Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2013
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year, are described below:
The group based its assumptions and estimation parameters available when the consolidated financial statements were
prepared. Existing circumstances and assumptions about future developments however may change due to market changes
or circumstances arising beyond the content of the Group. Such changes are reflected in the assumptions when they occur.
Estimation of net realisable value for property held for trading
Property held for trading is stated at the lower of cost and net realisable value (NRV). NRV for completed property held for
trading is assessed with reference to market conditions and prices existing at the reporting date and is determined by the
Group in the light of recent market transactions.
NRV in respect of property held for trading under construction is assessed with reference to market prices at the reporting
date for similar completed property, less estimated costs to complete construction and less an estimate of the time value
of money to the date of completion.
Valuation of investment properties
Fair value of investment properties have been assessed by an independent real estate appraiser. Two main methods were
used to determine the fair value of property interests in investment properties; (a) formula based discounted cash flow
analysis and (b) comparative analysis as follows:
(a)
Formula based discounted cash flow, is based on a series of projected free cash flows supported by the terms of
any existing lease and other contracts and discounted at a rate that reflects the risk of the asset.
(b)
Comparative analysis is based on the assessment made by an independent real estate appraiser using values
of actual deals transacted recently by other parties for properties in a similar location and condition, and based on
the knowledge and experience of the real estate appraiser.
The significant methods and assumptions used by valuers in estimating fair value of investment property are stated in note
8 and 29.
Valuation of unquoted equity investments
Valuation of unquoted equity investments is normally based on one of the following:
• Recent arm’s length market transactions;
• Current fair value of another instrument that is substantially the same;
• The expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics;
or
• Other valuation models.
The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation.
Where this estimation cannot be reliably determined these investments are carried at cost less impairment.
Impairment of trade accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer
probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are
not individually significant, but which are past due, are assessed collectively and a provision applied according to the
length of time past due, based on historical recovery rates. Any difference between the actual amounts collected in future
periods and the amounts expected will be recognised in the consolidated statement of income.
Impairment of goodwill
The Group tests whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use
of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an
estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order
to calculate the present value of those cash flows.
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