Bahri Annual Report-2011

Financial Statements Report 2011

Notes To The Consolidated Financial Statements For the year ended December 31, 2011 (In Thousands Saudi Riyals)


a) Accounting convention The accompanying consolidated financial statements are prepared in accordance with the accounting standards issued by the Saudi Organization for Certified Public Accountants (SOCPA) and under the historical cost convention, except for the investment in financial instruments and derivative financial instruments at fair value. The Company applies the accrual basis of accounting in recognizing revenues and expenses. b) Period of financial statements According to the by-laws of the Company, the fiscal year of the Company starts on the 1st of January and ends on December 31st of each Gregorian year. c) Basis of consolidation For the purpose of consolidating accounts, inter-company transactions and balances are eliminated in the consolidation process. Minority interest relating to third parties (other partners in the subsidiaries) is also accounted for in the subsidiaries’ net assets and income. d) Use of estimates The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reported period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates. e) Accounting for finance lease The present value of lease payments for assets sold under finance lease together with unguaranteed residual value at end of the lease is recognized as a receivable net of unearned finance income. Lease income is recognized over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

of a permanent decline in value, unrealized losses are charged to the consolidated income statement. 3- Investments in financial instruments: Investments in financial instruments represent investments in mutual funds units and investment portfolios managed by local banks, which were classified into three categories as follows:

The Company accounts for the assets acquired under a lease arrangement as a finance lease when the lease transfers to the lessee (the “Company”) substantially all the benefits and risks incident to the ownership of leased assets. f) Cash and cash equivalents For the purpose of preparing the consolidated statement of cash flows, cash and cash equivalents represent cash in hand, bank balances, investment in Murabaha and short-term deposits, and investments that can be liquidated to cash and maturing within three months or less from the date of acquisition which is available to the Company and its subsidiaries without any restrictions. Investment in affiliates in which the Company has significant influence, but no control, over the investee’s financial and operational policies, or in which the Company owns equity interest ranging between 20% and 50% are accounted for using the equity method. The Company’s investment in an associate includes goodwill identified on acquisition, being the excess of the purchase price over the value of purchased net assets, net of any accumulated amortization and impairment losses, if any. Due to the timing difference between Petredec Ltd. fiscal year and the Company’s fiscal year, the Company’s share in Petredec Ltd. net profits or losses is recognized in the Company’s books according to the latest financial statements prepared by Petredec Ltd. The gap period between the latest financial statements prepared by Petredec Ltd. and the date of the Company’s consolidated financial statements is two months. Investments in other companies which are not listed in market and the Company own equity interest of less than 20% is accounted for using the cost method. 2- Investments in government bonds: Investments in government bonds are held to maturity and are stated at cost adjusted by premium or discount. In case g) Investments 1- Investments in affiliates and others:

Investments held to maturity

Certain investments in financial instruments are classified as held to maturity based on the Company’s management intention. These investments are stated at cost adjusted by premium or discount, if any.

Investments held for trading

Certain investments in financial instruments are classified as held for trading based on the Company’s management intention. These investments are stated at fair value. Unrealized gains or losses are recorded in the consolidated income statement.

Investments available for sale

Certain investments are classified as available for sale when the conditions of classification as investments held to maturity or for trading are not met. The available for sale investments are stated at fair value. Unrealized gains or losses are recognized under shareholders’ equity, whereas the realized gains or losses from the redemptions of units are recognized in the consolidated income statement in the period in which these units are redeemed. If there is a permanent decline in the value of these investments or an objective evidence for impairment, the unrealized loss is transferred to the consolidated income statement. If the investment available for sale is within 12 months from the ending date of the financial statements, it is reported under current assets otherwise under non-current assets.

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