BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.18 Product classification (continued) Takaful contracts in the current portfolio are classified as being without discretionary participation features (“DPF”) as it does not satisfy the criteria for DPF. DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are: • likely to be a significant portion of the total contractual benefits; • whose amount or timing is contractually at the discretion of the issuer; and • that are contractually based on the: – performance of a specified pool of contracts or a specified type of contract; – realised and/or unrealised investment returns on a specified pool of assets held by the issuer; or – the profit or loss of the company, fund or other entity that issues the contract. 2.19 Retakaful The fund cedes takaful risk in the normal course of business. Retakaful assets represent balances receivable and recoverable from retakaful operators. Amounts recoverable from retakaful operators are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the retakaful’s certificates and are in accordance with the related retakaful contracts. Ceded retakaful arrangements do not relieve the fund from its obligations to participants. Contributions and claims are presented on a gross basis for both ceded and assumed retakaful. Retakaful assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the retakaful asset that the Family and General Takaful Fund may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Family and General Takaful Fund will receive from the retakaful operator. The impairment loss is recorded in profit or loss. Gains or losses on buying retakaful, if any, are recognised in profit or loss immediately at the date of purchase and are not amortised. The fund also assumes retakaful risk in the normal course of business for Family Takaful and General Takaful contracts when applicable. Contributions and claims on assumed retakaful are recognised as revenue or expenses in the same manner as they would be if the retakaful were considered direct business, taking into account the product classification of the retakaful business. Retakaful liabilities represent balances due to retakaful operators. Amounts payable are estimated in a manner consistent with the related retakaful contract. Retakaful assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party. Retakaful contracts that do not transfer significant takaful risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified contributions or fees to be retained by the retakaful operators. Investment income on these contracts is accounted for using the effective yield method when accrued. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 205 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary