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AL-MAZAYA HOLDING COMPANY - K.S.C. (PUBLIC)
AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(All amounts are in Kuwaiti Dinar)

Changes in fair value, gain on disposal, interest income and dividends are recorded in
consolidated statement of profit or loss according to the terms of the contract, or when the right
to payment has been established.

d – 1/2)Impairment of financial assets
The Group recognizes an allowance for expected credit losses (ECL) for all debt instruments not
held at fair value through profit or loss.

ECLs are based on the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive. The shortfall is then discounted
at an approximation to the asset’s original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral
to the contractual terms.

For trade and other receivables, the Group has applied the standard’s simplified approach and
has calculated ECLs based on lifetime expected credit losses. Accordingly, the Group does not
track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision matrix that is based on the Group’s
historical credit loss experience, adjusted for forward-looking factors specific to the customers
and the economic environment. Exposures were segmented based on common credit
characteristics such as credit risk grade, geographic region and industry, delinquency status and
age of relationship, where applicable.

In applying this forward-looking approach, the Group applies a three stage assessment to
measuring ECL as follows:
• Stage 1 - financial instruments that have not deteriorated significantly in credit quality since
initial recognition or that have low credit risk.
• Stage 2 (not credit impaired) - financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk is not low.
• Stage 3 (credit impaired) - financial assets that have objective evidence of impairment at the
reporting date and assessed as credit impaired when one or more events have a detrimental
impact on the estimated future cash flows have occurred.

In assessing whether the credit quality on a financial instrument has deteriorated significantly
since initial recognition, the Group compares the risk of a default occurring on the financial
instrument at the reporting date with the risk of a default occurring on the financial instrument at
the date of initial recognition. In making this assessment, the Group considers both quantitative
and qualitative information that is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or effort. Forward-looking
information considered includes the future prospects of the industries in which the Group's debtors
operate, obtained from economic expert reports, financial analysts, governmental bodies, relevant
think-tanks and other similar organizations, as well as consideration of various external sources
of actual and forecast economic information that relate to the Group's core operations.

‘12-months expected credit losses’ are recognized for Stage 1 while ‘lifetime expected credit
losses’ are recognized for Stage 2 and 3. Lifetime ECL represents the expected credit losses that
will result from all possible default events over the expected life of a financial instrument. 12-
months ECL represents the portion of lifetime ECL that is expected to result from default events
on a financial instrument that are possible within 12 months after the reporting date.

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