Page 81 - ICD-AR22-English

Notes to the Separate Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2022
Cash and cash equivalents
For the purposes of separate 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 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 an expected 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 of the Wakala agreement. However, the Wakeel bears the loss in cases of misconduct, negligence or violation of any of the terms of the Wakala agreements.
Murabaha
Murabaha financings are agreements whereby the Corporation sells to a customer, on a cost plus profit basis, a commodity or an asset, which the Corporation has purchased and acquired based on a promise received from the customer to buy.
Installment sales financing
Installment sale financing is a sale agreement where repayments are made on an installment basis over a pre-agreed period. The selling price comprises the cost plus an agreed profit margin without requirement of disclosing the actual cost.
Ijarah Muntahia Bittamleek
These consist of assets purchased by the Corporation either individually or as part of syndication with other entities and leased to beneficiaries for their use in Ijarah Muntahia Bittamleek agreements whereby the ownership of the leased assets is transferred to the beneficiaries at the end of the lease term after the completion of all payments under the agreement. The transfer of asset’s ownership may take place through transfer of control (entailing risks and rewards incidental to ownership of such assets) under a separate form of contract as follows:
– Contract of Sale: after the end of the Ijarah term; or
– Contract of gift” after the end of the contract term; or
– Contract of sale of proportionate ownership during the Ijarah term.
REINVIGORATING THE PRIVATE SECTOR TO SHAPE A BETTER FUTURE 79