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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)

- Allowance for expected credit losses:
The extent of allowance for expected credit losses involves estimation process. Allowance for expected
credit losses is based on a forward looking ECL approach as explained in Note (5). Bad debts are written
off when identified. The ECL allowance and write-down of accounts receivable are subject to management
approval.

- Valuation of investment properties
The Group carries its investment properties at fair value, with change in fair values being recognized in
consolidated statement of profit or loss. The main methods used to determine the fair value of the
investment properties are:

a) Income approach, where the property’s value is estimated based on the its income produced and is
computed by dividing the property’s net operating income by the expected rate of return on the
property in the market, known as ‘Capitalization Rate’.

b) Comparative analysis 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 independent
real estate appraiser.

c) 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.

- Valuation of properties held for trading:
Properties held for trading is stated at the lower of cost and net realizable value (NRV). NRV for completed
inventory property is assessed by reference to market conditions and prices existing at the reporting date
and is determined by the Group, based on comparable transactions identified by the Group for properties
in the same geographical market serving the same real estate segment. NRV in respect of Properties
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, estimated costs to sell the
property, and an estimate of the time value of money to the date of completion.

- Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs
to sell calculation is based on available data from binding sales transactions in an arm’s length transaction
of similar assets or observable market prices less incremental costs for disposing of the asset. The value
in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget
for the next five years and do not include restructuring activities that the Group is not yet committed to or
significant future investments that will enhance the asset’s performance of the cash generating unit being
tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash inflows and the growth rate used for extrapolation purposes.

- Employee stock option plan
The Group measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. Estimating fair value for stock option plan
transactions requires determining the most appropriate valuation model, which is dependent on the terms
and conditions of the grant.

- Taxes
The Group recognizes a liability for the anticipated taxes levied in the jurisdictions of its activity based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different
from the amounts that were initially recorded, such differences will impact the income tax and deferred
tax provisions in the period in which such determination is made. Any changes in the estimates and
assumptions may have an impact on the carrying values of the deferred taxes.

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