Page 128 - EXIM-Bank_Annual-Report-2023

EXIM BANk MALAySIA
126 A Vision to Serve Empowering Growth Management Discussion and Analysis
ANNUAL REPORT 2023
Notes to the fiNaNcial statemeNts

2. MATErIAL ACCouNTING PoLICy INForMATIoN (cont’d)
2.4 Summary of material accounting policy information (cont’d)

(f) Financial assets (cont’d)
(iv) Financial assets at FVTPL

Financial assets at FVTPL include financial assets held for trading, financial assets designated upon initial
recognition at FVTPL, or financial assets mandatorily required to be measured at fair value. Financial assets are
classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets with cash flows that are not solely payments
of principal and interest are classified and measured at FVTPL, irrespective of the business model.
Notwithstanding the criteria for debt instruments to be classified at amortised cost or at FVOCI, as described
above, debt instruments may be designated at FVTPL on initial recognition if doing so eliminates, or significantly
reduces, an accounting mismatch.

Financial assets at FVTPL are carried in the statements of financial position at fair value with net changes in fair
value recognised in the statement of profit or loss.

(v) Financing and receivables
Financing and receivables consist of Murabahah, Tawarruq, Ijarah, Istisna’, Bai’ Al Dayn and Kafalah. These
contracts are recognised at amortised cost (except for Kafalah contracts), including direct and incremental
transaction costs using the effective profit method. These contracts are stated net of unearned income and
any amounts written off and/or impaired.
Definition of Shariah concept:

(a) Murabahah: Sale of an asset by the Bank to the customer at cost plus a markup in which the profit rate has
to be disclosed to the customer. The Sale Price is payable by the customer on deferred terms.

(b) Tawarruq: An arrangement that involves sale of commodity by the Bank to the customer in which the
Sale Price is payable on a deferred basis and subsequent sale of the commodity to a third party on a cash
basis to obtain cash.

(c) Ijarah: A lease contract to transfer the usufruct (benefits) of a particular property of the Bank to the
customer in exchange for a rental payment for a specified period.

(d) Istisna’: An agreement to sell to the customer a non-existent asset that is to be manufactured or built
according to the agreed specifications and delivered on a specified future date at a predetermined selling
price.

(e) Bai’ Al Dayn: Sale of debt in which the customer sells his payable right to the Bank at discount price or at
cost price on the spot payment basis.
(f) Kafalah: Conjoining the guarantor’s liability to the guaranteed party’s liability such that the obligation of
the guaranteed party is established as a joint liability of the guarantor and the guaranteed party.