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ANNUAL REPORT
2015
Notes to The Consolidated Financial Statement
AL MAZAYA HOLDING COMPANY K.S.C.P. AND ITS SUBSIDIARIES
31 December 2015
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available.
If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each
of the Group’s cash-generating units to which goodwill allocated. These budgets and forecast cash flow calculations generally
cover a period of two to five years.
Properties held for trading
Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital
operation, is held as properties held for trading and is measured at lower of cost and net realisable value.
Cost includes freehold and leasehold rights for land, amount paid to contractors for construction, borrowing costs, planning and
design costs, cost of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other
related costs.
Net realizable value is the estimated selling price in the ordinary course of business, based on market prices at the reporting date
and discounted for the time value of money of material, less costs of completion and estimated cost of sale.
The cost of properties held for trading recognised in consolidated statement of income on disposal is determined with reference
to the specific cost incurred on the property sold and an allocation of any non-specific costs based on the relative size of the
property sold.
Employees’ end of service benefits
The Group provides end of service benefits to its employees. Provision is made for amounts payable to employees under the
Kuwaiti Labour Law, employee contracts and applicable labour laws in the countries where the subsidiaries operate. The expected
costs of these benefits are accrued over the period of employment.
Also, with respect to its national employees, the Parent Company makes contributions to Public Institution for Social Security
calculated as a percentage of the employees’ salaries, which are expensed when due.
Share based payment transactions
The Group operates an equity-based payment plan to its employees. Under the terms of the plan, shares are granted to permanent
employees. The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which
they are granted. The fair value of the shares is measured based on market prices available taking into account the terms and
conditions upon which those shares were granted.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and / or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The consolidated statement of income expense or credit for a period represents the movement
in cumulative expense recognised as at the beginning and end of that period.
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