the quantity and value of the work units completed during the current &
preceding month(s) in addition to an aggregate representation of the same.
 The End User Department shall send a payment request confirming the receipt of goods or services
along with all the necessary documents to initiate the payment process.

Bank Payment
 All payment for vendor should have a signed contract unless it is onetime payment or
Reimbursement Request.

 All payment should have payment authorization signed by the authorized person based on the
DoA to confirm the delivery of items or services and to process the payment.

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16. Revenue
Purpose
The purpose of this policy is to provide guidance on the measurement, recognition and presentation
of income/revenue earned.

Applicable IFRS
 IFRS 15 Revenue from Contracts with Customers

Policies
 Revenue shall be recorded using 5 step model as prescribed in IFRS 15.

Step Description Explanation

1 Identify the contract(s) A contract is an agreement between two or more parties that creates
with customer enforceable rights and obligations. The principles of the standard
shall apply to each contract that has been agreed upon with a
customer and meets specified criteria. Considering the facts and
circumstances, an entity shall combine contracts and account for them
as one contract. Judgement and evaluation is required to account the
contract modification either as separate contract or continue with
existing contract. The standard provides requirements for the
accounting for all possible scenarios of contract modifications.
2 Identify the performance A contract includes promises to transfer goods or services to a
obligations in the contract customer. If those goods or services are distinct, the promises are
performance obligations and are accounted for separately. A good or
service is distinct, if the customer can benefit from the good or service
on its own or together with other resources that are readily available
to the customer and the entity's promise to transfer the good or
service to the customer is separately identifiable from other promises
in the contract.
3 Determine the transaction The transaction price is the amount of consideration in a contract to
price which an entity expects to be entitled in exchange for transferring
promised goods or services to a customer.
The transaction price can be a fixed amount of customer
consideration, but it may sometimes include variable consideration or
consideration in a form other than cash.
The transaction price is also adjusted for the effects of the time value
of money if the contract includes a significant financing component
and for any consideration payable to the customer. If the
consideration is variable, an entity estimates the amount of
consideration to which it will be entitled in exchange for the promised
goods or services. The estimated amount of variable consideration
will be included in the transaction price only to the extent that it is
highly probable that a significant reversal in the amount of cumulative
revenue recognized will not occur when the uncertainty associated
with the variable consideration is subsequently resolved.
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Step Description Explanation
4 Allocate the transaction An entity typically allocates the transaction price to each performance
price to relative stand- obligation on the basis of the relative stand-alone selling prices of
alone selling price each distinct good or service promised in the contract. If a stand-alone
selling price is not observable, an entity estimates it. Sometimes, the
transaction price includes a discount or a variable amount of
consideration that relates entirely to a part of the contract. The
requirements specify when an entity allocates the discount or variable
consideration to one or more, but not all, performance obligations (or
distinct goods or services) in the contract.
5 Recognize the revenue An entity recognizes revenue when (or as) it satisfies a performance
obligation by transferring a promised good or service to a customer
(which is when the customer obtains control of that good or service).
The amount of revenue recognized is the amount allocated to the
satisfied performance obligation. A performance obligation may be
satisfied at a point in time (typically for promises to transfer goods to
a customer) or over time (typically for promises to transfer services
to a customer). For performance obligations satisfied over time, an
entity recognizes revenue over time by selecting an appropriate
method for measuring the entity's progress towards complete
satisfaction of that performance obligation.

 At every contract inception, THE COMPANY shall determine the following and evaluate various
factors under IFRS 15:
o Documents / agreement binding THE COMPANY with customer, e.g. sales deed, rent
agreement, invoice etc.;
o Promises / performance obligations provided to customer;
o Judgement to evaluate whether the contract is integrated;
o Total consideration agreed upon;
o Factors affecting the consideration e.g. rebates, concessions, discounts etc.;
o Stand-alone selling price of the promises / performance obligations; and
o Credit period provided to customer to assess the time value of money in recording the
revenue and collection of revenue.

 THE COMPANY shall recognized the revenue when (or as) it satisfies a performance obligation by
transferring a promised good(s) or service to customer. THE COMPANY shall evaluate ‘control’
guidelines for all performance obligations separately in the contract, to ensure whether the revenue
shall be recorded over time or point in time.
 Following principles (any one condition shall need to satisfy) shall be considered to evaluate
whether the performance obligation is satisfied over time (and hence the revenue):
o the customer simultaneously receives and consumes the benefits provided by the THE
COMPANY
o THE COMPANY creates or enhances an asset (for example, work in progress) that the
customer controls as the asset is created or enhanced; or
o THE COMPANY does not create an asset with an alternative use to the entity and the
entity has an enforceable right to payment for performance completed to date.

 In all other cases, THE COMPANY shall record the revenue point in time, i.e. as when performance
obligation is satisfied.

 THE COMPANY shall recognized the asset for the incremental cost of obtaining the contract (e.g.
sales commission), only if THE COMPANY expects to recover those costs.
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 THE COMPANY shall provide following disclosures in the notes to FS with respect to revenue:

o Details of contract with customers;

o Disaggregation of revenue;
o Contract assets balance;
o List of performance obligations along with descriptions relating to shipping terms,
payment details, nature of goods and services;
o Timing of revenue recognition;
o Method used for measuring the progress of performance obligation; and
o Any significant judgement applied.

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17. Government grants
Purpose
The purpose of this policy is to provide guidance on the accounting for, and disclosure of,
government grants and other forms of government assistance.

Applicable IFRS
 IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

Policies
Recognition criteria

 The principles of accounting for Government grant received in any form is provided under IAS 20
“Accounting for Government Grants and Disclosure of Government Assistance”.

 A government grant may take the form of a transfer of a non-monetary asset, such as land or other
resources, for the use of THE COMPANY. In these circumstances it is usual to assess the fair value of
the non-monetary asset and to account for both capital contribution and asset at that fair value

Recognition and measurement of government grants and assistance

 A government grant shall be recognized only when there is reasonable assurance that:
o THE COMPANY will comply with any conditions attached to the grant; and
o The grant will be received.

 The grant shall be recognized as income over the period necessary to match them with the related
costs, for which they are intended to compensate, on a systematic basis.

 The manner in which a grant is received shall not affect the accounting method to be adopted in
regard to the grant. Thus, a grant shall be accounted for in the same manner whether it is received
in cash or as a reduction of a liability to the government.

 Non-monetary grants, such as land or other resources, shall be accounted for at fair value, although
recording both the asset and the grant at a nominal amount shall be allowable. THE COMPANY shall
be required to measure the fair value of such non-monetary grants that have no active markets on
the basis of a valuation done by an independent valuer. The name and qualification of the valuer is
to be disclosed.

 A non-monetary grant relating to assets may be presented in one of two ways:

o As deferred income; or
o By deducting the grant from the asset's carrying amount.

 Even if there are no conditions attached to the grant and/or assistance relating to the operating
activities of THE COMPANY (other than the requirement to operate in certain regions or industry
sectors), such grants shall not be credited to equity.

 A grant receivable as compensation for costs already incurred or for immediate financial support,
with no future related costs, shall be recognized as income in the period in which it is receivable.

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 A grant relating to income may be reported separately as 'other income' or deducted from the
related expense.

 The benefit of a government loan at a below-market rate of interest shall also be treated as a
government grant. The loan shall be recognized and measured in accordance with IFRS 9 Financial
Instruments. The benefit of the below-market rate of interest shall be measured as the difference
between the initial carrying value of the loan determined in accordance with IFRS 9 and the
proceeds received. The benefit is accounted for as gains in the respective period.

 If a grant becomes repayable, it shall be treated as a change in estimate in accordance with IAS 8.
The following treatment shall apply:
o Where the original grant was related to income, the repayment should be applied first
against any related unamortized deferred credit, and any excess should be dealt with as
an expense.
o Where the original grant was related to an asset, the repayment should be treated as
increasing the carrying amount of the asset or reducing the deferred income balance.
The cumulative depreciation which would have been charged had the grant not been
received should be charged as an expense.

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18. Financial reporting
Purpose
The purpose of this policy section is to provide guidance on disclosure requirements for financial
reporting purposes in accordance with IFRS.
The THE COMPANY should provide the Portfolio Companies Governance Department within
ULTIMATE PARENT with the following:
 Quarterly financial statements prepared by the management (management accounts) or the
initial financial statements within the sixty calendar days following the end of each quarter.

 Quarterly financial statements prepared based on the accounting policies applied in ULTIMATE
PARENT for the purpose of consolidating the financial statements, within the ninety calendar
days following the end of each quarter.

 Confirm and match transactions and balances between ULTIMATE PARENT and the THE
COMPANY, within the thirty calendar days following the end of each quarter.

 Ensure that all letters and paperwork pertaining to the company’s external auditor have been
examined and signed by the company and the external auditor (including the engagement letter)
before the end of the fiscal year and make the necessary arrangements to schedule the
examination of the company's external auditor paperwork.

 Annual financial statements prepared by the management (management accounts) within sixty
calendar days following the end of the fiscal year.

 Audited financial statements and auditors' report within ninety calendar days following the end
of the fiscal year.

 Annual financial statements prepared based on the accounting policies applied in ULTIMATE
PARENT and attested by the external auditor within the ninety calendar days following the end
of the fiscal year.

 A detailed and approved business plan for the following fiscal year of the THE COMPANY for the
purposes of accounting valuation of the investments owned by the company (if any) to be
submitted by the end of November of each year.

 The actual performance comparison report of the company and the approved business plan and
annual budget, to be submitted within the thirty calendar days following the end of the year.

 Report and discloser transactions with related parties.

 Address and discuss with ULTIMATE PARENT ’s finance department about any transactions that
have a material effect on the level of the company or ULTIMATE PARENT at the time of its
occurrence and without any delay. for example, obtaining government subsidy by dealing
directly with government agencies, or when discussing interest rates with creditors when there
is a need to obtain funding or similar transactions that have a material effect.

 Notify ULTIMATE PARENT ’s finance department of the subsequent events (if any) in the period
between the end of the company's fiscal year and the date of signing the report of the company's
external auditor as soon as they occur.

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Applicable IFRS
 IAS 1 Presentation of FS

Policies
Fair presentation and compliance with IFRS

To comply with the provisions of IFRS, THE COMPANY shall ensure that:
 The FS present fairly the financial position, financial performance and cash flows of the entity.

 The FS comply with all the requirements of each applicable IFRS.

 In the extremely rare circumstances in which management concludes that compliance with a
requirement of an IFRS will be so misleading that it would conflict with the objective of FS set out in
IAS 1 Presentation of FS, and where the relevant regulatory framework requires, or otherwise does
not prohibit such a departure, THE COMPANY shall ensure the following have been disclosed:
o That management has concluded that the FS fairly present THE COMPANY’s financial
position, financial performance and cash flows;
o That THE COMPANY has complied with applicable IFRS except that it has departed from
a particular requirement in order to achieve a fair presentation;
o That the title of the IFRS from which THE COMPANY has departed, the nature of the
departure, including the treatment that the IFRS would require, the reason why that
treatment would be so misleading in the circumstances that it would conflict with the
objective of FS set out in IAS 1-Presentation of FS, and the treatment adopted; and
o That the financial impact of the departure on each item in the FS that would have been
reported in complying with the requirement for each period has been adequately
presented.

 IFRS Issued but not yet Effective: Where THE COMPANY chooses not to apply a new IFRS that has
been issued but is yet to be effective, the following would be disclosed:
o Statement of this fact shall be expressly made in the FS.
o Known or reasonably estimable information relevant to assessing the possible impact
that application of the new IFRS will have on UCJ’s FS in the period of initial application.
o To further ensure compliance with IFRS, THE COMPANY would consider disclosing:
 The title of the new IFRS;
 The nature of the impending change or changes in accounting policy;
 The date by which application of the IFRS is required;
 The date at which THE COMPANY plans to apply the IFRS initially; and
 Either:
 A statement of the impact that initial application of the IFRS is
expected to have on THE COMPANY’s FS; or
 If that impact is not known or reasonably estimable, a statement to
that effect.

 Early Application of IFRSs: Where THE COMPANY applies an IFRS for a period before the effective
date of the IFRS (early application of the IFRS) that fact shall be disclosed by it.

True and fair view

 The annual FS of THE COMPANY shall give a true and fair view of its affairs and the income and
expenditure for each financial period.

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 The Finance Function is responsible for ensuring that the annual FS are prepared in this manner.
THE COMPANY shall apply the accounting assumptions and concepts described in this section on
the appropriate IFRS, which would then result in a true and fair view of the FS prepared.

 Any material non-compliance (including any deviations from an IFRS) and the effect of any such
non-compliance shall be disclosed in the FS as notes and reported to the Board.

Components of FS

 A complete set of FS according to IAS 1 Presentation of Financial Statements comprises:

o A statement of financial position (“Balance Sheet”);
o A statement of financial performance (“Income and Expenditure Account”);
o A statement of changes in equity;
o A cash flow statement; and
o Notes, comprising a summary of significant accounting policies and other explanatory
notes.

Use of estimates and judgments

 The preparation of FS in conformity with approved accounting standards shall require the use of
certain accounting estimates.

 It shall also require management to exercise its judgment in the process of applying the THE
COMPANY’s accounting policies.

 THE COMPANY shall use estimates and assumptions concerning the future, which may equal to the
actual results or differ from estimates.

 Estimates and judgments shall be continually evaluated and be based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.

Current / non-current classification

 THE COMPANY shall present assets and liabilities in the statement of financial position based on
current/non-current classification.

 An asset is current when it is:

o Expected to be realized or intended to be sold or consumed in the normal operating
cycle;
o Held primarily for the purpose of trading;
o Expected to be realized within twelve months after the reporting period; and
o Cash or cash equivalent unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period.

 All other assets shall be classified as non-current by THE COMPANY.

 A liability is current when:

o It is expected to be settled in the normal operating cycle;
o It is held primarily for the purpose of trading;
o It is due to be settled within twelve months after the reporting period;
o There is no unconditional right to defer the settlement of the liability for at least twelve
months after the reporting period.

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 THE COMPANY shall classify all other liabilities as non-current.

Errors

 Errors are the results of omissions, misstatements, mathematical inaccuracy, mistakes, and
erroneous application of accounting policies, oversights or misinterpretation of facts or as a result
of fraud.

 THE COMPANY shall correct its material prior period errors retrospectively in the first set of FS
after their discovery, by restating the comparative amounts for the prior period(s) presented in
which the error occurred; or if the error occurred before the earliest prior period presented, restate
the opening balances of net assets for the earliest prior period presented.

 When it is impracticable to determine the period specific effects of an error on comparative

information for one or more prior periods presented, THE COMPANY shall restate the opening
balances of net assets for the earliest period for which retrospective restatement is practicable.
When it is impracticable to determine the cumulative effect, at the beginning of the current period,
of an error on all prior periods, THE COMPANY shall restate the comparative information to correct
the error prospectively from the earliest date practicable.

Events after the reporting period

 Events after the reporting period are those events, favorable and unfavorable, that occur between
the end of the reporting period and the date when the FS are authorized for issue. Two types of
events can be identified:
o Those that provide evidence of conditions that existed at the end of the reporting
period (adjusting events after the reporting period); and
o Those that are indicative of conditions that arose after the reporting period (non-
adjusting events after the reporting period).

 Adjusting events after the reporting period: THE COMPANY shall adjust the amounts recognized
in its FS to reflect adjusting events after the reporting period.

 Non-adjusting events after the reporting period: THE COMPANY shall not adjust the amounts
recognized in its FS to reflect non-adjusting events after the reporting period.

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19. Budget
Purpose
The Budgeting Policy sets out the fundamental guidelines and principles that must be approved and
consistently followed by THE COMPANY in accordance with their scope of operations and best industry
practices. The objectives of the Budgeting Policy are the following:

 Ensure that THE COMPANY’s Budgeting policies are formalized and documented and serve as a
single point of reference to the management and staff at THE COMPANY;
 Ensure that all staff at THE COMPANY consistently apply approved policies in line with the
organizational needs and defined practices; and
 Standardize Budgeting and Monitoring team practices for consistent application.

Scope
 The Budgeting Policy includes all budgeting and management reporting activities and aims to
guide the Finance Division in achieving its overall objectives. The [Budgeting Policy] covers the
following areas:
o Budget Framework and Guidelines
o Annual Budget Preparation and Consolidation
o Budget Challenge and Approval
o Budget Transfers
o Budget Reserve
o Budget Monitoring
o Forecast Preparation and Monitoring
o Management Reporting

Distribution and Target Audience

 The Budgeting Policy aims to assist the Budgeting and Monitoring team at THE COMPANY in
implementing Budgeting Policy within this manual consistently. All relevant employees within
THE COMPANY shall understand the operational implications of these policies on THE
COMPANY. All relevant employees should be trained on the policies affecting their work. The
Budgeting and Monitoring Department should take appropriate action to ensure that this Policy
is implemented within the Budgeting and Monitoring team.

Effective Date
 The Budgeting Policy is intended to be an evolving document with regular revisions and policies
being added when necessary. The Budgeting Policy is effective from the date it is approved by the
BoD.

Policies
 The annual budget shall be developed for each financial year (“budget year”) and it shall be
approved as per the DoA. The budget preparation process for next year shall commence at least 3
months prior to completion of the current financial year. The Budgeting & Monitoring team shall
circulate the timeline and calendar each year for the budgeting cycle. The budget shall be
prepared by each Budget Owner based on the guidelines circulated by the Budgeting &
Monitoring team.
 The annual budget shall be prepared using a hybrid approach with top-down strategic inputs
from the CEO and the inputs from the various departments on the revenue, income and expenses
value.

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  The Budgeting & Monitoring team shall plan, coordinate and manage the budget preparation
process with inputs from each Department representatives.
 The Budgeting and Monitoring team shall provide a framework for budgeting activities that:
o Enables Employees to follow and apply uniform principles for budgeting activities;
o Allows efficient and effective management of financial resources within THE COMPANY
i.e. provides an opportunity for discussion on budget allocation among all the
stakeholders involved in the decision-making process;
o Ensures accountability for the budgeted figures; and
o Allows for actual performance to be closely monitored against the budget objectives
and provides for appropriate analysis to support any corrective action.

 The Budgeting and Monitoring team shall develop the budget circular, which shall include the
budget calendar and guidelines for each division/department. CFO pre-approval is mandatory
prior to sending the circular.
 The Budgeting and Forecasting team shall ensure that the timetable and guidelines are strictly
followed by each division/department to ensure that all tasks are completed within the planned
timeframe. Any deviations from the guidelines shall be escalated to the CFO and the CEO by the
Budgeting and Monitoring team.
 The budgeting guidelines shall be distributed at the start of the budgeting process and
should contain:
o A statement of objectives which shall highlight the key goals for the budget year (and
may include the subsequent years), target areas of growth and key strategic initiatives;
o Steps in preparation of the budget;
o Budget methodology/approach to be adapted;
o Template for the budget;
o Department approval process;
o Key meeting for challenging the budget

Annual Budget Preparation and Consolidation

 The Budget Owners shall prepare their budget as per the issued guidelines and shall submit their
budgets to the Budgeting and Monitoring team including, the budget input data supported by
their workings.
 The [Budgeting and Forecasting team] shall consider the following attributes while developing
the annual budget but not limited. These attributes shall be clearly mentioned in the budget
template and budget guidelines.
Revenue & Other Income Budget;
o Sales income
o Investment income (short-term)
o Cost recharge
o Other income

Operating & Other Expenditure Budget (OPEX);

o Commissions
o Business support/ Admin costs
o Sales and marketing costs
o IT expenses
o Business related costs (facility management, customer service, renovation/ warranty
costs etc.)
o Professional services expenses
o Financing costs

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 o Claims and other legal expenses
o Travel expenses
o Zakat and taxes
o Other operating expenses (depreciation, insurance etc.)

Capital Expenditure Budget (CAPEX); and

o Development Projects
o Existing (existing/ new contractual commitments to fulfill)
o New projects
o Fixed assets additions

Manpower Budget
o Basic salaries and bonus payments
o Monthly and annual allowances
o Life and health insurance
o Pension and end of service benefits
o Training and recruitment costs

Budget Challenge and Approval

 The consolidated annual budget shall be reviewed and approved as per the DoA as per the
timelines mentioned in the calendar. If the new budget is not approved before the new financial
year, THE COMPANY shall operate under the previous year approved budget, which shall account
for a 5% of budget increase.
 The [Budgeting and Forecasting team] shall upload the approved annual budget in the system
(when the system is ready) and ensure it is locked out for any modifications without authorized
approvals.

Budget Transfers and Additions

 The Budgeting and Monitoring team shall coordinate and incorporate any budget transfer within
the same category, between categories and/or between Departments if approved as per the DoA.
 Budget transfers related to any CAPEX category, whether within the [department] or between
[departments], shall not be permitted. However, should there be a requirement, this shall need to
be [approved as per the DoA] after submission of a valid business case with appropriate
justification.
 The [Budgeting and Forecasting team] shall ensure that the approved budget transfers are
reflected accurately in the revised budget and proper documentation of all transfer requests,
justifications and approvals are filed and maintained.
 Any budget addition/ top-up shall only be permitted as per the DoA. As per the DoA, the
authority of budget addition is based on a percentage of the total approved budget.
 The [Budgeting and Forecasting team] shall ensure that any budget additions are reflected and
updated in the system.

Budget Reserve
 The [Budgeting and Forecasting team] shall ensure the annual budget has a budget reserve
allocated as a contingency amount to be used for non-budgeted items and that the percentage of
the reserve is limited to a maximum of [10%] of the current OPEX budget and [5-10%] of the
current CAPEX budget in alignment with the approved business plan.
 The [Budgeting and Forecasting team] shall also review and assess the previous year ad-hoc
unplanned expenditure to forecast for the reserve. The use of the budget reserve shall be
recommended by the [CFO] and [approved as per the DoA].

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  Requests for budget support (budget reserve) for the requesting department/project shall be
only considered after it is established that there are no budget transfers possible.

Budget Monitoring
 Each Budget Owner shall be responsible for controlling their respective budget. The Budget
Owners should ensure that the actual expenses (OPEX and CAPEX) are within the approved
budget and actual revenue are higher or equal to the approved budget. The Budget Owners
should ensure that all activities listed within the budgets are planned appropriately in order to
achieve the Key Performance Indicators (“KPIs”).
 The [Budgeting and Forecasting Department] shall prepare a budget variance report [at least on
a monthly basis], to compare the actual performance against the budget and identify variances.
The budget variance report shall include the Month-To-Date (“MTD”) and Year-To-Date (“YTD”)
actual expenses incurred under the defined OPEX and CAPEX categories, in comparison to the
MTD and YTD budgeted expenses, any approved transfers within the budget and previous year
actual expenses for the same period.
 For variances exceeding the materiality threshold as determined by THE COMPANY Management
(on a yearly basis), the Budget Owners shall provide valid supporting justifications and a
contingent plan for their budget variances to the Budgeting and Monitoring Department. For any
changes in the budgeted spend, that has a financial impact (negative or positive) shall be notified
to the relevant Budget Owners and will require necessary approvals.

Forecast Preparation and Monitoring

Forecasts shall be prepared:
A. On specific request from the [Board, CEO or the CFO]; and
B. When major differences are identified during the budget monitoring process.

 This forecast shall not be a replacement for the original approved budget but shall be used as a
reporting input in order to have realistic comparisons, if the market conditions/expectations
have significantly changed.
 Forecasts shall be developed based on actuals, for the period already expired, for the remaining
period in the calendar year.
 All departments participating in the preparation of the budget shall also participate in the
forecasting process. Assumptions for all the forecast elements shall be clearly explained and well
documented by each of the forecast owners.
 Forecasts shall be prepared according to realistic projection of revenues and expenditures.
 The forecast guidelines shall be distributed at the start of the forecast process and should
contain:
o Timeline for submission and approval of the forecast;
o Timetables shall be developed by the [Budgeting and Forecasting team] team and
communicated to all relevant departments that participate in the process;
o Instructions and explanations for any format/template/master data change compared
to the previous forecast period; and
o Actuals YTD at the point of forecast.
 All departments participating in the preparation of the forecast shall prepare the figures
according to the guidelines set using assumptions in relation to their business measurements,
with calculated variances for comparative purposes.
 Assumptions for all the forecast elements shall be clearly explained and well documented by each
of the Budget Owners.
 The Budgeting and Monitoring team shall be responsible for collecting the different forecast
elements and following up with the Budget Owners for any clarifications/explanations required.
 The CEO and the CFO shall approve the draft forecast
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 Management Reporting
 All management reporting (except the Financial Reporting) for THE COMPANY shall be managed
and routed via the Budgeting and Monitoring team. The Budgeting and Monitoring team shall
review each report for factual accuracy prior to being sent out to the recipients. Financial
Reporting and any reports related to the Financial Statements of THE COMPANY shall be
managed and prepared by the Financial Reporting Department.
 The Budgeting and Monitoring team shall prepare a Management Reporting Framework that
should at least include the following information for each report:
o Report Name.
o Detailed Description.
o Report Frequency.
o Preparation & Development Responsibility.
o List of Recipients.
 It is the responsibility of CFO to make sure that data needed for the reports is made available in a
timely manner to enable issuance of timely management reports. The Budgeting and Monitoring
team may liaise with other relevant departments to obtain the information (if required).
 The Budgeting and Monitoring team shall ensure that required corrections in the management
reports shall be undertaken in coordination with respective THE COMPANY Department/Project
Manager.
 Management reporting Framework shall be reviewed at the end of every year and updated if
required as per changes in THE COMPANY business requirements. Any changes in the management
reporting framework shall be approved by the CFO.

20. Other Policies

Purpose
The purpose of this section is to cover accounting policies and guidance related to miscellaneous
topics.

Applicable IFRS
 IAS 27 Separate Financial Statements
 IAS 37 Provisions, Contingent Liabilities and Contingent Assets
 IAS 24 Related Party Disclosures
 IAS 21 The Effects of Changes in Foreign Exchange Rates

Policies
Contribution and distribution of assets from the Parent

 These transactions include transfers of property plant and equipment, intangible assets, investment
property from one parent to THE COMPANY These may be for no consideration or at fair value or
deemed cost. These arrangements are not contractual but are equity transactions: either specie
capital contributions (an asset is gifted by a parent to a subsidiary) or non-cash distributions (an
asset is given by a subsidiary to its parent).

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 The relevant standards (IAS 2, IAS 16, IAS 38 and IAS 40) refer to assets being recognized at cost.
Similarly, investments in subsidiaries, associates and joint ventures may be recognized at cost under
IAS 27. Following the principles of, the entity receiving the asset has a choice: recognized it at zero
or at fair value. It is in practice more common for an entity that has received an asset in what is
purely an equity transaction to recognized it at fair value.

 Where there is a difference between the fair value and the consideration, there is a choice available
to the THE COMPANY to:
o (a) recognized the transaction at fair value, irrespective of the actual consideration; any
difference between fair value and agreed consideration will be a contribution to or a
distribution of equity for a subsidiary, or an increase in the investment held or a
distribution received by the parent; or
o (b) recognized the transaction at the actual consideration stated in any agreement
related to the transaction.

 As described above, THE COMPANY has a choice: recognized it at zero or at fair value. It is in
practice more common for an entity that has received an asset in what is purely an equity
transaction to recognized it at fair value.

Provisions

 Provisions are recognized when THE COMPANY has a present obligation (legal or constructive) as a
result of a past event, which makes it 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 such obligation.

 If the effect of the time value of money is material, provisions shall be discounted using a current
pre-tax rate that reflects, the risks specific to the liability. When a discounting rate is used, the
increase in the provision due to the passage of time shall be recognized as finance costs.

Contingent liability and contingent asset

 A contingency is defined as a condition, which exists at the reporting date where the outcome will
be confirmed only on the occurrence of one or more uncertain future event.

 A contingent liability is:

o A possible obligation that arises from past events. Its existence will be confirmed only
by the occurrence or non-occurrence of one or more uncertain future events not wholly
within control of THE COMPANY or
o A present obligation that arises from past events but is not recognized because:
 It is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; or
 The amount of the obligation cannot be measured with sufficient reliability.

o THE COMPANY’s contingent liabilities (if any) shall be assessed continually to

determine whether an outflow of resources embodying economic benefits has become
probable and a reliable estimate can be made. Contingent liabilities are disclosed in the
notes to FS.
o In case it is probable that a loss (asserted or unasserted) may be incurred at the
reporting date, the loss shall be accrued, if there is a reasonable basis for estimating the
loss. However, if a loss is possible, but not probable, following disclosures shall be made
in the FS of THE COMPANY:
 An estimate of its financial impact;

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  An indication of the uncertainties relating to the amount or timing of any
outflow; and
 The possibility of any reimbursement

 Contingent asset – A possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity. THE COMPANY’s contingent assets shall be disclosed as a
note to the FS.

Commitments

 An undertaking to commit substantial expenditure at a future date. Such pledges are deemed
liabilities and must be shown as such in THE COMPANY’s financial statements as off-balance sheet
items even if the expense has not been incurred to have become an actual liability.

Related parties

 A related party is a person or entity that is related to THE COMPANY that is preparing its financial
statements.

a) A person or a close member of that person’s family is related to THE COMPANY if that person:
(i) has control or joint control of THE COMPANY;
(ii) has significant influence over THE COMPANY or
(iii) is a member of the key management personnel of THE COMPANY or of a parent of the
reporting entity.

b) An entity is related to THE COMPANY if any of the following conditions applies:

(i) The entity and THE COMPANY are members of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint
venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third
entity.
(v) The entity is a post-employment benefit plan for the benefit of employees of either the THE
COMPANY or an entity related to the reporting entity. If THE COMPANY entity is itself such
a plan, the sponsoring employers are also related to THE COMPANY.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the
key management personnel of the entity (or of a parent of the entity).
(viii)The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.

 A related party transaction is a transfer of resources, services or obligations between THE

COMPANY and a related party, regardless of whether a price is charged.
 Close members of the family of a person are those family members who may be expected to
influence, or be influenced by, that person in their dealings with the entity and include:
o that person’s children and spouse or domestic partner;
o children of that person’s spouse or domestic partner; and
o dependants of that person or that person’s spouse or domestic partner.
 Compensation includes all employee benefits (as defined in IAS 19 Employee Benefits) including
employee benefits to which IFRS 2 Share-based Payment applies. Employee benefits are all forms of
consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for

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 services rendered to the entity. It also includes such consideration paid on behalf of a parent of the
entity in respect of the entity. Compensation includes:
o short-term employee benefits, such as wages, salaries and social security contributions,
paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within
twelve months of the end of the period) and non-monetary benefits (such as medical
care, housing, cars and free or subsidized goods or services) for current employees;
o post-employment benefits such as pensions, other retirement benefits, post-
employment life insurance and post-employment medical care;
o other long-term employee benefits, including long-service leave or sabbatical leave,
jubilee or other long-service benefits, long-term disability benefits and, if they are not
payable wholly within twelve months after the end of the period, profit-sharing,
bonuses and deferred compensation;
o termination benefits; and
o share-based payment.
 Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity. Government refers to government, government
agencies and similar bodies whether local, national or international.
 Related parties related to THE COMPANY include:
o A natural person who directly or indirectly owns a number of shares with a relative
importance of the shares of the entity having the right to vote. As well as to the relatives
of the natural person to the fourth-degree.
o An entity that owns a percentage of the voting rights that enables it to influence the
entity operations directly or indirectly through one or more intermediaries.
o Board members and directors of key positions such as CEOs in the entity or the holding
entity and the relatives of such persons to the fourth-degree.
o An entity in which any of the persons mentioned in the three previous points above or
relatives of such persons to the fourth-degree own directly or indirectly a percentage of
relative importance in the shares of the entity and have the ability to influence the
decisions of the entity and strive to achieve their interest.
o Subsidiaries or sister entities.
o Special funds for the benefit of the employees of the entity.
o Auditors and their associates.

 THE COMPANY shall disclose the nature of the related party relationship as well as information
about related party transactions and outstanding balances with related parties, including
commitments, necessary for users to understand the potential effect of the relationship on the FS. At
a minimum, disclosures shall include:
o The amount of the transactions;
o The amount of outstanding balances, including commitments;
o Their terms and conditions, including whether they are secured, and the nature of the
consideration to be provided in settlement;
o Details of any guarantees given or received;
o Provisions for doubtful debts related to the amount of outstanding balances; and
o The expense recognized during the period in respect of bad or doubtful debts due from
related parties.

Foreign currency transaction

 IAS 21 shall be applied:

o In accounting for transactions and balances in foreign currencies, except for those
derivative transactions and balances that are within the scope of financial instrument;
and
o Translating THE COMPANY 's results and financial position into its presentational
currency.
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 Transactions in foreign currencies shall initially be recorded at their respective functional currency
spot rates at the date the transaction first qualifies for recognition.

 Monetary assets and liabilities denominated in foreign currencies shall be re-translated at the
functional currency spot rates of exchange at the reporting date.

 Differences arising on settlement or translation of monetary items shall be recognized in statement

of income and expenditure.

 Non-monetary items that are measured in terms of historical cost in a foreign currency shall be
translated using the exchange rates at the dates of the initial transactions. Non-monetary items
measured at fair value in a foreign currency shall be translated using the exchange rates at the date
when the fair value is determined. The gain or loss arising on translation of non-monetary items
measured at fair value shall be treated in line with the recognition of the gain or loss on the change
in fair value of the item.

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