Investor Presentaiton
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
7
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Income Taxes and Deferred Taxation
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the balance sheet date in the countries where the Bank and its subsidiaries operate and generate
taxable income. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be settled with the tax authorities.
Deferred tax is accounted for using the asset and liability method. Deferred tax assets and liabilities are
recognised for the full tax consequences of all temporary differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax bases. Recognition of deferred
tax assets are, however, restricted to the extent that it is probable that sufficient taxable profits will be
available against which the deductible temporary differences can be utilised. Deferred tax assets and
liabilities are measured using tax rates that are expected to apply to the period in which the asset is
expected to be realised or the liability is expected to be settled.
Deferred tax assets are reviewed periodically to reduce the carrying amount by the extent to which it is
no longer probable that sufficient taxable profits will be available to utilise the differences.
Deferred tax assets and liabilities are off set when there is a legally enforceable right to set off current
tax asset against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Group intends to settle its current tax assets and current tax liabilities on a net basis.
(j) Financial Assets and Financial Liabilities
(i) Classification of Financial Assets and Financial Liabilities
On initial recognition, a financial asset is classified as measured: at amortised cost, FVOCI or FVTPL.
A financial asset is measured at amortised cost if it meets both the following conditions and is not
designated as at FVTPL:
The asset is held within a business model whose objective is to hold assets to collect contractual
cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not
designated as at FVTPL:
.
The asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
NOTES TO THE GROUP CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
7
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Financial Assets and Financial Liabilities (continued)
(i) Classification of Financial Assets and Financial Liabilities (continued)
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably
elect to present subsequent changes in fair value in other comprehensive income (OCI). This election
is made on an investment-by-investment basis.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Group may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if
doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
(ii) Recognition and Initial Measurement
The Group initially recognises loans and receivables, Islamic financing receivables, deposits,
debts and sukuks issued on the date on which they are originated or acquired. All other financial
instruments (including regular-way purchases and sales of financial assets) are recognised on the
trade date, which is the date on which the Group becomes a party to the contractual provisions of
the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at FVTPL,
transaction costs that are directly attributable to its acquisition or issue.
Business Model Assessment:
The Group makes an assessment of the objective of a business model in which an asset is held at a
portfolio level as this best reflects the way the business is managed and information is provided to
management. The information considered includes:
•
The stated policies and objectives for the portfolio and the operation of those policies in practice.
In particular, whether management's strategy focuses on earning contractual interest revenue,
maintaining a particular interest rate profile, matching the duration of the financial assets to the
duration of the liabilities that are funding those assets or realising cash flows through the sale of
the assets;
How the performance of the portfolio is evaluated and reported to the Group's management;
The risks that affect the performance of the business model (and the financial assets held within
that business model) and how those risks are managed;
How managers of the business are compensated - e.g. whether compensation is based on the
fair value of the assets managed or the contractual cash flows collected; and
The frequency, volume and timing of sales in prior periods, the reasons for such sales and its
expectations about the future sales activity. However, information about sales activity is not
considered in isolation, but as part of an overall assessment of how the Group's stated objective
for managing the financial assets is achieved and how cash flows are realised.
Financial assets that are held for trading or managed and whose performance is evaluated on a fair
value basis are measured at FVTPL because they are neither held to collect contractual cash flows
nor held both to collect contractual cash flows and to sell financial assets.
31
EMIRATES NBD BANK PJSC - GROUP CONSOLIDATED FINANCIAL STATEMENTS - FOR THE YEAR ENDED 31 DECEMBER 2021
32
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