Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C. AND ITS SUBSIDIARIES
31 December 2012
Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event and it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to
reflect the current best estimate. Where the Group expects some or all of a provision to be reimbursed, for example, under
an issuance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in the consolidated statement of income net of any reimbursement.
Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Goup and the revenue can
be reliably measured, regardless of when the payment is being made. Revenue is measured at fair value of the consideration
received or receivable. The following specific recognition criteria must also be met before revenue is recognized:
Sale of completed property
A property is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally
on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant
conditions are satisfied.
Sales of property under development
Where property is under development and agreement has been reached to sell such property when construction is
complete, the directors consider whether the contract comprises:
i) A contract to construct a property or, ii) a contract for the sale of a completed property.
• Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage of
completion method as construction progresses. Where the contract is judged to be for the sale of a completed property,
revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to
the buyer. If, however, the legal terms of the contract are such that the construction represents the continuous transfer
of work in progress to the purchaser, the percentage-of-completion method of revenue recognition is applied and
revenue is recognised as work progresses. Continuous transfer of work in progress is applied when:
• The buyer controls the work in progress, typically when the land on which the development takes place is owned by
the final customer;
• and all significant risks and rewards of ownership of the work in progress in its present state are transferred to the buyer
as construction progresses, typically, when buyer cannot put the incomplete property back to the Group.
In such situations, the percentage of work completed is measured based on the costs incurred up until the end of the
reporting period as a proportion of total costs expected to be incurred.
Real estate rental income
Rental income receivable from operating leases except for contingent rental income which is recognised when it arises.
Initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease
term on the same basis as the lease income.
Dividends income
Dividend income is recognized when the right to receive payment is established, which is generally when shareholders
approve the dividend.
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