Page 31 - FS-Q2-2023-EN

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)

Contingent liabilities recognized in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date.
At the end of subsequent reporting periods, such contingent liabilities are measured at the higher of the amount
that would be recognized in accordance with IAS 37 and the amount recognized initially less cumulative amount
of income recognized in accordance with the principles of IFRS 15.

Onerous contracts
An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid
because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected
to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the
contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil
it.

If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured
as a provision. However, before a separate provision for an onerous contract is established, the Group recognizes
any impairment loss that has occurred on assets dedicated to that contract.

Provisions are not recognized for future operating losses.

u) Borrowing costs:
Borrowing costs consist of interest, finance cost and other costs that an entity incurs in connection with the
borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or
sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended
use or sale. Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

All other borrowing costs are expensed in consolidated statement of profit or loss in the period in which they are
incurred.

v) Leases:

Group as a lessor
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified
as operating leases. All other leases are classified as finance 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.

(i) Finance lease:
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s
net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

(ii) Operating lease:
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount
of the leased asset and recognized on a straight-line basis over the lease term.

Group as a lessee
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognizes
a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is the
lessee.

28