Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C. AND ITS SUBSIDIARIES
31 December 2012
Management fees
Management fees earned for the provision of services over a period of time are accrued for over that period.
Interest income
Interest income is recognised as the interest accrues using the effective yield method.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
Group as a lessor
Leases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same basis as rental income.
Group as a lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating
leases. Operating lease payments are recognised as an expense in the consolidated statement of income on a straight-line
basis over the lease term, except for contingent rental payments which are expensed when they arise.
A property interest that is held by the Group under an operating lease may be classified and accounted for as an investment
property when the property otherwise meets the definition of an investment property, evaluated property by property, and
based on management’s intention. The initial cost of a property interest held under a lease and classified as an investment
property is determined at the lower of the fair value of the property and the present value of the minimum lease payments.
An equivalent amount is recognised as a liability.
Borrowing costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised, if they are directly attributable to a
project, as part of projects under construction, over the period of the construction until the project concerned is completed
and becomes ready for its intended use, on the basis of actual borrowings and actual expenditure incurred on the project.
Capitalisation of borrowing costs ceases when substantially all activities necessary to prepare the project for its intended
use are complete. Borrowing costs capitalised is calculated using the Group’s weighted average cost of borrowings.
Contingencies
Contingent liabilities are not recognised in the consolidated financial statements, but are disclosed unless the possibility
of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognised in the consolidated financial statements, but are disclosed when an inflow of
economic benefit is probable.
Taxation
Kuwait Foundation for the Advancement of Sciences (KFAS)
The Parent Company calculates the contribution to KFAS at 1% in accordance with the modified calculation based on
the Foundation’s Board of Directors resolution, which states that the income from associates and subsidiaries, Board of
Directors’ remuneration, transfer to statutory reserve should be excluded from profit for the year when determining the
contribution.
35
