arabian waterproofing ind ustries company and its subsidiaries … financial 2018 en.pdf · 2018....

Arabian Waterproofing Ind ustries Companyand its Subsidiaries(A Saudi Joint Stock Company)

CONSOLIDATED FINANCIAL STATEMENTSAND INDEPENDENT AUDITOR’S REPORT

FOR THE YEAR ENDED 31 MARCH 2018

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 31 March 2018

Pages

Independent auditor’s report 1

Consolidated statement of financial position 4

Consolidated statement of profit or loss 5

Consolidated statement of other comprehensive income 6

Consolidated statement of changes in equity 7

Consolidated statement of cash flows 8

Notes to the consolidated financial statements 9 - 46

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 March 2018

The attached notes from 1 to 30 form an integral part of these consolidated financial statements.4

Notes

31 March2018SR

31 March2017

(see Note 5)SR

1 April2016

(see Note 5)SR

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment 6 81,499,242 84,709,948 90,012,845Investment properties 7 33,941,479 34,623,970 33,283,877Available-for-sale investment 8 29,536 23,593 24,838

───────── ───────── ─────────TOTAL NON-CURRENT ASSETS 115,470,257 119,357,511 123,321,560

───────── ───────── ─────────CURRENT ASSETSPrepayments and other receivables 9 13,083,185 18,144,079 17,476,097Inventories 10 59,745,463 56,604,734 57,803,540Accounts receivable 11 130,581,514 151,422,832 137,369,818Cash and cash equivalents 12 129,699,027 137,040,864 129,664,059

───────── ───────── ─────────TOTAL CURRENT ASSETS 333,109,189 363,212,509 342,313,514

───────── ───────── ─────────TOTAL ASSETS 448,579,446 482,570,020 465,635,074

═════════ ═════════ ═════════EQUITY AND LIABILITIES

EQUITYShare capital 13 272,999,780 272,999,780 272,999,780Statutory reserve 14 19,502,613 16,093,517 8,774,283Contractual reserve 15 43,111,562 75,192,437 67,873,203Available-for-sale fair value reserve 6,710 767 2,012Foreign currency translation reserve 63,283 (294,818) (122,924)Retained earnings 57,120,137 55,208,201 41,559,165

───────── ───────── ─────────Equity attributable to equity holders of the

Parent 392,804,085 419,199,884 391,085,519Non-controlling interests 17 3,188,089 4,287,591 4,540,641

───────── ───────── ─────────TOTAL EQUITY 395,992,174 423,487,475 395,626,160

───────── ───────── ─────────NON-CURRENT LIABILITYEmployees’ end-of-service benefits 18 13,526,665 10,585,815 8,604,228

───────── ───────── ─────────CURRENT LIABILITIESZakat payable 20 9,493,424 9,632,917 9,486,390Accrued expenses and other liabilities 21 16,944,085 30,535,831 40,913,456Accounts payable 22 12,623,098 8,327,982 11,004,840

───────── ───────── ─────────TOTAL CURRENT LIABILITIES 39,060,607 48,496,730 61,404,686

───────── ───────── ─────────TOTAL LIABILITIES 52,587,272 59,082,545 70,008,914

───────── ───────── ─────────TOTAL EQUITY AND LIABILITIES 448,579,446 482,570,020 465,635,074

═════════ ═════════ ═════════

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED STATEMENT OF PROFIT OR LOSSFor the year ended 31 March 2018


Notes2018SR

2017(see Note 5)

SR

Sales 266,962,759 341,026,472Cost of sales (185,360,991) (214,970,606)

───────── ─────────GROSS PROFIT 81,601,768 126,055,866

Selling and distribution expenses 23 (26,655,607) (27,000,707)General and administrative expenses 24 (20,706,209) (22,487,230)

───────── ─────────OPERATING PROFIT 34,239,952 76,567,929

Finance costs 18 (781,457) (1,025,077)Other income, net 25 8,716,046 4,871,238

───────── ─────────PROFIT BEFORE ZAKAT 42,174,541 80,414,090

Zakat 20 (9,190,478) (9,376,815)───────── ─────────

NET PROFIT FOR THE YEAR 32,984,063 71,037,275═════════ ═════════

Attributable to:Equity holders of the Parent 34,090,963 71,254,401Non-controlling interests (1,106,900) (217,126)

───────── ─────────32,984,063 71,037,275

═════════ ═════════

Earnings per share – basic and diluted 26 1.25 2.61═════════ ═════════

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOMEFor the year ended 31 March 2018


Notes2018SR

2017(see Note 5)

SR

NET PROFIT FOR THE YEAR 32,984,063 71,037,275

OTHER COMPREHENSIVE INCOMETo be reclassified to profit or loss in subsequent periods:

Fair value gain (loss) on available-for-sale investments 8 5,943 (1,245)Foreign currency translation reserve 365,499 (294,232)

───────── ─────────Other comprehensive income (loss) to be reclassified to profit

or loss in subsequent periods 371,442 (295,477)

Not to be reclassified to profit or loss in subsequent periods:Re-measurement (loss) gain on end-of-service benefits 18 (805,534) 799,481

───────── ─────────OTHER COMPREHENSIVE INCOME (434,092) 504,004

───────── ─────────TOTAL COMPREHENSIVE INCOME 32,549,971 71,541,279

═════════ ═════════

Attributable to:Equity holders of the Parent 33,649,473 71,880,743Non-controlling interests (1,099,502) (339,464)

───────── ─────────32,549,971 71,541,279

═════════ ═════════

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 March 2018


Attributable to equity holders of the Parent

Non-controlling

interestsTotal

equity

─────────────────────────────────────────────────────────────────────────────────────

Sharecapital

Statutoryreserve

Contractualreserve

Available-for-sale

fair valuereserve

Foreigncurrency

translationreserve

Retainedearnings Total

SR SR SR SR SR SR SR SR SR

As at 1 April 2017 272,999,780 16,093,517 75,192,437 767 (294,818) 55,208,201 419,199,884 4,287,591 423,487,475Net profit (loss) for the year - - - - - 34,090,963 34,090,963 (1,106,900) 32,984,063Other comprehensive income for the year - - - 5,943 358,101 (805,534) (441,490) 7,398 (434,092)

───────── ──────── ──────── ──────── ──────── ───────── ───────── ───────── ─────────Total comprehensive income - - - 5,943 358,101 33,285,429 33,649,473 (1,099,502) 32,549,971Transfer to statutory reserve - 3,409,096 - - - (3,409,096) - - -Transfer to contractual reserve - - 3,409,096 - - (3,409,096) - - -Dividends (see notes 15 and 16) - - (35,489,971) - - (24,555,301) (60,045,272) - (60,045,272)

───────── ──────── ──────── ──────── ──────── ───────── ───────── ───────── ─────────As at 31 March 2018 272,999,780 19,502,613 43,111,562 6,710 63,283 57,120,137 392,804,085 3,188,089 395,992,174

═════════ ════════ ════════ ════════ ════════ ═════════ ═════════ ═════════ ═════════

As at 1 April 2016 272,999,780 8,774,283 67,873,203 2,012 (122,924) 41,559,165 391,085,519 4,540,641 395,626,160Net profit (loss) for the year - - - - - 71,254,401 71,254,401 (217,126) 71,037,275Other comprehensive income (loss) for the year - - - (1,245) (171,894) 799,481 626,342 (122,338) 504,004

───────── ──────── ──────── ──────── ──────── ───────── ───────── ──────── ─────────Total comprehensive income - - - (1,245) (171,894) 72,053,882 71,880,743 (339,464) 71,541,279Transfer to statutory reserve - 7,319,234 - - - (7,319,234) - - -Transfer to contractual reserve - - 7,319,234 - - (7,319,234) - - -Losses of minority absorbed - - - - - (86,414) (86,414) 86,414 -Dividends (see note 16) - - - - - (43,679,964) (43,679,964) - (43,679,964)

───────── ──────── ──────── ──────── ──────── ───────── ───────── ──────── ─────────As at 31 March 2017 272,999,780 16,093,517 75,192,437 767 (294,818) 55,208,201 419,199,884 4,287,591 423,487,475

═════════ ════════ ════════ ════════ ════════ ═════════ ═════════ ════════ ═════════

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 March 2018


Notes2018SR

2017SR

OPERATING ACTIVITIESIncome before zakat 42,174,541 80,414,090Adjustments to reconcile income before zakat to net cash flows

from operating activities:Depreciation on property, plant and equipment 6 8,106,919 9,341,722Provision for doubtful debts 11 4,418,187 2,456,038Provision for employees’ end-of-service benefits 18 2,742,458 3,005,289Provision for (reversal of provision for ) slow-moving

inventories, net 10 2,315,769 (1,135,734)Depreciation on investment property 7 683,847 547,572Gain on disposal of property, plant and equipment 25 (13,194) (199,668)

───────── ─────────60,428,527 94,429,309

Working capital adjustments:Prepayments and other receivables 1,204,570 (667,982)Inventories (5,456,498) 2,334,540Accounts receivable 16,423,131 (16,509,052)Accrued expenses and other current liabilities (13,591,746) (10,377,625)Accounts payable 4,295,116 (2,676,858)

───────── ─────────Net cash from operations 63,303,100 66,532,332Zakat paid 20 (9,329,971) (9,230,288)Employees’ end-of-service benefits paid (622,161) (218,943)

───────── ─────────Net cash flows from operating activities 53,350,968 57,083,101

───────── ─────────INVESTING ACTIVITIESPurchase of property, plant and equipment 6 (5,500,856) (4,086,373)Proceeds from sale of property, plant and equipment 620,859 252,533Additions to investment properties 7 - (1,887,665)

───────── ─────────Net cash flows used in investing activities (4,879,997) (5,721,505)

───────── ─────────FINANCING ACTIVITYDividends paid 16 (56,188,948) (43,679,964)

───────── ─────────Cash used in financing activity (56,188,948) (43,679,964)

───────── ─────────NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS DURING THE YEAR (7,717,977) 7,681,632Cash and cash equivalents at the beginning of the year 137,040,864 129,664,059Effect of exchange rate changes in cash and cash equivalents 376,140 (304,827)

───────── ─────────CASH AND CASH EQUIVALENTS AT THE END OF THE

YEAR 12 129,699,027 137,040,864═════════ ═════════

Significant non-cash transactions:IPO-related receivable from shareholders settled against dividend 16 3,856,324 -Re-measurement gain on end-of-service benefits 18 (611,274) (799,481)Change in fair value of available-for-sale investment 8 5,943 (1,245)

═════════ ═════════

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAt 31 March 2018

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1 CORPORATE INFORMATION

Arabian Waterproofing Industries Company (the “Company”) is a Saudi joint stock company, which wasconverted from a limited liability company on 15 Safar 1426H (corresponding to 25 March 2005). The Companycommenced its operation on 14 Sha’aban 1401H (corresponding to 17 June 1981) under the CommercialRegistration No. 1010039827. The Company has branches in Riyadh (Transport Branch), Jeddah and Dammamunder Commercial Registration No. 1010431578, 4030045288 and 2050020686, respectively.

The Company and its subsidiaries are collectively referred to as the “Group”. The Group is engaged in themanufacturing of waterproofing products and heat insulation material and purchasing, processing and selling ofstone and marble.

Effective ownership as at

SubsidiaryCountry of

incorporation Principal activities31 March

201831 March

20171 April2016

Awazel InternationalCompany, LLC1

United ArabEmirates

Building and constructionmaterials trading

99% 99% 99%

Awazel KuwaitCompany forBuilding Materials1

Kuwait Building materialsproduction

99% 99% 99%

Awazel QatarInternationalCompany1

Qatar Production and sale ofconstruction products

95% 95% 95%

Awazel IndonesiaInternationalCompany2

Indonesia Building and constructionmaterials trading

- 95% 95%

Advanced MembraneCompany forIndustry

Kingdom ofSaudi Arabia

Production ofwaterproofing and

temperature resistantmaterials out of various

plastics.

90% 90% 90%

Al Sultan ContractingTrading CompanyLimited3


Building and maintenanceof pipes, residentialproperties, airports,railways and sewage

80% 80% 80%

Al Takamal Companyfor Marble Limited3


Production andpreparation of natural

rocks including but notlimited to marbles.

80% 80% 80%

1 Legally held by a shareholder of the Company for the benefit of the Company.

2 During prior year, Awazel Indonesia International Company has been liquidated. The assets, liabilities and results of operations of theIndonesian subsidiary of the Group are not material to the Group and therefore have not been disclosed separately.

3 In December 2017, the Board of Directors approved the acquisition of additional 10% shares in these subsidiaries from the non-controllinginterests. The share-purchase agreement is yet to be completed as at reporting date.

Arabian Waterproofing Industries Company and its Subsidiaries(A Saudi Joint Stock Company)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)At 31 March 2018

10

1 CORPORATE INFORMATION (continued)

On 10 Ramadan 1438H (corresponding to 5 June 2017), the Company made an in-principle decision to seek aninitial public offering (“IPO”). The Board of Directors of the Company approved the application to the relatedauthorities to obtain an approval on offering 30% of the Company’s shares to public by way of an IPO. TheCompany’s prospectus was submitted to and approved by the Capital Market Authority (“CMA”) for offering30% of the Company’s shares to public by way of an IPO.

However, subsequently on 4 Safar 1439H (corresponding to 24 October 2017), the Company requestedcancellation of the IPO approval and the CMA Board issued its resolution dated 5 Safar 1439H (correspondingto 25 October 2017) approving the Company’s request cancelling the IPO of the Company’s shares.

2 STATEMENT OF COMPLIANCE, BASIS OF PREPARATION AND CONSOLIDATION

These consolidated financial statements are the statutory financial statements of the Group for the year ended31 March 2018.

2.1 Statement of compliance

These consolidated financial statements of the Group have been prepared in accordance with InternationalFinancial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”),that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the SaudiOrganization for Certified Public Accountants (“SOCPA”) (collectively referred to as “IFRS as endorsed inKSA”).

For all periods up to and including the year ended 31 March 2017, the Group prepared its financial statementsin accordance with accounting standards generally accepted in the Kingdom of Saudi Arabia (“SOCPAaccounting standards”). These financial statements for the year ended 31 March 2018 are the first the Group hasprepared in accordance with IFRS as endorsed in KSA. Refer to Note 5 for information on how the Groupadopted IFRS as endorsed in KSA.

2.2 Basis of preparation

These consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale (“AFS”) financial assets that have been measured at fair value. The consolidated financial statements arepresented in Saudi Riyals (“SR”) which is the functional currency of the Company and all values are rounded tothe nearest Riyal, except when otherwise indicated.

2.3 Basis of consolidation

These consolidated financial statements comprise the assets, liabilities and the results of operations of the Group.Subsidiaries are entities that are controlled by the Group. Control is achieved when the Group is exposed, or hasrights, to variable returns from its involvement with the investee and has the ability to affect those returns throughits power over the investee.

Specifically, the Group controls an investee if and only if the Group has:· power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities

of the investee);· exposure, or rights, to variable returns from its involvement with the investee; and· the ability to use its power over the investee to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there arechanges to one or more of the three elements of control.


11

2 BASIS OF PREPARATION (continued)

2.3 Basis of consolidation (continued)

When the Group has less than a majority of the voting rights of an investee, it has power over the investee whenthe voting rights are sufficient to give it the practical ability to direct the relevant activities of the investeeunilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group’svoting rights in an investee are sufficient to give it power, including:

· the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of theother vote holders;

· potential voting rights held by the Group, other vote holders or other parties;· the contractual arrangement with other vote holders of the investee;· rights arising from other contractual arrangements; and· any additional facts and circumstances that indicate that the Group has, or does not have, the current

ability to direct the relevant activities at the time that decisions need to be made, including votingpatterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when theGroup loses control of the subsidiary. Specifically, assets, liabilities, income and expenses of a subsidiaryacquired or disposed of during the year are included in the consolidated financial statements from the date theGroup gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Companyand to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the equityholders of the Company and to the non-controlling interests even if this results in the non-controlling interestshaving a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accountingpolicies in line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions betweenmembers of the Group are eliminated in full on consolidation.

Changes in ownership interest in subsidiariesChanges in Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for asequity transactions (i.e. transactions with owners in their capacity as owners). In such circumstances, the carryingamounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relativeinterests in the subsidiary. Any difference between the amount by which the non-controlling interest are adjustedand the fair value of the consideration paid or received is recognised directly in equity and attributed to theshareholder of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated asthe difference between (i) the aggregate of the fair value of the consideration received and the fair value of anyretained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of thesubsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive incomein relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets orliabilities of the subsidiary. Retained investment is recorded at fair value.


12

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted are as follows:

a. Current versus non-current classificationThe Group presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is classified as current when it is:

· Expected to be realised or intended to be sold or consumed in the normal operating cycle;· Held primarily for the purpose of trading;· Expected to be realised within twelve months after the reporting period; or· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least

twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:· It is expected to be settled in the normal operating cycle;· It is held primarily for the purpose of trading;· It is due to be settled within twelve months after the reporting period; or· There is no unconditional right to defer the settlement of the liability for at least twelve months after

the reporting period.

The Group classifies all other liabilities as non-current.

b. Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. The fair value measurement is based on the presumptionthat the transaction to sell the asset or transfer the liability takes place either:

· In the principal market for the asset or liability, or· In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would usewhen pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generateeconomic benefits by using the asset in its highest and best use or by selling it to another market participant thatwould use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data areavailable to measure fair value, maximizing the use of relevant observable inputs and minimizing the use ofunobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statementsare categorized within the fair value hierarchy, described as follows, based on the lowest level input that issignificant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable


13

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

b. Fair value measurement (continued)For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurringbasis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement as a whole) atthe end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basisof the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explainedabove and in the related notes.

c. Revenue recognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and therevenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fairvalue of the consideration received or receivable, taking into account contractually defined terms of paymentand excluding taxes or duty. The Group has concluded that it is the principal in all of its revenue arrangementssince it is the primary obligor in all the revenue arrangements, has pricing latitude, and is also exposed toinventory and credit risks.

The specific recognition criteria described below must also be met before revenue is recognized.

Sale of goodsRevenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goodshave passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at thefair value of the consideration received or receivable, net of returns and allowances, trade discounts and volumerebates.

Rental incomeRental income arising from operating leases on investment properties is accounted for on a straight-line basisover the lease terms and is included in other income in the consolidated statement of profit or loss.

Finance incomeFor all financial instruments measured at amortized cost and interest-bearing financial assets classified as AFS,finance income is recorded using the effective interest rate (“EIR”). The EIR is the rate that exactly discountsthe estimated future cash receipts over the expected life of the financial instrument or a shorter period, whereappropriate, to the net carrying amount of the financial asset. Interest income is included in finance income inthe consolidated statement of profit or loss.

d. ZakatThe Group is subject to zakat in accordance with the regulations of the General Authority of Zakat and Tax(“GAZT”) in the Kingdom of Saudi Arabia. Provision for zakat, if any, is accrued and zakat is charged to theconsolidated statement of profit or loss. Additional amounts payable, if any, at the finalization of finalassessments are accounted for when such amounts are determined.

The Group withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia asrequired under Saudi Arabian Income Tax Law.

e. Value-added tax (“VAT”)Revenues, expenses and assets are recognized net of the amount of VAT, except:

· where the VAT incurred on a purchase of assets or services is not recoverable from the tax authority,in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of theexpense item as applicable; and

· receivables and payables that are stated with the amount of VAT included.


14


e. Value-added tax (“VAT”) (continued)The net amount of VAT recoverable from or payable to the tax authority is included under “Prepayments andother receivables” or “Accrued expenses and other liabilities”, respectively, in the consolidated statement offinancial position.

f. Foreign currenciesThe Group’s consolidated financial statements are presented in Saudi Riyal, which is also the Company’sfunctional currency. For each entity, the Group determines the functional currency and items included in thefinancial statements of each entity are measured using that functional currency.

Transactions and balancesTransactions in foreign currencies are initially recorded by the Group’s entities at their respective functionalcurrency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spotrates of exchange ruling at the reporting date. All differences arising on settlement or translation of monetaryitems are taken to the consolidated statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using theexchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreigncurrency are translated using the exchange rates at the date when the fair value is determined. The gain or lossarising on translation of non-monetary measured at fair value is treated in line with the recognition of gain orloss on change in fair value in the item (i.e., the translation differences on items whose fair value gain or loss isrecognized in OCI or profit or loss are also recognized in OCI or profit or loss, respectively).

Group companiesOn consolidation, the assets and liabilities of foreign operations are translated into Saudi Riyal at the rate ofexchange prevailing at the reporting date and their statements of profit or loss are translated at exchange ratesprevailing at the dates of the transactions. The exchange differences arising on translation for consolidation arerecognized in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreignoperation is reclassified to consolidated statement of profit or loss.

g. Cash dividendFinal dividends are recognised as a liability at the time of their approval by the General Assembly. Interimdividends are recorded as and when approved by the Board of Directors.

h. Property, plant and equipmentProperty, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairmentlosses, if any. Such cost includes the cost of replacing part of the property plant and equipment and borrowingcosts for long-term construction projects if the recognition criteria are met. When significant parts of property,plant and equipment are required to be replaced at intervals, the Group depreciates them separately based ontheir specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carryingamount of the property, plant and equipment as a replacement if the recognition criteria are satisfied. All otherrepair and maintenance costs are recognized in consolidated statement of profit or loss as incurred.

The present value of the expected cost for the decommissioning of an asset after its use is included in the cost ofthe respective asset if the recognition criteria for a provision are met.


15


h. Property, plant and equipment (continued)Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

Asset categories Useful livesLand improvements 33 yearsBuildings 33 yearsBuilding improvements 33 yearsFurniture and fixtures 4 to 10 yearsComputer and IT equipment 4 yearsMotor vehicles 4 yearsPlant and equipment 4 to 15 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upondisposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising onderecognition of the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the asset) is included in the consolidated statement of profit or loss when the asset is derecognized.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed ateach financial year-end and adjusted prospectively, if appropriate.

Project under construction is stated at cost incurred until the asset is ready for its intended use, thereafter, thiscost is capitalized on the related assets. This includes the cost of contractors, materials and services.

i. LeasesThe determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangementat the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependenton the use of a specific asset (or assets) and the arrangement conveys a right to use the asset (or assets), even ifthat asset is (or those assets are) not explicitly specified in an arrangement.

Group as a lesseeA lease is classified at the inception date as a finance lease or an operating lease. A lease that transferssubstantially all the risks and rewards incidental to ownership to the Group is classified as a finance lease.

Finance leases are capitalized at the commencement of the lease at the inception date fair value of the leasedproperty or, if lower, at the present value of the minimum lease payments. Lease payments are apportionedbetween finance charges and reduction of the lease liability so as to achieve a constant rate of interest on theremaining balance of the liability. Finance charges are recognized in finance costs in the consolidated statementof profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty thatthe Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of theestimated useful life of the asset and the lease term.

An operating lease is a lease other than a finance lease. Operating lease payments are recognized as an operatingexpense in the consolidated statement of profit or loss on a straight-line basis over the lease term.

Group as a lessorLeases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset areclassified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease areadded to the carrying amount of the leased asset and recognized over the lease term on the same basis as rentalincome. Contingent rents are recognized as revenue in the period in which they are earned.


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j. Investment propertiesInvestment properties are measured at cost less accumulated depreciation and any accumulated impairment invalue. Investment properties are derecognized either when they have been disposed of or when they arepermanently withdrawn from use and no future economic benefit is expected from their disposal. The differencebetween the net disposal proceeds and the carrying amount of the asset is recognized in consolidated statementof profit or loss in the period of derecognition.

Transfers are made to (or from) investment property only when there is a change in use. For a transfer frominvestment property to owner-occupied property, the deemed cost for subsequent accounting is the book valueat the date of change in use. If owner-occupied property becomes an investment property, the Group accountsfor such property in accordance with the policy stated under property, plant and equipment up to the date ofchange in use.

Depreciation is charged on straight-line bases over the estimated useful lives of 33 years. No depreciation ischarged on land.

k. Financial instrumentsFinancial assetsInitial recognition and measurementFinancial assets are classified, at initial recognition, as financial assets at fair value through profit or loss(“FVPL”), loans and receivables, held-to-maturity investments, AFS financial assets, or as derivativesdesignated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognizedinitially at fair value plus, in the case of financial assets not recorded at FVPL, transaction costs that areattributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulationor convention in the market place (regular way trades) are recognized on the trade date, i.e., the date that theGroup commits to purchase or sell the asset.

Subsequent measurementFinancial assets at FVPL include financial assets held for trading and financial assets designated upon initialrecognition at fair value through profit or loss. Financial assets are classified as held for trading they are acquiredfor the purpose of selling or repurchasing in the near term. Derivatives, including separated embeddedderivatives, are also classified as held for trading unless they are designated as effective hedging instruments asdefined by IAS 39 – “Financial Instruments: Recognition and Measurement”. For investments to be designatedas at FVPL, the following criteria must be met:

· The designation eliminates or significantly reduces the inconsistent treatment that would otherwisearise from measuring the assets or liabilities or recognizing gains or losses on a different basis; or

· The assets and liabilities are part of a group of financial assets, financial liabilities, or both, which aremanaged and their performance is evaluated on a fair value basis, in accordance with a documentedrisk management or investment strategy

Subsequent to initial recognition, they are measured at fair value. Changes in fair value are recorded in “Fairvalue gains and losses”. Finance income is accrued and presented in “Investment income”, using the EIR method.Dividend income is recorded in “Investment income” when the right receive the dividend has been established.

Loans and receivables category is the most relevant to the Group. Loans and receivables are non-derivativefinancial assets with fixed or determinable payments that are not quoted in an active market. After initialmeasurement, such financial assets are subsequently measured at amortized cost using the EIR method, lessimpairment. Amortized cost is calculated by taking into account any discount or premium on acquisition andfees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in theconsolidated statement of profit or loss. The losses arising from impairment are recognized in the consolidatedstatement of profit or loss in finance costs for loans and in cost of sales or other operating expenses forreceivables.


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k. Financial instruments (continued)Financial assets (continued)Subsequent measurement (continued)This category generally applies to accounts receivable and prepayments and other receivables.

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity investments when the Group has the positive intention and ability to hold them to maturity. Afterinitial measurement, held-to-maturity investments are measured at amortized cost using the EIR method, lessimpairment. Amortized cost is calculated by taking into account any discount or premium on acquisition andfees or costs that are an integral part of the EIR. The EIR amortization is included as finance income in theconsolidated statement of profit or loss. The losses arising from impairment are recognized in the consolidatedstatement of profit or loss.

AFS financial assets include equity investments and debt securities. Equity investments classified as AFS arethose that are neither classified as held for trading nor designated at FVPL. Debt securities in this category arethose that are intended to be held for an indefinite period of time and that may be sold in response to needs forliquidity or in response to changes in market conditions.

After initial measurement, AFS financial assets are subsequently measured at fair value with unrealized gains orlosses recognized in OCI and credited to the AFS reserve until the investment is derecognized, at which time,the cumulative gain or loss is recognized in other operating income, or the investment is determined to beimpaired, when the cumulative loss is reclassified from the AFS reserve to the consolidated statement of profitor loss in finance costs. Finance income earned whilst holding AFS financial assets is reported as finance incomeusing the EIR method.

The Group evaluates whether the ability and intention to sell AFS financial assets in the near term is stillappropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactivemarkets, the Group may elect to reclassify these financial assets if management has the ability and intention tohold the assets for the foreseeable future or until maturity.

For a financial asset reclassified from the AFS category, the fair value at the date of reclassification becomes itsnew amortized cost and any previous gain or loss on the asset that has been recognized in equity is amortized tostatement of profit or loss over the remaining life of the investment using the EIR method. Any differencebetween the new amortized cost and the maturity amount is also amortized over the remaining life of the assetusing the EIR method. If the asset is subsequently determined to be impaired, then the amount recorded in equityis reclassified to the consolidated statement of profit or loss.

DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) isprimarily derecognized (i.e., removed from the Group’s consolidated statement of financial position) when:

· The rights to receive cash flows from the asset have expired; or· The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation

to pay the received cash flows in full without material delay to a third party under a ‘pass-through’arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset,or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset,but has transferred control of the asset

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass througharrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it hasneither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control ofthe asset, the Group continues to recognize the transferred asset to the extent of its continuing involvement. Inthat case, the Group also recognizes an associated liability. The transferred asset and the associated liability aremeasured on a basis that reflects the rights and obligations that the Group has retained.


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k. Financial instruments (continued)Financial assets (continued)Derecognition (continued)Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower ofthe original carrying amount of the asset and the maximum amount of consideration that the Group could berequired to repay.

Impairment of financial assetsThe Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a groupof financial assets is impaired. An impairment exists if one or more events that has occurred since the initialrecognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of thefinancial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may includeindications that the debtors or a group of debtors is experiencing significant financial difficulty, default ordelinquency in interest or principal payments, the probability that they will enter bankruptcy or other financialreorganization and observable data indicating that there is a measurable decrease in the estimated future cashflows, such as changes in arrears or economic conditions that correlate with defaults.

For financial assets carried at amortized cost, the Group first assesses whether impairment exists individuallyfor financial assets that are individually significant, or collectively for financial assets that are not individuallysignificant. If the Group determines that no objective evidence of impairment exists for an individually assessedfinancial asset, whether significant or not, it includes the asset in a group of financial assets with similar creditrisk characteristics and collectively assesses them for impairment. Assets that are individually assessed forimpairment and for which an impairment loss is, or continues to be, recognized are not included in a collectiveassessment of impairment.

The amount of any impairment loss identified is measured as the difference between the assets carrying amountand the present value of estimated future cash flows (excluding future expected credit losses that have not yetbeen incurred). The present value of the estimated future cash flows is discounted at the financial asset’s originalEIR.

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognizedin the consolidated statement of profit or loss. Finance income (recorded as finance income in the consolidatedstatement of profit or loss) continues to be accrued on the reduced carrying amount using the rate of interest usedto discount the future cash flows for the purpose of measuring the impairment loss. Loans, together with theassociated allowance are written-off when there is no realistic prospect of future recovery and all collateral hasbeen realized or has been transferred to the Group. If, in a subsequent year, the amount of the estimatedimpairment loss increases or decreases because of an event occurring after the impairment was recognized, thepreviously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-offis later recovered, the recovery is recorded in the consolidated statement of profit or loss.

For AFS financial assets, the Group assesses at each reporting date whether there is objective evidence that aninvestment or a group of investments is impaired.

In the case of equity investments classified as AFS, objective evidence would include a significant or prolongeddecline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost ofthe investment and ‘prolonged’ against the period in which the fair value has been below its original cost. Whenthere is evidence of impairment, the cumulative loss – measured as the difference between the acquisition costand the current fair value, less any impairment loss on that investment previously recognized – is removed fromOCI and recognized in the consolidated statement of profit or loss. Impairment losses on equity investments arenot reversed through statement of profit or loss; increases in their fair value after impairment are recognized inOCI.


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k. Financial instruments (continued)Financial assets (continued)Impairment of financial assets (continued)The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Groupevaluates, among other factors, the duration or extent to which the fair value of an investment is less than itscost.

In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria asfinancial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative lossmeasured as the difference between the amortized cost and the current fair value, less any impairment loss onthat investment previously recognized.

Future finance income continues to be accrued based on the reduced carrying amount of the asset, using the rateof interest used to discount the future cash flows for the purpose of measuring the impairment loss. The financeincome is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increasesand the increase can be objectively related to an event occurring after the impairment loss was recognized, theimpairment loss is reversed through the consolidated statement of profit or loss.

Financial liabilitiesInitial recognition and measurementFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through statement ofprofit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effectivehedge, as appropriate.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables,net of directly attributable transaction costs.

The Group’s financial liabilities include accounts payables and accrued expenses and other liabilities.

Subsequent measurementFinancial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated uponinitial recognition as at FVPL.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in thenear term. This category also includes derivative financial instruments entered into by the Group that are notdesignated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded derivativesare also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the consolidated statement of profit or loss.

Financial liabilities designated upon initial recognition at FVPL are designated at the initial date of recognition,and only if the criteria in IAS 39 are satisfied. The Group has not designated any financial liability as at FVPL.

Loans and borrowings is the category most relevant to the Group. After initial recognition, interest-bearing loansand borrowings are subsequently measured at amortized cost using the EIR method. Gains or losses arerecognized in the consolidated statement of profit or loss when the liabilities are derecognized as well as throughthe EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or coststhat are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidatedstatement of profit or loss. This category generally applies to interest-bearing loans and borrowings.


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k. Financial instruments (continued)Financial liabilities (continued)Financial guarantee contractsFinancial guarantee contracts issued by the Group are those contracts that require a payment to be made toreimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due inaccordance with the terms of a debt instrument. Financial guarantee contracts are recognized initially as aliability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle thepresent obligation at the reporting date and the amount recognized less cumulative amortization.

DerecognitionA financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.When an existing financial liability is replaced by another from the same lender on substantially different terms,or the terms of an existing liability are substantially modified, such an exchange or modification is treated as thederecognition of the original liability and the recognition of a new liability. The difference in the respectivecarrying amounts is recognised in the consolidated statement of profit or loss.

Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the consolidated statementof financial position if there is a currently enforceable legal right to offset the recognized amounts and there isan intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

l. ContingenciesContingent liabilities are not recognized in the consolidated financial statements, but are disclosed unless thepossibility of an outflow of resources embodying economic benefits is remote.

Contingent assets are not recognized in the consolidated financial statements, but are disclosed when an inflowof economic benefits is probable.

m. InventoriesInventories are measured at the lower of cost and net realizable value with due allowance for any obsolete or slowmoving items. Cost is determined as follows:

Raw material - purchase cost on a weighted average basisFinished goods - cost of direct materials and labour plus attributable overheads based on

the higher of normal capacity or actual production for the period on aweighted average basis

Spare parts - purchase cost on a specific identification basis

Cost includes expenditure incurred in acquiring the inventories and costs incurred in bringing them to theirexisting location and condition.

Net realizable value is based on estimated selling price less any further costs expected to be incurred on disposal.

n. Impairment of non-financial assetsThe Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If anyindication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’srecoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”)fair value less costs of disposal and its value in use. The recoverable amount is determined for an individualasset, unless the asset does not generate cash inflows that are largely independent of those from other assets orgroups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset isconsidered impaired and is written down to its recoverable amount.


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n. Impairment of non-financial assets (continued)In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to theasset. In determining fair value less costs of disposal, recent market transactions are taken into account. If nosuch transactions can be identified, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately foreach of the Group’s CGU to which the individual assets are allocated. These budgets and forecast calculationsare generally covering a period of five years. A long-term growth rate is calculated and applied to projectedfuture cash flows after the fifth year.

Impairment losses of continuing operations are recognized in the consolidated statement of profit or loss inexpense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is anindication that previously recognized impairment losses no longer exist or have decreased. If such indicationexists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment lossis reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amountsince the last impairment loss was recognized. The reversal is limited so that the carrying amount of the assetdoes not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, netof depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognizedin the consolidated statement of profit or loss. Impairment loss recognized against goodwill is not reversedsubsequently.

o. Cash and cash equivalentsCash and cash equivalents in the consolidated statement of financial position comprise cash at banks and onhand and short-term deposits with a maturity of three months or less, which are subject to an insignificant riskof changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts (if any) as they are considered an integralpart of the Group’s cash management.

p. ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a result of a pastevent, it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation. When the Group expects someor all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognizedas a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision ispresented in the consolidated statement of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate thatreflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in theprovision due to the passage of time is recognized as a finance cost.

q. Employees’ end-of-service benefitsA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group hasend-of-service benefits which qualify as defined benefit plans.

The pension liability recognized in the consolidated statement of financial position in respect of defined benefitpost-employment plans is the present value of the projected defined benefit obligation (“DBO”) at the reportingdate.


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q. Employees’ end of service benefits (continued)DBO is re-measured on a periodic basis using the projected unit credit method. The present value of the DBO isdetermined by discounting the estimated future cash outflows using interest rates of high-quality corporate bondsthat are denominated in the currency in which the benefits will be paid, and that have terms approximating tothe terms of the related obligation. In countries where there is no deep market in such bonds, the market rates ongovernment bonds are used. The net interest cost is calculated by applying the discount rate to the net balanceof the DBO. This cost is included in employee benefit expense in the consolidated statement of profit or loss.

Re-measurement gains and losses arising from changes in actuarial assumptions are recognized in OCI in theperiod in which they occur. Changes in the present value of the DBO resulting from plan amendments orcurtailments are recognized immediately in the consolidated statement of profit or loss as past service costs.

In the Kingdom of Saudi Arabia, for the liability for employees’ end-of-service benefits, the actuarial valuationprocess takes into consideration the provisions of the Saudi Arabian Labor and Workmen Law as well as theGroup policy. In other countries, the respective labor laws are taken into consideration.

r. Standards issued but not yet effectiveThe standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’sconsolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicablewhen they become effective.

IFRS 9 – “Financial Instruments”In July 2014, the IASB issued the final version of IFRS 9 that replaces IAS 39 and all previous versions ofIFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classificationand measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on orafter 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application isrequired but providing comparative information is not compulsory. For hedge accounting, the requirements aregenerally applied prospectively, with some limited exceptions.

The Group plans to adopt the new standard on the required effective date. Overall, the Group expects nosignificant impact on its consolidated financial statements except for the effect of applying the impairmentrequirements of IFRS 9.

IFRS 15 – “Revenue from Contracts with Customers”IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contractswith customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which anentity expects to be entitled in exchange for transferring goods or services to a customer. The new revenuestandard will supersede all current revenue recognition requirements under IFRS. Either a full retrospectiveapplication or a modified retrospective application is required for annual periods beginning on or after 1 January2018. Early adoption is permitted. The Group plans to adopt the new standard on the required effective dateusing the full retrospective method.

The Group is currently assessing the potential effect of the amendments on its future financial statements.


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r. Standards issued but not yet effective (continued)Amendments to IFRS 10 – “Consolidated Financial Statements” and IAS 28 – “Investment inAssociates and Joint Ventures” - Sale or Contribution of Assets Between An Investor and itsAssociate or Joint Venture”The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of asubsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain orloss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3 – “BusinessCombinations”, between an investor and its associate or joint venture, is recognized in full. Any gain or lossresulting from the sale or contribution of assets that do not constitute a business, however, is recognized only tothe extent of unrelated investors’ interests in the associate or joint venture. The IASB has deferred the effectivedate of these amendments indefinitely, but an entity that early adopts the amendments must apply themprospectively.

Amendments to IFRS 2 – “Share-based Payment” - Classification and Measurement of Share-basedPayment TransactionsThe IASB issued amendments to IFRS 2 that address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based paymenttransaction with net settlement features for withholding tax obligations; and accounting where a modification tothe terms and conditions of a share-based payment transaction changes its classification from cash settled toequity settled.

On adoption, entities are required to apply the amendments without restating prior periods, but retrospectiveapplication is permitted if elected for all three amendments and other criteria are met. The amendments areeffective for annual periods beginning on or after 1 January 2018, with early application permitted. The Groupis assessing the potential effect of the amendments on its consolidated financial statements.

IFRS 16 – “Leases”IFRS 16 was issued in January 2016 and it replaces IAS 17 – “Leases”, International Financial ReportingInterpretations Committee (“IFRIC”) 4 – “Determining Whether an Arrangement Contains a Lease”, StandardsInterpretation Committee (“SIC”) 15 – “Operating Leases – Incentives” and SIC 27 – “Evaluating the Substanceof Transactions Involving the Legal Form of a Lease”. IFRS 16 sets out the principles for the recognition,measurement, presentation and disclosure of leases and requires lessees to account for all leases under a singleon-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes tworecognition exemptions for lessees – leases of “low-value” assets (e.g., personal computers) and short-termleases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee willrecognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to usethe underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separatelyrecognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.Lessees will be also required to re-measure the lease liability upon the occurrence of certain events (e.g., achange in the lease term, a change in future lease payments resulting from a change in an index or rate used todetermine those payments). The lessee will generally recognize the amount of the re-measurement of the leaseliability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchangedfrom today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classificationprinciple as in IAS 17 and distinguish between two types of leases - operating and finance leases.

IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 iseffective for annual periods beginning on or after 1 January 2019. Early application is permitted, but not beforean entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modifiedretrospective approach. The standard’s transition provisions permit certain reliefs. In due course, the Group plansto assess the potential effect of IFRS 16 on its consolidated financial statements.


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r. Standards issued but not yet effective (continued)Amendments to IAS 40 – “Investment Property” - Transfers of Investment PropertyThe amendments clarify when an entity should transfer property, including property under construction ordevelopment into, or out of investment property. The amendments state that a change in use occurs when theproperty meets, or ceases to meet, the definition of investment property and there is evidence of the change inuse. A mere change in management’s intentions for the use of a property does not provide evidence of a changein use.

Entities should apply the amendments prospectively to changes in use that occur on or after the beginning of theannual reporting period in which the entity first applies the amendments. An entity should reassess theclassification of property held at that date and, if applicable, reclassify property to reflect the conditions thatexist at that date.

The amendments are effective for annual periods beginning on or after 1 January 2018. Retrospective applicationin accordance with IAS 8 – “Accounting Policies, Changes in Accounting Estimates and Errors” is onlypermitted if that is possible without the use of hindsight. Early application of the amendments is permitted andmust be disclosed.

The Group is currently assessing the potential effect of the amendments on its future consolidated financialstatements

IFRIC 22 – “Foreign Currency Transactions and Advance Consideration”The interpretation clarifies that in determining the spot exchange rate to use on initial recognition of the relatedasset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liabilityrelating to advance consideration, the date of the transaction is the date on which an entity initially recognizesthe non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiplepayments or receipts in advance, then the entity must determine a date of the transactions for each payment orreceipt of advance consideration.

Entities may apply the amendments on a fully retrospective basis. Alternatively, an entity may apply theinterpretation prospectively to all assets, expenses and income in its scope that are initially recognized on orafter:

· The beginning of the reporting period in which the entity first applies the interpretation;· The beginning of a prior reporting period presented as comparative information in the financial

statements of the reporting period in which the entity first applies the interpretation.

IFRIC 22 is effective for annual periods beginning on or after 1 January 2018. Early application of interpretationis permitted and must be disclosed. First-time adopters of IFRS are also permitted to apply the interpretationprospectively to all assets, expenses and income initially recognized on or after the date of transition to IFRS.

The amendments are intended to eliminate diversity in practice, when recognizing the related asset, expense orincome (or part of it), on the derecognition of a non-monetary asset or non-monetary liability relating to advanceconsideration received or paid in foreign currency. The Group is currently assessing the potential effect of theamendments on its consolidated financial statements.

IFRS 1 – “First-time Adoption of IFRSs”Deletion of short-term exemptions for first-time adopters - short-term exemptions in paragraphs E3–E7 ofIFRS 1 were deleted because they have now served their intended purpose. The amendment is effective from1 January 2018.


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r. Standards issued but not yet effective (continued)IAS 28 – “Investments in Associates and Joint Ventures”Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice.The amendments clarifies that:

· An entity that is a venture capital organization, or other qualifying entity, may elect, at initialrecognition on an investment-by-investment basis, to measure its investments in associates and jointventures at FVPL.

· If an entity that is not itself an investment entity has an interest in an associate or joint venture that isan investment entity, the entity may, when applying the equity method, elect to retain the fair valuemeasurement applied by that investment entity associate or joint venture to the investment entityassociate’s or joint venture’s interests in subsidiaries. This election is made separately for eachinvestment entity associate or joint venture, at the later of the date on which (a) the investment entityassociate or joint venture is initially recognized; (b) the associate or joint venture becomes aninvestment entity; and (c) the investment entity associate or joint venture first becomes a parent.

The amendments should be applied retrospectively and are effective from 1 January 2018, with earlierapplication permitted. If an entity applies those amendments for an earlier period, it must disclose that fact.

4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Group’s consolidated financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and theaccompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions andestimates could result in outcomes that require a material adjustment to the carrying amount of asset or liabilityaffected in future periods.

In the process of applying the Group’s accounting policies, management has made the following judgments, whichhave the most significant effect on the amounts recognized in the consolidated financial statements. The keyassumptions concerning the future and other key sources of estimation uncertainty at the reporting date, thathave a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities arediscussed below.

Allowance for impairmentThe Group reviews its trade receivables at each reporting date to assess whether an allowance for bad anddoubtful debts should be recorded in the consolidated statement of profit or loss. In particular, judgment bymanagement is required in the estimation of the amount and timing of future cash flows when determining thelevel of allowance required. Such estimates are based on assumptions about a number of factors and actual resultsmay differ, resulting in future changes to the allowance.

Impairment of inventoriesInventories are held at the lower of cost and net realizable value. When inventories become old or obsolete, anestimate is made of their net realizable value. For individually significant amounts this estimation is performedon an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessedcollectively and a provision applied according to the inventory type and the degree of ageing or obsolescence,based on historical selling prices.

Impairment of non-financial assetsImpairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higherof its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is basedon available data from binding sales transactions, conducted at arm’s length, for similar assets or observable marketprices less incremental costs of disposing of the asset.


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4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS(continued)

Impairment of non-financial assets (continued)The value in use calculation is based on a Discounted Cash Flow (“DCF”) model, if applicable. The cash flows arederived from the budget for the next five years and do not include restructuring activities that the Group is not yetcommitted to or significant future investments that will enhance the performance of the assets of the CGU beingtested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expectedfuture cash-inflows and the growth rate used for extrapolation purposes.

End-of-service benefit plansThe cost of employees’ defined benefit obligation and other post-employment benefits are determined usingactuarial valuations. An actuarial valuation involves making various assumptions which may differ from actualdevelopments in the future. These include the determination of the discount rate, future salary increases andmortality rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, adefined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed ateach reporting date.

Fair value measurement of financial instrumentsWhen the fair values of financial assets and financial liabilities recorded cannot be measured based on quotedprices in active markets, their fair value is measured using valuation techniques including the DCF model. Theinputs to these models are taken from observable markets where possible, but where this is not feasible, a degreeof judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidityrisk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fairvalue of financial instruments.

Contingent liabilitiesThe Group is exposed to various contingent liabilities in the normal course of business. Management evaluatesthe status of these exposures on a regular basis to assess the probability of the Group incurring related liabilities.However, provisions are only made in the consolidated financial statements where, based on the managements’evaluation, a present obligation has been established.

Economic useful lives of property, plant, equipmentThe Group’s management determines the estimated useful lives of its property, plant, and equipment forcalculating depreciation. This estimate is determined after considering the expected usage of the asset or physicalwear and tear. The Group periodically reviews estimated useful lives and the depreciation method to ensure thatthe method and period of depreciation are consistent with the expected pattern of economic benefits from theseassets.

5 FIRST-TIME ADOPTION OF IFRS AS ENDORSED IN KSA

These consolidated financial statements for the year ended 31 March 2018, are the first the Group has preparedin accordance with IFRS as endorsed in KSA. For the years up to and including the year ended 31 March 2017,the Group prepared its consolidated financial statements in accordance with SOCPA accounting standards.

Accordingly, the Group has prepared consolidated financial statements that comply with IFRS as endorsed inKSA that are applicable as at 31 March 2018, together with the comparative period data for the years ended31 March 2017, as described in the summary of significant accounting policies. In preparing the consolidatedfinancial statements, the Group’s opening statement of financial position was prepared as at 1 April 2016, theGroup’s date of transition to IFRS as endorsed in KSA.

This note explains the principal adjustments made by the Group in restating its consolidated financial statementsprepared in accordance with SOCPA accounting standards including the consolidated statement of financialposition as at 1 April 2016 and the consolidated financial statements for the year ended 31 March 2017.


27

5 FIRST-TIME ADOPTION OF IFRS AS ENDORSED IN KSA (continued)

Certain optional exemptions were availed by the Group in preparing these consolidated financial statements inaccordance with IFRS 1 as endorsed in KSA from full retrospective application of IFRS as endorsed in KSA.The optional exemptions applied is that the Group has elected the business combination exemption in IFRS 1 tonot apply IFRS 3 – “Business Combinations” retrospectively, to past business combinations. Accordingly, theGroup has not restated business combinations that took place prior to the transition date.

EstimatesThe estimates at 31 March 2017 and 1 April 2016 are consistent with those made for the same dates inaccordance with SOCPA accounting standards (after adjustments to reflect any differences in accountingpolicies) apart from the employees’ end-of-service benefits liabilities where application of SOCPA accountingstandards did not require estimation.

The estimates used by the Group to present these amounts in accordance with IFRS as endorsed in KSA reflectconditions at 1 April 2016, the date of transition to IFRS as endorsed KSA, and as at 31 March 2017.


28


Group reconciliation of equity as at 31 March 2017

Notes

As per SOCPAaccountingstandards

SRAdjustments

SR

As per IFRSas endorsed

in KSASR

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment 84,709,948 - 84,709,948Investment properties 34,623,970 - 34,623,970Available-for-sale investments 23,593 - 23,593

───────── ───────── ─────────TOTAL NON-CURRENT ASSETS 119,357,511 - 119,357,511

───────── ───────── ─────────CURRENT ASSETSPrepayments and other receivables 18,144,079 - 18,144,079Inventories 56,604,734 - 56,604,734Accounts receivable 151,422,832 - 151,422,832Cash and cash equivalents 137,040,864 - 137,040,864

───────── ───────── ─────────TOTAL CURRENT ASSETS 363,212,509 - 363,212,509

───────── ───────── ─────────TOTAL ASSETS 482,570,020 - 482,570,020


EQUITYShare capital 272,999,780 - 272,999,780Statutory reserve 16,093,517 - 16,093,517Contractual reserve 75,192,437 - 75,192,437Available-for-sale fair value reserve 767 - 767Foreign currency translation reserve (294,818) - (294,818)Retained earnings A 54,635,447 572,754 55,208,201

───────── ───────── ─────────Equity attributable to equity holders of the Parent 418,627,130 572,754 419,199,884Non-controlling interests 4,287,591 - 4,287,591

───────── ───────── ─────────TOTAL EQUITY 422,914,721 572,754 423,487,475

───────── ───────── ─────────NON-CURRENT LIABILITYEmployees’ end-of-service benefits A 11,158,569 (572,754) 10,585,815

───────── ───────── ─────────CURRENT LIABILITIESZakat payable 9,632,917 - 9,632,917Accrued expenses and other liabilities 30,535,831 - 30,535,831Accounts payable 8,327,982 - 8,327,982

───────── ───────── ─────────TOTAL CURRENT LIABILITIES 48,496,730 - 48,496,730

───────── ───────── ─────────TOTAL LIABILITIES 59,655,299 (572,754) 59,082,545

───────── ───────── ─────────TOTAL EQUITY AND LIABILITIES 482,570,020 - 482,570,020

═════════ ═════════ ═════════


29


Group reconciliation of equity as at 1 April 2016

Notes


SRAdjustments

SR


in KSASR

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment 90,012,845 - 90,012,845Investment properties 33,283,877 - 33,283,877Available-for-sale investments 24,838 - 24,838

───────── ───────── ─────────TOTAL NON-CURRENT ASSETS 123,321,560 - 123,321,560

───────── ───────── ─────────CURRENT ASSETSPrepayments and other receivables 17,476,097 - 17,476,097Inventories 57,803,540 - 57,803,540Accounts receivable 137,369,818 - 137,369,818Cash and cash equivalents 129,664,059 - 129,664,059

───────── ───────── ─────────TOTAL CURRENT ASSETS 342,313,514 - 342,313,514

───────── ───────── ─────────TOTAL ASSETS 465,635,074 - 465,635,074


EQUITYShare capital 272,999,780 - 272,999,780Statutory reserve 8,774,283 - 8,774,283Contractual reserve 67,873,203 - 67,873,203Available-for-sale fair value reserve 2,012 - 2,012Foreign currency translation reserve (122,924) - (122,924)Retained earnings A 41,347,949 211,216 41,559,165

───────── ───────── ─────────Equity attributable to equity holders of the Parent 390,874,303 211,216 391,085,519Non-controlling interests 4,540,641 - 4,540,641

───────── ───────── ─────────TOTAL EQUITY 395,414,944 211,216 395,626,160

───────── ───────── ─────────NON-CURRENT LIABILITYEmployees’ end-of-service benefits A 8,815,444 (211,216) 8,604,228

───────── ───────── ─────────CURRENT LIABILITIESZakat payable 9,486,390 - 9,486,390Accrued expenses and other liabilities 40,913,456 - 40,913,456Accounts payable 11,004,840 - 11,004,840

───────── ───────── ─────────TOTAL CURRENT LIABILITIES 61,404,686 - 61,404,686

───────── ───────── ─────────TOTAL LIABILITIES 70,220,130 (211,216) 70,008,914

───────── ───────── ─────────TOTAL EQUITY AND LIABILITIES 465,635,074 - 465,635,074

═════════ ═════════ ═════════


30


Group reconciliation of total comprehensive income for the year ended 31 March 2017

Notes


SRAdjustments

SR


in KSASR

Sales 341,026,472 - 341,026,472Cost of sales (214,970,606) - (214,970,606)

───────── ───────── ─────────GROSS PROFIT 126,055,866 - 126,055,866

Selling and distribution expenses (27,000,707) - (27,000,707)General and administrative expenses A, D (21,574,364) (912,866) (22,487,230)

───────── ───────── ─────────OPERATING PROFIT 77,480,795 (912,866) 76,567,929

Finance costs A - (1,025,077) (1,025,077)Other income, net 4,871,238 - 4,871,238

───────── ───────── ─────────PROFIT BEFORE ZAKAT 82,352,033 (1,937,943) 80,414,090

Zakat (9,376,815) - (9,376,815)───────── ───────── ─────────

PROFIT FOR THE PERIOD 72,975,218 (1,937,943) 71,037,275

OTHER COMPREHENSIVE INCOME

To be reclassified to profit or loss in subsequent periods:Fair value loss on AFS investments B - (1,245) (1,245)Foreign currency translation reserve C - (294,232) (294,232)

───────── ───────── ─────────Other comprehensive income to be reclassified to profit or loss in

subsequent periods - (295,477) (295,477)

Not to be reclassified to profit or loss in subsequent periods:Re-measurement gain on end-of-service benefits A - 799,481 799,481

───────── ───────── ─────────OTHER COMPREHENSIVE INCOME - 504,004 504,004

───────── ───────── ─────────TOTAL COMPREHENSIVE INCOME 72,975,218 (1,433,939) 71,541,279

═════════ ═════════ ═════════

A. Employees’ end-of-service benefitsAs per IFRS as endorsed in KSA, end-of-service benefits are required to be calculated using actuarial valuation. Anyactuarial gains or losses are recorded in OCI. Historically, the Group has calculated these obligations based on thelocal regulations at the reporting date without considering expected future service periods of employees, salaryincrements and discount rates. This change resulted in a decrease in the employees’ end-of-service benefit liabilitybalance and an increase in retained earnings at the reporting date.

B. AFS financial assetsUnder SOCPA accounting standards, the Group accounted for the changes in fair value of the AFS financial assetsdirectly in the AFS fair value reserve, recognized as a separate component of equity. This is now being routed throughOCI.

C. Foreign currency translationUnder SOCPA accounting standards, the Group recognized translation differences on foreign operations directly inforeign currency translation reserve as a separate component of equity. This is now being routed through OCI.

D. OthersUnder SOCPA accounting standards, the Group recognized board remuneration directly in retained earnings. This isnow being routed through general and administrative expenses in the consolidated statement of profit or loss.


31

6 PROPERTY, PLANT AND EQUIPMENT

The estimated useful lives of the assets for the calculation of depreciation are based on the following rates:

Land improvements - 3% Furniture and fixtures - 10% - 25% Motor vehicles - 25%Buildings - 3% Computer and IT equipment - 25% Plant and equipment - 7% - 25%Building improvements - 3%

Land

Landimprovements,buildings and

buildingimprovements

Furniture,fixtures and

motor vehiclesComputer andIT equipment

Plant andequipment

Capitalwork-in-progress Total

For the year ended 31 March 2018 SR SR SR SR SR SR SR

CostAt 1 April 2017 20,545,686 63,364,385 49,948,100 11,849,624 116,025,622 390,674 262,124,091Additions during the year - 1,098,082 1,198,943 215,058 1,599,997 1,388,776 5,500,856Disposals during the year - (1,249,264) (58,960) (2,041) - - (1,310,265)Foreign currency adjustment 505 (1,435) 13,141 1,728 243 - 14,182

───────── ───────── ───────── ───────── ───────── ───────── ─────────At 31 March 2018 20,546,191 63,211,768 51,101,224 12,064,369 117,625,862 1,779,450 266,328,864

───────── ───────── ───────── ───────── ───────── ───────── ─────────Accumulated depreciationAt 1 April 2017 - (21,959,022) (45,571,915) (8,278,173) (101,605,033) - (177,414,143)Depreciation charge for the year - (2,047,648) (1,364,800) (1,687,441) (3,007,030) - (8,106,919)Relating to disposals - 643,837 57,403 1,360 - - 702,600Foreign currency adjustment - 1,795 (11,188) (1,237) (530) - (11,160)

───────── ───────── ───────── ───────── ───────── ───────── ─────────At 31 March 2018 - (23,361,038) (46,890,500) (9,965,491) (104,612,593) - (184,829,622)

───────── ───────── ───────── ───────── ───────── ───────── ─────────Net book value as at 31 March 2018 20,546,191 39,850,730 4,210,724 2,098,878 13,013,269 1,779,450 81,499,242

═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════


32

6 PROPERTY, PLANT AND EQUIPMENT (continued)

Land

Landimprovements,buildings and

buildingimprovements

Furniture,fixtures and

motor vehiclesComputer andIT equipment

Plant andequipment

Capitalwork-in-progress Total

For the year ended 31 March 2017 SR SR SR SR SR SR SR

CostAt 1 April 2016 20,542,472 62,888,940 48,316,149 11,414,749 115,178,879 365,147 258,706,336Additions during the year - 421,617 2,304,120 440,261 649,159 271,216 4,086,373Disposals during the year - - (667,975) (5,098) - - (673,073)Transfers - 48,169 - - 197,520 (245,689) -Foreign currency adjustment 3,214 5,659 (4,194) (288) 64 - 4,455

───────── ───────── ───────── ───────── ───────── ───────── ─────────At 31 March 2017 20,545,686 63,364,385 49,948,100 11,849,624 116,025,622 390,674 262,124,091

───────── ───────── ───────── ───────── ───────── ───────── ─────────Accumulated depreciationAt 1 April 2016 - (20,028,087) (44,398,335) (6,647,988) (97,619,081) - (168,693,491)Depreciation charge for the year - (1,927,514) (1,792,688) (1,635,283) (3,986,237) - (9,341,722)Relating to disposals - - 615,110 5,098 - - 620,208Foreign currency adjustment - (3,421) 3,998 - 285 - 862

───────── ───────── ───────── ───────── ───────── ───────── ─────────At 31 March 2017 - (21,959,022) (45,571,915) (8,278,173) (101,605,033) - (177,414,143)

───────── ───────── ───────── ───────── ───────── ───────── ─────────Net book value as at 31 March 2017 20,545,686 41,405,363 4,376,185 3,571,451 14,420,589 390,674 84,709,948

═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════Net book value as at 1 April 2016 20,542,472 42,860,853 3,917,814 4,766,761 17,559,798 365,147 90,012,845

═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════

Capital work-in-progress pertains to the Group’s refurbishment of its office and manufacturing facilities.

The cost of fully-depreciated property, plant and equipment still used in operations amounted to SR 140.1 million (31 March 2017: SR 134.5 million; 1 April 2016: SR 118.4million). As at reporting date, the Group does not have any idle assets.


33

6 PROPERTY, PLANT AND EQUIPMENT (continued)

The depreciation expense provided during the year has been allocated to the following:

2018SR

2017SR

Cost of sales 5,537,977 6,619,895Selling and distribution expenses (see note 23) 748,292 1,004,512General and administrative expenses (see note 24) 1,820,650 1,717,315

──────── ────────8,106,919 9,341,722════════ ════════

7 INVESTMENT PROPERTIES

2018SR

2017SR

CostAt the beginning of the year 35,229,572 33,341,907Additions during the year - 1,887,665Foreign currency adjustment 1,356 -

──────── ────────At the end of the year 35,230,928 35,229,572

──────── ────────Accumulated depreciationAt the beginning of the year (605,602) (58,030)Depreciation charge for the year (see note 23) (683,847) (547,572)

──────── ────────At the end of the year (1,289,449) (605,602)

──────── ────────Net book value at the end of the year 33,941,479 34,623,970

════════ ════════

The Group’s investment properties consist of land, warehouse and showroom in the United Arab Emirates.Management has intentions to hold these properties for the purposes of capital appreciation and these properties(except land) are carried at cost less depreciation and any accumulated impairment in value.

The fair value of the investment properties at 31 March 2018 is estimated at SR 51.1 million (31 March 2017:SR 60.6 million). This is based on a valuation done by Chestertons (“Valuer”), an independent third party, as at25 April 2018 (year ended 31 March 2017: 22 March 2017) using the income capitalization method which is inaccordance with RICS Valuation Standards. The valuation has been prepared in accordance with the definitionof market value adopted by the International Valuation Standards Committee (“IVSC”) and endorsed by RICSValuation Standards. The assumption used in the valuation were as follows: Yield - 8.5%; Occupancy - 100%(2017: Yield - 8%; Occupancy - 95%).

Under the income capitalization method, the value of any asset or business is estimated by comparing andcorrelating its features to those of similar assets or businesses in the market, determining the capitalization rateapplicable to such assets and arriving at the value of the asset by applying this capitalization rate to theestablished net income of the asset.

The Valuer has appropriate qualifications and experience in the valuation of properties at the relevant locations.

The Group has no restrictions on the realisability of its investment properties and no contractual obligations topurchase, construct or develop investment properties or for repairs, maintenance and enhancements.


34

7 INVESTMENT PROPERTIES (continued)

The fair value measurement of the investment property is categorized under Level 3 of the fair value hierarchy.

Rent revenue for the lease of the Group’s investment property amounted to SR 2.2 million for the year ended31 March 2018 (2017: SR 1.7 million). Related direct expenses amounted to SR 683,847 for the year ended31 March 2018 (2017: SR 547,572).

8 AVAILABLE-FOR-SALE INVESTMENT

2018SR

2017SR

Quoted securitiesAt the beginning of the year 23,593 24,838Movement during the year 5,943 (1,245)

───────── ─────────At the end of the year 29,536 23,593

═════════ ═════════

9 PREPAYMENTS AND OTHER RECEIVABLES

31 March2018SR

31 March2017SR

1 April2016SR

Staff receivable and others 13,839,376 14,593,931 16,506,215Prepayments 3,857,342 4,297,995 4,466,991Advances to suppliers 3,097,417 4,992,379 6,941,706Receivable on sludge lifting service 444,688 444,688 456,902Margin on bank guarantees 409,397 558,869 408,910Others 3,688,908 6,287,418 2,046,608

───────── ───────── ─────────Prepayments and other receivables, gross 25,337,128 31,175,280 30,827,332Less: advances to employees (see note 18) (12,253,943) (13,031,201) (13,351,235)

───────── ───────── ─────────13,083,185 18,144,079 17,476,097

═════════ ═════════ ═════════

10 INVENTORIES

31 March2018SR

31 March2017SR

1 April2016SR

Finished products 31,426,819 25,637,711 22,876,498Raw materials 28,342,143 27,756,295 31,949,268Spare parts 6,089,154 6,779,618 7,126,094Goods-in-transit - 227,994 784,298

───────── ───────── ─────────65,858,116 60,401,618 62,736,158

Less: provision for slow-moving inventories (6,112,653) (3,796,884) (4,932,618)───────── ───────── ─────────

59,745,463 56,604,734 57,803,540═════════ ═════════ ═════════


35

10 INVENTORIES (continued)

Movement in provision for slow-moving inventories is as follows:

2018SR

2017SR

At the beginning of the year 3,796,884 4,932,618Charge for the year 2,315,769 1,501,295Reversal during the year - (2,637,029)

───────── ─────────At the end of the year 6,112,653 3,796,884

═════════ ═════════

Inventories charged to cost of sales amounted to SR 208.3 million (2017: SR 242.4 million).

11 ACCOUNTS RECEIVABLE

31 March2018SR

31 March2017SR

1 April2016SR

Trade receivables 142,526,520 160,194,292 144,033,183Less: provision for doubtful debts (12,525,882) (9,179,357) (6,953,433)

───────── ───────── ─────────130,000,638 151,014,935 137,079,750

Due from related parties (see note 19) 580,876 407,897 290,068───────── ───────── ─────────130,581,514 151,422,832 137,369,818═════════ ═════════ ═════════

Trade receivables are non-interest bearing and are generally collected within 60 days.

For the terms and conditions of amounts due from related parties, refer to note 19.

Movement in provision for doubtful debts is as follows:

2018SR

2017SR

At the beginning of the year 9,179,357 6,953,433Charge for the year (see note 23) 4,418,187 2,456,038Written-off during the year (1,071,662) (230,114)

───────── ─────────At the end of the year 12,525,882 9,179,357

═════════ ═════════


36

12 CASH AND CASH EQUIVALENTS

31 March2018SR

31 March2017SR

1 April2016SR

Cash in hand 748,025 1,000,294 1,002,615Cash at bank 38,951,002 66,040,570 128,661,444Short-term deposits 90,000,000 70,000,000 -

───────── ───────── ─────────129,699,027 137,040,864 129,664,059═════════ ═════════ ═════════

Short-term deposits are with a local bank with an original maturity of up to three months.

Interest income earned from cash at bank and short-term deposits amounted to SR 1.1 million (2017: SR 1.6million).

13 SHARE CAPITAL

The share capital of the Company is divided into 27,299,978 shares of SR 10 each (31 March 2017: 27,299,978of SR 10 each; 1 April 2016: 27,299,978 of SR 10 each) held as follows:

AmountSR Percentage

Boubyan Petrochemical Company 56,720,360 20.78%Mr. Ibrahim Ali Al Sugair 18,375,470 6.73%Mrs. Hela Abdul Rahman Issa Al Remaiah 17,830,230 6.53%Samama Investment Company 17,369,490 6.36%Mr. Nasir Ali Al Sugair 16,637,400 6.10%Mr. Firas Ali Al Sugair 14,939,190 5.47%Mr. Mansour Ali Al Sugair 14,939,190 5.47%Mr. Sugair Ali Ibrahim Al Sugair 13,867,980 5.08%Other shareholders 102,320,470 37.48%

───────── ───────272,999,780 100.00%═════════ ═══════

Capital managementThe Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a goingconcern and benefit other stakeholders. Management’s policy is to maintain a strong capital base so as tomaintain creditor and market confidence and to sustain future development of the business.

The Company is not subject to significant externally imposed capital requirements.

No changes were made in the objectives, policies or processes for managing capital during the current and prioryear.

For the purpose of the Company’s capital management, capital includes share capital, reserves and retainedearnings totaling SR 392.8 million as at 31 March 2018 (31 March 2017: SR 419.2 million; 1 April 2016:SR 391.1 million).


37

14 STATUTORY RESERVE

In accordance with the Saudi Arabian Regulations for Companies and the Company’s By-Laws, 10% of the netincome for the year (after zakat and income tax) is required to be transferred to statutory reserve. The Companymay resolve to discontinue such transfers when the reserve total 50% of share capital. The reserve is not availablefor distribution.

15 CONTRACTUAL RESERVE

The Group makes 10% transfers to contractual reserve for dividend protection purposes. The contractual reservewill be used as per Board of Directors’ decision in the manner as stipulated in the Company’s By-Laws.

The Board of Directors in their meeting held in December 2017 approved the distribution of special dividend, atthe rate of SR 1.3 per share based on shares outstanding as at 27 December 2017, amounting to SR 35.5 millionto be paid from the contractual reserve (see note 16).

16 DIVIDENDS

The General Assembly in its meeting held in July 2016 approved the distribution of dividend for the quarterended 31 March 2016, at the rate of SR 0.4 per share amounting to SR 10.9 million, which has been paid duringJuly 2016.

During October 2016, the Board of Directors approved distribution of dividend for the quarter ended 30 June2016, at the rate of SR 0.4 per share based on shares outstanding as at 13 October 2016 amounting to SR 10.9million which was paid in October 2016.

The Board of Directors in their meeting held in December 2016 approved the distribution of dividend for thequarter ended 30 September 2016, at the rate of SR 0.4 per share based on shares outstanding as at 20 December2016 amounting to SR 10.9 million which has been paid during December 2016.

The Board of Directors also approved in its meeting held in March 2017 the distribution of dividend for thequarter ended 31 December 2016, at the rate of SR 0.4 per share based on the shares outstanding as at 27 March2017, amounting to SR 10.9 million which was paid in March 2017.

The General Assembly of the Company, in its meeting held in September 2017 approved the distribution ofdividend for the quarter ended 31 March 2017, at the rate of SR 0.4 per share amounting to SR 10.9 million,which has been paid in October 2017.

The Board of Directors in their meeting held in December 2017 approved the distribution of dividend for thequarters ended 30 June 2017 and 30 September 2017, at the rate of SR 0.25 per share for each quarter based onshares outstanding as at 27 December 2017, amounting to SR 6.8 million for each quarter, which has been paidin January 2018. The Board of Directors also approved in its aforementioned meeting distribution of specialdividend, at the rate of SR 1.3 per share based on shares outstanding as at 27 December 2017, amounting toSR 35.5 million which was paid in January 2018 out of the Company’s contractual reserve (see note 15). Thepayment was net of amount receivable from the shareholders amounting to SR 3.9 million representing theexpenses incurred (and recoverable from shareholders) in relation to the planned initial public offering of theCompany. Such initial public offering was cancelled by the Company during 2017


38

17 NON-CONTROLLING INTERESTS

This balance represents the share of the non-controlling interests in the following consolidated subsidiaries:

31 March2018SR

31 March2017SR

1 April2016SR

Al Sultan Contracting Trading Company Limited 1,318,012 2,236,776 2,458,788Advanced Membrane Company for Industry 726,566 842,770 941,139Al Takamal Company for Marble Limited 426,101 554,096 629,814Awazel International Company, LLC 285,345 247,203 204,175Awazel Kuwait Company for Building Materials 235,192 225,713 202,412Awazel Qatar International Company 196,873 181,033 183,626Awazel Indonesia International Company - - (79,313)

─────── ─────── ───────3,188,089 4,287,591 4,540,641═══════ ═══════ ═══════

Information on the non-controlling interests’ share in profit (loss) and other comprehensive income for the yearended 31 March is as follows:

Net profitOther comprehensive

income2018SR

2017SR

2018SR

2017SR

Al Sultan Contracting Trading Company Limited (918,764) (102,012) - (121,158)Al Takamal Company for Marble Limited (127,995) (75,718) - -Advanced Membrane Company for Industry (116,204) (98,369) - -Awazel International Company, LLC 38,127 42,828 15 200Awazel Qatar International Company 12,224 (2,992) 3,616 399Awazel Kuwait Company for Building Materials 5,712 25,080 3,767 (1,779)Awazel Indonesia International Company - (5,943) - -

──────── ──────── ──────── ────────(1,106,900) (217,126) 7,398 (122,338)════════ ════════ ════════ ════════

18 EMPLOYEES’ DEFINED BENEFIT LIABILITIES

The movement of employees’ end-of-service benefits liability (unfunded) for the year ended 31 March is asfollows:

2018SR

2017SR

Opening balance – present value of defined benefit obligation 23,617,016 21,955,463Current service cost 1,961,001 1,980,212Interest cost 781,457 1,025,077Benefits paid (1,399,419) (538,977)Actuarial loss (gain) on obligation 805,534 (799,481)Foreign currency adjustment 15,019 (5,278)

──────── ────────Closing balance – present value of defined benefit obligation 25,780,608 23,617,016Less: advance payments to employees (see note 9) (12,253,943) (13,031,201)

──────── ────────13,526,665 10,585,815════════ ════════


39

18 EMPLOYEES’ DEFINED BENEFIT LIABILITIES

The principal assumptions used for all the years presented are as follows:

Value (%)Financial assumptions:

Net discount rate (per annum) 3.60%Salary growth rate (per annum) 3.60%

Demographic assumptions:Retirement age 65 yearsWithdrawal from service rates (per annum) Moderate

The sensitivity analysis below has been determined based on reasonably possible changes of each significantassumption on the defined benefit obligation as at 31 March 2018, 31 March 2017 and 1 April 2016, assumingall other assumptions are held constant:

Increase(decrease in)Basis Points

Increase/(decrease) in Defined Benefit Obligations31 March

201831 March

20171 April2016

SR SR SR

Discount rate +50 (1,165,888) (1,417,237) (1,358,044)-50 1,258,165 1,591,503 1,528,530

Salary increase rate +50 1,232,182 1,360,885 1,312,743-50 (1,153,470) (1,240,171) (1,193,743)

Shown below is the maturity profile of the undiscounted benefit payments as at 31 March 2018:

AmountSR

Within the next 12 months 509,758Between 2 and 5 years 5,915,373Beyond 5 years 14,978,429

19 RELATED PARTY TRANSACTIONS AND BALANCES

The Group enters into certain transactions with related parties for which the terms and conditions are approvedby the Group’s management.

Significant transactions with related parties in the ordinary course of business included in the consolidatedfinancial statements are summarized below:

Related parties Nature of transactions2018SR

2017SR

Entities under common control Sales 1,807,293 1,346,523Purchases 1,518,132 3,209,574Expenses 347,145 688,033

Key management personnel Salaries and wages 5,073,192 5,580,137End-of-service benefits 502,141 472,626Board remuneration - 1,500,000

═══════ ═══════


40

19 RELATED PARTY TRANSACTIONS AND BALANCES (continued)

Significant balances arising from transactions with related parties are as follows:

31 March2018SR

31 March2017SR

1 April2016SR

Due from related partiesEntities under common control (see note 11) 580,876 407,897 290,068

══════ ══════ ══════

Due to a related partyEntity under common control (see note 22) - 57,350 -

══════ ══════ ══════

Due from and to related parties are included as part of accounts receivable and accounts payable, respectively.

Terms and conditions of transactions with related partiesTransactions with related parties are made at terms equivalent to those that prevail in Group’s normal commercialtransactions. Outstanding balances at the reporting date are unsecured, interest free and settled in cash. Therehave been no guarantees provided or received for any related party receivables or payables. During the currentand prior year, the Group has not recorded any impairment of receivables relating to amounts owed by relatedparties. This assessment is undertaken each period by examining the financial position of the related party andthe market in which the related party operates.

20 ZAKAT

The movement in Group’s zakat payable for the year ended 31 March is as follows:

2018SR

2017SR

At the beginning of the year 9,632,917 9,486,390Charge for the year 9,190,478 9,376,815Paid during the year (9,329,971) (9,230,288)

──────── ────────At the end of the year 9,493,424 9,632,917

════════ ════════

The zakat charge for the year ended 31 March pertains to current year provision and is based on the following:

2018SR

2017SR

Equity 359,449,431 349,526,354Opening allowances and other adjustments 21,710,426 30,181,333Book value of long-term assets (net of related financing) (121,559,398) (126,113,536)

───────── ─────────259,600,459 253,594,151

Zakatable income for the year 50,369,940 87,170,472───────── ─────────

Total 309,970,399 340,764,623═════════ ═════════

Zakat provision @ 2.5% of zakat base 7,749,260 8,519,116═════════ ═════════

Zakat accrued during the year 9,190,478 9,376,815═════════ ═════════


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20 ZAKAT (continued)

Status of assessmentsThe Company has obtained zakat certificates from the General Authority of Zakat and Tax (“GAZT”) up to31 March 2017. The assessments up to the year 31 March 2011 have been finalized, whereas assessments fromthe year 31 March 2012 to 31 March 2017 have not yet been raised by the GAZT.

21 ACCRUED EXPENSES AND OTHER LIABILITIES

31 March2018SR

31 March2017SR

1 April2016SR

Employee related accruals 7,245,287 9,063,540 10,939,446Accrued custom duty on import 3,497,323 14,926,877 21,681,786Accrued sales commission 2,696,159 3,378,776 3,431,314Accrued professional fees 852,078 288,657 282,774Value added tax payable 779,034 - -Accrued transportation charges 760,309 1,034,275 1,492,537Accrued utilities expenses 555,407 251,033 547,190Accrued sales incentives 97,149 200,000 1,860,601Retentions payable - 998,734 234,079Others 461,339 393,939 443,729

──────── ──────── ────────16,944,085 30,535,831 40,913,456════════ ════════ ════════

Accrued custom duty on import represents custom duty accrued on import of raw materials which are subject tocustom duty during prior years. In 2017, the Company received a claim for SR 6.2 million for the aforesaidbalance from the Saudi Custom Authorities for which a bank guarantee was issued.

During the year based on a legal advice, the Company reversed an amount of SR 4.5 million (2017: SR Nil) andrecorded as other income representing the reversal of accruals for which the authorities right to claim has lapsed(see note 25).

22 ACCOUNTS PAYABLE

31 March2018SR

31 March2017SR

1 April2016SR

Trade payables 12,623,098 8,270,632 11,004,840Due to a related party (note 19) - 57,350 -

──────── ──────── ────────12,623,098 8,327,982 11,004,840════════ ════════ ════════

Trade payables are non-interest bearing and are due for payment within 120 days.

For terms and conditions of amount due to a related party, refer to note 19.


42

23 SELLING AND DISTRIBUTION EXPENSES

2018SR

2017SR

Salaries and employees’ benefits 11,263,948 11,809,659Doubtful debts expense (see note 11) 4,418,187 2,456,038Rental expense 2,757,257 2,761,818Sales commission expense 1,509,753 2,432,681Advertising and promotion expense 887,354 1,353,349Depreciation on property, plant and equipment (see note 6) 748,292 1,004,512Depreciation on investment property (see note 7) 683,847 547,572Communication expense 338,823 326,589Bank charges 337,867 319,085Travel expense 330,754 345,575Office utilities 318,900 235,865Insurance expense 280,337 287,203Repairs and maintenance expense 192,328 600,072Others 2,587,960 2,520,689

──────── ────────26,655,607 27,000,707════════ ════════

24 GENERAL AND ADMINISTRATIVE EXPENSES

2018SR

2017SR

Salaries and employee’s benefits 15,328,705 16,533,703Depreciation on property, plant and equipment (see note 6) 1,820,650 1,717,315Professional services 1,280,202 1,799,835Insurance expense 448,307 450,480Travel expense 199,112 151,305Bank charges 25,071 82,954Others 1,604,162 1,751,638

──────── ────────20,706,209 22,487,230════════ ════════

25 OTHER INCOME, NET

2018SR

2017SR

Reversal of accrued custom duty on import (see note 21) 4,538,266 -Income from rental of warehouse and store 2,431,313 1,920,845Income from short-term deposits (see note 12) 1,054,565 1,622,472Foreign exchange loss, net (323,816) (49,675)Sale of scrap and raw materials 213,582 45,520Gain on disposal of property, plant and equipment, net 13,194 199,668Others 788,942 1,132,408

──────── ────────8,716,046 4,871,238════════ ════════


43

26 EARNINGS PER SHARE

Earnings per share have been computed by dividing the net income for the year attributable to equity holders ofthe parent by the weighted average number of shares outstanding during the year.

27 COMMITMENTS AND CONTINGENCIES

27.1 Contingent liabilities

The Group had contingent liabilities arising in the normal course of business, in respect of performanceguarantees, as at 31 March 2018 amounting to SR 8.0 million (31 March 2017: SR 7.9 million; 1 April 2016:SR 7.2 million).

27.2 Operating lease commitments

Group as a lessorThe Group has entered into an operating lease for a portion of its land, warehouse and showroom in Dubai (seenote 7) for a period of one year. Future minimum lease receivable under the non-cancellable operating leases areas follows:

31 March2018SR

31 March2017SR

1 April2016SR

Within one year 204,206 140,316 402,050After one year but not more than five years - - 36,550

─────── ─────── ───────204,206 140,316 438,600

═══════ ═══════ ═══════

Group as a lesseeThe Company has lease agreements with the government covering the land where the manufacturing and officefacilities in Riyadh and Jeddah are located for an annual rental totaling SR 0.2 million. The leases are for a periodof 25 years, subject to renewal, and are accounted for as operating leases. Rental expense on these lease contractsfor the year ended 31 March 2018 amounted to SR 0.2 million (2017: SR 0.2 million).

Future minimum lease payments are as follows:

31 March2018SR

31 March2017SR

1 April2016SR

Within one year 237,940 237,940 237,940After one year but not more than five years 951,760 951,760 951,760More than five years 1,947,523 2,185,463 2,423,403

─────── ─────── ───────3,137,223 3,375,163 3,613,103═══════ ═══════ ═══════


44

28 FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (includingforeign currency risk, commission rate risks and price risks). The Group’s overall risk management programfocuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on theGroup’s financial performance. Risk management is carried out by senior management. The most importanttypes of risk are summarised below.

28.1 Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and will causethe other party to incur a financial loss. The Group seeks to manage its credit risk with respect to customers bysetting credit limits for individual customers and by monitoring outstanding receivables.

The following table shows the Group’s maximum exposure to credit risk for components of the consolidatedstatement of financial position.

31 March2018SR

31 March2017SR

1 April2016SR

Accounts receivable 130,581,514 151,422,832 137,369,818Other receivables 6,128,426 8,853,705 6,067,400Cash equivalents 128,951,002 136,040,570 128,661,444

───────── ───────── ─────────265,660,942 296,317,107 272,098,662═════════ ═════════ ═════════

Accounts receivableThe Group’s exposure to credit risk on trade receivables is influenced mainly by the individual characteristicsof each customer.

As at reporting date, the ageing of accounts receivable that were not impaired are as follows:

31 March2018SR

31 March2017SR

1 April2016SR

Neither past due nor impaired - 8,642,875 11,277,649Past due 1 to 90 days 40,303,160 49,547,126 50,187,839More than 90 days 90,278,354 93,232,831 75,904,330

───────── ───────── ─────────130,581,514 151,422,832 137,369,818═════════ ═════════ ═════════

Management believes that the unimpaired amounts that are past due by more than 90 days are still collectible infull, based on historical payment behavior and extensive analysis of credit risk, including customers creditratings, if they are available.

Movement in allowance for impairment during the year, in respect of accounts receivable, is presented in note 11.

Other receivablesThis mainly includes staff receivables, margin on bank guarantees and other receivables. There is no credit riskattached to other receivables and management expects to recover these fully.


45

28 FINANCIAL RISK MANAGEMENT (continued)

28.1 Credit risk (continued)Cash equivalentsCredit risk on cash equivalents is limited as these are held with banks with sound credit ratings.

Credit concentrationNo significant concentrations of credit risk were identified by the management as at the reporting date.

28.2 Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associatedwith financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at anamount close to its fair value. The Group’s approach to managing liquidity is to ensure, as far as possible, thatit will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressedconditions, without incurring unacceptable losses or risking damage to Group’s reputation. Accordingly, theGroup ensures that sufficient bank facilities are always available.

The remaining contractual maturities at the reporting date of the Group’s financial liabilities consisting ofaccrued expenses and other liabilities and accounts payable are all due within 12 months. The undiscountedamount of these financial liabilities approximate their carrying values at the reporting date.

28.3 Market risk

Market risk is the risk that changes in the market prices, such as foreign exchange rates and interest rates, willaffect the Group’s income or cash flows. The objective of market risk management is to manage and controlmarket risk exposures within acceptable parameters while optimizing the return.

Foreign currency riskForeign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreignexchange rates. The Group is subject to fluctuations in foreign exchange rates in the normal course of business.The Group undertook significant transactions and has significant monetary assets and liabilities in Saudi Riyals,Qatari Riyals, Kuwaiti Dinars and UAE Dirhams. The Group operates internationally and is exposed to foreignexchange risk arising from various currency exposures. The Group has investments in foreign subsidiaries, andtheir net assets are also exposed to currency translation risk. Management monitors such exposures and believesthat the Group’s exposure to foreign currency risk is not significant as at the reporting date. Managementmitigates foreign currency risk of the Group by regularly monitoring foreign currency rates of the currencies thatthe Group deals in.

Commission rate riskCommission rate risk is the risk that the value of financial instruments will fluctuate due to changes in the marketcommission rates. The Group’s commission rate risks arise mainly from short-term deposits. Managementbelieves that the Group’s exposure to commission rate risk is not significant.

Price riskPrice risk is the risk that the value of the Group’s financial instruments will fluctuate as a result of changes inmarket prices, whether these changes are caused by factors specific to the individual instrument or its issuer orfactors affecting all instruments traded in the market. The price risk of the Group mainly arises from its available-for-sale investment which is carried at fair value. Management believes that the Group’s exposure to price riskis not significant.


46

29 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. The fair value measurement is based on the presumptionthat the transaction to sell the asset or transfer the liability takes place either:

· In the principal market for the asset or liability or· In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use whenpricing the asset or liability, assuming that market participants act in their economic best interest.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.Fair values are categorized in to different levels in a fair value hierarchy based on the inputs used in the valuationtechniques as follows.

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.· Level 2 - inputs other than quoted prices included in Level 1 that are observable for the assets or

liabilities either directly (i.e. as prices) or indirectly (i.e. derived from prices).· Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable

input).

The Group measures available-for-sale investment at fair value at each reporting date. Fair value of available-for-sale investment is disclosed on the consolidated statement of financial position and is categorized withinLevel 1 of the fair value hierarchy.

Fair value of investment properties is disclosed in note 7 to these consolidated financial statements and iscategorized within Level 3 of the fair value hierarchy.

The fair value of the Group’s other financial instruments including accounts receivables, other receivables, cashequivalents, accrued expenses and other liabilities and accounts payable approximate their carrying values dueto the relatively short-term maturity of these financial instruments. These are categorized within Level 2 of thefair value hierarchy.

During the current and prior year, there were no transfers between Levels 1 and 2 or into/out of Level 3.

30 APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

These consolidated financial statements have been approved by the Board of Directors on 17 Dhul Qadah 1439H(corresponding to 30 July 2018).

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