BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.23 Recognition of income Financing income – Banking business Financing income is recognised in the profit or loss using the effective profit rate method. The effective profit rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial instruments. When calculating the effective profit rate, the Group has considered all contractual terms of the financial instruments but does not consider future credit losses. The calculation includes all fees and transaction costs integral to the effective profit rate, as well as premium or discounts. Income from a sale-based contract is recognised on effective profit rate basis over the period of the contract based on the principal amounts outstanding whereas income from Ijarah (lease-based contract) is recognised on effective profit rate basis over the lease term. Once a financial asset or a group of financial assets has been written down as a result of an impairment loss, income is recognised using the profit rate used to discount the future cash flows for the purpose of measuring the impairment loss. Financing income – Takaful business Income from financing are recognised on an accrual basis and on a time proportion basis that takes into account the effective yield of the asset. Contribution income – General Takaful Fund Contributions are recognised in a financial period in respect of risks assumed during that particular financial period based on the inception date. Inward treaty retakaful contributions are recognised on the basis of periodic advices received from ceding takaful operators. Contribution income – Family Takaful Fund Contribution is recognised as soon as the amount of the contribution can be reliably measured. Initial contribution is recognised from inception date and subsequent contribution is recognised when it is due. At the end of each financial period, all due contributions are accounted for to the extent that they can be reliably measured. Wakalah fees Wakalah fees are recognised as income or expenses by the respective funds based on a predetermined percentage of gross contributions upon inception of certificates. Wakalah surplus/(deficit) is arrived at after deducting commission and management expenses against the Wakalah fees charged. Fee and other income recognition Financing arrangement, management and participation fees, underwriting commissions, brokerage fees and wakalah performance incentive fees are recognised as income based on contractual arrangements. Fees from advisory and corporate finance activities are recognised net of service taxes and discounts on completion of each stage of the assignment. Dividend income from subsidiaries and associates and other investments are recognised when the Group’s rights to receive payment is established. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 207 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary