Page 83 - ICD AR21 EN

Investment entity
An investment entity is an entity that: (a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; (b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and c) measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Corporation meets the definition and typical characteristics of an “investment entity” as described in the amendments. In accordance with the amendments, an investment entity is required to account for its investments in subsidiaries and associates at fair value through income statement.
3 SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES The following is a summary of the Corporation’s significant accounting policies:
Accounting convention
The financial statements are prepared under the historical cost convention, except for the measurement at
fair value of certain of its financial assets and the actuarial valuation of its defined benefit obligations in accordance with the accounting policies adopted.
Transactions and balances
Transactions in foreign currencies are recorded in United States Dollars (“USD”) at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the date of the statement of financial position. All differences arising on translation are taken to the income statement.
Non-monetary items measured at historical cost denominated in a foreign currency are translated at the exchange rate ruling at the date of initial recognition. Non-monetary items measured at fair value in a foreign currency are 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 is treated in line with the recognition of the gain or loss on the change in fair value of the item.
Cash and cash equivalents
For the purposes of statement of cash flow, cash and cash equivalents consist of bank balances and Commodity Murabaha and Wakala placements having an original maturity of three months or less at the date of acquisition.
Commodity Murabaha and Wakala placements
Commodity Murabaha placements are made through financial institutions and are utilized in the purchase and
sale of commodities at a fixed profit. The buying and selling of commodities is limited by the terms of agreement between the Corporation and other Islamic and conventional financial institutions. Commodity placements are initially recorded at cost including acquisition charges associated with the placements and subsequently measured at amortized cost less impairment.
Wakala placement is an agreement whereby one party (the “Muwakkil” / “Principal”) appoints an investment agent (the “Wakeel” / “Agent”) to invest the Muwakkil’s funds (the “Wakala Capital”) on the basis of an agency contract (the “Wakala”) in return for a specified fee. The agency fee can be a lump sum or a fixed percentage of the Wakala Capital. The agent decides in respect to the investments to be made from the Wakala Capital, subject to the terms
STRONGER TOGETHER 81
ANNEXES