136
137
Annual Report 2018
Notes to the consolidated financial statements – continued For the year ended 31 December 2018
Notes to the consolidated financial statements – continued For the year ended 31 December 2018
28. FINANCIAL INSTRUMENTS
28. FINANCIAL INSTRUMENTS (continued)
28.1. Financial Assets
28.3 Fair values of financial instruments (continued)
The fair value hierarchy is as follows:
Note
2018
2017
2018 Qouted prices in the active market (Level 1)
Derivatives not designated as hedging instruments: CAP commission options AFS financial assets at fair value through OCI Unquoted equity shares
Significant observable inputs (Level 2)
Significant Unobservable inputs (Level 3)
28-3
69,207
67,572
Total
FVOCI – equity instrument: Unquoted equity shares *
11
7,334
10,711 78,283
-
-
7,334
7,334
Total instruments at fair value financial Financial assets at amortized cost Trade receivables, net
76,541
Derivatives measured at fair value through statement of income CAP commission option -
69,207
-
69,207
13 11
1,883,716
1,474,988
2017 Qouted prices in the active market (Level 1)
Other investments
83
83
Significant observable inputs (Level 2)
Significant Unobservable inputs (Level 3)
Murabaha and short-term deposits Total financial assets at amortized cost
15-1
364,293
692,921
Total
2,248,092 2,324,633
2,167,992 2,246,275
FVOCI – equity instrument: Unquoted equity shares *
Total financial assets
-
-
10,711
10,711
Derivatives measured at fair value through statement of income CAP commission option -
67,572
-
67,572
28.2 Financial Liabilities
*Based on provisions of IFRS 9, carrying value has been used as an approximation to the fair value Management believes that the fair value of other assets and liabilities approximate to their carrying values.
Note
2018
2017
Financial liabilities at amortized cost Sukuk and Short/ long Term loans
28.4 Financial Risk Management
18 20
10,196,663
10,255,874
The Group’s activities expose it to a variety of financial risks, including market risk (comprised of currency risk, fair value risk, cash flows for commission rate, credit risk and liquidity risk). The Group’s risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The financial instruments in the consolidated statement of financial position are comprised primarily of cash and cash equivalent, investments, trade receivables, financing, trade payables, other accrued expenses, derivative financial instruments and loans and sukuk. Financial assets and liabilities are netted together and shown as a net amount, if the Group has the legal right to do so and the intention is to either settle on the net or recognize the assets and liabilities simultaneously. Higher management monitors the financial risk management department. The most important types of risk are summarized below: Credit risk is the risk that one party will fail to discharge an obligation and cause the other party to incur a financial loss. The Group seeks to manage its credit risk by dealing with reputable banks and with respect to customers by setting credit limits for individual customers, monitoring outstanding receivables and ensuring close follow-ups. The group uses an allowance matrix to measure the ECLs of trade receivables from governments and commercial. Loss rates are calculated using a roll rate method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different segments based on the following common credit risk characteristics- governments and commercial. 28.4.1. Credit risk
Trade and other payables and other liabilities Total financial liabilities at amortized cost
873,340
694,947
11,070,003 11,070,003
10,950,821 10,950,821
Total financial liabilities
28.3 Fair values of financial instruments
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 in an arm’s length transaction. Financial instruments comprised of financial assets and financial liabilities. The Group has derivative financial instruments consisting of commission rate options agreements to hedge against fluctuations in commission rates. The loss from revaluation of these agreements is recognized in the consolidated statement of income (note 24).
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