EFGD EFG Holding

 

3      Summary of material accounting policies

 

3.1    Basis of consolidation

 

Business combination

The Group accounts for business combinations using the acquisition method when control is transferred to the Group.

 

The consideration transferred in the acquisition copmrises of:

·   fair values of the assets transferred

·   liabilities incurred to the former owners of the acquired business

·   equity interests issued by the Group

·   fair value of any asset or liability resulting from a contingent consideration arrangement, and

·   fair value of any pre-existing equity interest in the subsidiary.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.

 

Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in which case those instruments are recognized at fair value, net of transaction costs.

 

The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity and acquisition-date fair value of any previous equity interest in the acquired entity, over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase.

 

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are iscounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

 

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

 

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

 

The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

 

 

 

 

 

 

3      Summary of material accounting policies (continued)

 

3.1    Basis of consolidation (continued)

Subsidiaries (continued)

The consolidated financial statements comprise the financial statements of the Group and those of its following subsidiaries:

Name of subsidiary	Direct ownership %	Indirect ownership %
EFG Hermes International Securities brokerage- Financial Brokerage Group (Previously)	99.87	0.09
EFG Hermes Fund Management - Egyptian Fund Management Group(Previously)	88.51	11.49
Hermes Portfolio and Fund Management	78.81	21.19
Hermes Securities Brokerage	97.58	2.42
Hermes Corporate Finance	99.42	0.48
EFG - Hermes Advisory Inc.	100	-
EFG- Hermes Financial Management (Egypt) Ltd.	-	100
EFG - Hermes Promoting & Underwriting	99.88	-
Bayonne Enterprises Ltd.	100	-
EFG- Hermes Fixed Income	99	1
EFG- Hermes Private Equity	96.3	3.7
EFG- Hermes Private Equity-BVI	-	100
EFG- Hermes UAE LLC.	-	100
Flemming CIIC Holding	100	-
Flemming Mansour Securities	-	99.33
Flemming CIIC Securities	-	96
Flemming CIIC Corporate Finance	-	74.92
EFG- Hermes UAE Ltd.	100	-
EFG- Hermes Holding - Lebanon	99	-
EFG- Hermes KSA	73.3	26.7
EFG- Hermes Lebanon	99	0.97
Mena Opportunities Management Limited	-	95
Mena (BVI) Holding Ltd.	-	95
EFG - Hermes Mena Securities Ltd.	-	100
Middle East North Africa Financial Investments W.L.L	-	100
EFG- Hermes Regional Investment Ltd.	100	-
Offset Holding KSC (ii)	-	50
EFG- Hermes IFA Financial Brokerage	-	63.084
IDEAVELOPERS	-	81
EFG- Hermes CB Holding Limited	-	100
EFG- Hermes Global CB Holding Limited	100	-
Mena Long-Term Value Feeder Holdings Ltd. (ii)	-	50
Mena Long-Term Value Master Holdings Ltd. (ii)	-	45
Mena Long-Term Value Management Ltd**	-	45
EFG - Hermes CL Holding SAL	-	100
EFG-Hermes IB Limited	100	-
EFG Hermes Securitization- Financial Group for Securitization (previously)	100	-
Beaufort Investments Company	-	100
EFG Hermes-Direct Investment Fund	64	-
Tanmeyah Micro Enterprise Services S.A.E	-	93.983
EFG- Hermes Brokerage Holding LTD- EFG - Hermes Frontier Holdings LLC(previously)	100	-
EFG - Hermes USA	100	-
EFG Capital Partners III	-	100
Health Management Company	-	52.5
EFG - Hermes Kenya Ltd.	-	100
EFG Finance Holding	99.82	0.18
EFG - Hermes Pakistan Limited	-	51
EFG - Hermes UK Limited	-	100
OLT Investment International Company (B.S.C)	99.9	-
Frontier Investment Management Partners LTD (ii)	-	50

 

 

 

 

 

3      Summary of material accounting policies (continued)

3.1    Basis of consolidation (continued)

Subsidiaries (continued)

Name of subsidiary	Direct ownership %	Indirect ownership %
EFG-hermes SP Limited	-	100
U Consumer Finance -Valu(previously)	-	94.961
EFG Corp - Solutions- EFG Hermes Corp-Solutions(previously)	-	100
Beaufort Asset Managers LTD	-	100
EFG Hermes Bangladesh Limited	-	100
EFG Hermes FI Limited	-	100
EFG Securitization- EFG Hermes Securitization(previously)	-	100
EFG Hermes PE Holding LLC	100	-
Etkan for Inquiry and Collection and Business Processes	-	100
RX Healthcare Management	-	52.5
FIM Partners KSA (ii)	-	50
Egypt Education Fund GP Limited	-	80
EFG Hermes Nigeria Limited	-	100
EFG-Hermes Int. Fin Corp	100	-
FIM Partners UK Ltd	-	50
EFG Hermes Sukuk	90	10
Beaufort Holding LTD.	-	100
Beaufort Management LTD.	-	100
Vortex IV GP LTD.	-	100
Beaufort SLP Holding	-	100
Beaufort Private Investment Holding LTD.	-	100
Frontier Disruption Capital	-	50
Arab Investment Bank	51	-
EFG VA Holdco Limited	-	100
EFG VA Investco Limited	-	100
Lighthouse Energy GP Limited	-	100
Beaufort SLP II Limited	-	100
Lighthouse Energy GP II	-	100
Beaufort Management Spain	-	100
EFG Singapore PTE LTD	-	100
Fatura Netherlands B.V	-	93.983
Fatura L.L.C	-	93.983
ASASY FOR DIGITAL CONTENT	-	93.983
EFG Payment	-	100
FIM Partners Muscat SPC(ii)	-	50
Noutah for electronic commerce	-	93.983
EFG National Holding Limited	-	100
VA ESOP Limited- EFG RMBV National Investco Limited(previously)	-	100
EFG IB Holdco Limited	-	100
EFG IB Investco Limited	-	100
EFG For SME Financing	-	100
Beaufort Managers SLP Limited	-	100
EFG Finance B.V	-	100
EFG SMEs B.V	-	100
Valu For Payments and Digital Solutions- Paynas ( Previously )	-	94.961
Paynas BV	-	94.961
Vortex Energy IV Luxembourg GP S.A.R.L	-	100
EFG Hermes PE Holdco Ltd	-	100
EFG Hermes IB Holding Ltd	100	-

(i)  Due to the political situation in Syria, the Group lost its control on the Syrian entities. In 2016, the Group has deconsolidated the Syrian companies and has fully impaired those investments.

(ii) Management has determined that they do control those companies even though the Holding Company may own 50% or less of the issued capital of those entities. This is because the Holding Company is exposed and has the right to the variable returns of those companies and is able to use its power over those companies to affect those returns.

 

3       Summary of material accounting policies (continued)

 

3.1      Basis of consolidation (continued)

 

Non-controlling interests

NCI are measured at their proportionate share of the acquiree's identifiable net assets at the date of acquisition. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

Interests in equity-accounted investees

The Group's interests in equity-accounted investees comprise interests in associates and a joint venture. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, where by the Group has rights to the net assets of the arrangement. Rather than rights to its assets and obligations for its liabilities. Interests in associates and the joint venture are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs.

 

Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases.

 

Transactions eliminated on consolidation

Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

3.2      Foreign currency

 

Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are recognised in consolidated statement of profit or loss.

 

However, foreign currency differences arising from the translation of the following items are recognised in OCI:

 

-    A financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

-    Qualifying cash flow hedges to the extent that the hedges are effective.

 

 

3       Summary of material accounting policies (continued)

 

3.2      Foreign currency (continued)

 

Foreign currency transactions (continued)

 

Exchange differences on a monetary item that is part of a net investment in a foreign operation are recognised in other comprehensive income in consolidated accounts. On disposal of a foreign operation, exchange differences previously recognised in other comprehensive income are reclassified to the income statement as a reclassification adjustment.

 

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates at the reporting date. The income and expenses of foreign operations are translated at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to Non Controlling Interest (the " NCI").

 

When a foreign operation is disposed off in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

 

3.3      Discontinued operation

 

A discontinued operation is a component of the Group's business, the operations and cash flows of which can be clearly distinguished from the rest of the Group. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative period.

 

3.4      Revenue

 

Gain on sale of investments

Gain (loss) resulting from sale of investments are recognized on transaction date and measured by the difference between cost and selling price less selling commission and expenses.

In case of derecognizing of investments in associates, the difference between the carrying amount and the sum of both the consideration received and cumulative gain or loss that had been recognized in shareholders' equity is recognized in the consolidated statement of profit or loss.

 

Dividend income

Dividend income is recognized when declared and the right to receive payment is established.

 

Custody fee

Custody fees are recognized when the service is provided and the invoice is issued. Assets held in a fiduciary capacity are not treated as assets of the Group as they are only held in trust where the Group acts as a custodian on customers' behalf. The Group has no liability or obligations towards the customer on these assets held in trust. Accordingly, these assets are not included in these consolidated financial statements.

 

3       Summary of material accounting policies (continued)

 

3.4      Revenue (continued)

 

Interest income and expenses

Interest income and expense for all interest-bearing financial instruments, except for those classified as FVTPL or designated at fair value through profit or loss, are recognized within 'interest income' and 'interest expense' in the consolidated statement of profit or loss using the effective interest method. Interest income and expense are recognized in the consolidated statement of profit or loss using the effective interest method. The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

Ø the gross carrying amount of the financial asset; or

Ø the amortized cost of the financial liability.

 

When calculating the effective interest rate for financial instruments other than credit-impaired assets, the Groups estimate future cash flows considering all contractual terms of the financial instrument, but not expected credit losses.

 

The calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the effective interest rate. Transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

 

Presentation

Interest income and expense presented in the consolidated statement of profit or loss and OCI include:

Interest on financial assets and financial liabilities measured at amortized cost calculated on an effective interest basis; and

Interest on financial investment is measured at FVOCI calculated on an effective interest basis; Interest income and expense on other financial assets and financial liabilities at FVTPL are presented in net income from other financial instruments at FVTPL.

 

Amortized cost and gross carrying amount

The 'amortized cost' of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any expected credit loss allowance.

 

The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any expected credit loss allowance.

 

For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of the asset. The calculation of interest income does not revert to a gross basis, even if the credit risk of the asset improves.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability.

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.4      Revenue (continued)

 

Fee and commission income

Fee and commission income and expense that are integral to the effective interest rate of a financial asset or liability are included in the measurement of the effective interest rate.

Other fee and commission income, including account servicing fees, placement fees and syndication fees, are recognised as the related services are performed.

A contract with a customer that results in a recognised financial instrument in the Group's financial statements may be partially in the scope of IFRS 9 and partially in the scope of IFRS 15. If this is the case, then the Group first applies IFRS 9 to separate and measure the part of the contract that is in the scope of IFRS 9 and then applies IFRS 15 to the residual.

Other fees and commission expenses relates mainly to transaction and service fees, which are expensed in the consolidated statement of profit or loss as the services are received.

 

Brokerage commission

Brokerage commission resulting from purchase of and sale of securities in favor of clients are recorded upon the execution of the transaction.

 

Management fee

Management fee is calculated as determined by the management contract of each investment fund & portfolio and recorded on accrual basis.

 

Incentive fee

Incentive fee is calculated based on certain percentages of the annual return realized by the fund and portfolio, however these incentive fee will not be recognized until revenue realization conditions are satisfied and there is adequate assurance of collection.

 

Investment property rental income

Rental income from investment property is recognized as revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease. Rental income from other property is recognized as other income.

 

Revenue from micro-finance services

-      Revenue from micro-finance services is recognized based on time proportion taking into consideration the rate of return on asset. Revenue yield is recognized in the consolidated statement of profit or loss using the effective interest method for all financial instruments that carry a yield, the effective interest method is the method of measuring the amortized cost of a financial asset and distributing the revenue over the life time of the relevant instrument. The effective interest rate is the rate that discounts estimated future cash receipts during the expected life of the financial instrument to reach the book value of the financial asset.

-      When classifying loans to customers as irregular, no income is recognized on its return and it is recognized in marginal records outside the financial statements and are recognized as revenue in accordance with the cash basis when it is collected.

-      The commission income is represented in the value of the difference between the yield of the financing granted micro-enterprises and the accruals of the Group's bank by deducting the services provided directly from the amounts collected from the entrepreneurs.

-      The benefits and commissions resulting from the performance of the service are recognized, according to the accrual basis as soon as the service is provided to the client unless those revenues cover more of the financial period are recognized on a time proportion basis.

-      The administrative commission of the loan granted to customers is collected on contracting in exchange for the issuance of the loan service and administrative commission revenue are proven in the consolidated statement of profit or loss upon the issuance of the loan to the client.

 

3       Summary of material accounting policies (continued)

 

3.4      Revenue (continued)

 

Revenue from micro-finance services (continued)

-      A commission delay in payments of premiums is collected at rates agreed upon within the contracts and are recognized as soon as customers delayed payment on the basis of the extended delay.

Gains from securitization

Gains from securitization is measured as the difference between the fair value of the consideration received or is still due to the Group at the end of securitization process and the carrying amount of the securitization portfolios in the Group's books on the date of the transfer agreement.

 

3.5      Income tax

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met.

 

Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is not recognized for:

-      Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

-      Temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

-      Taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

3        Summary of material accounting policies (continued)

 

3.6      Property and equipment

 

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. The cost of certain items of property, plant and equipment . If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.  Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

 

Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

 

Depreciation

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.  The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:     

                                                         

 

	Estimated useful life (years)
Buildings	20 - 50
Office furniture, equipment & electrical appliances	2 - 16.67
Computer equipment	3.33 - 5
Transportation means	3.33 - 5

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

Reclassification to investment property

When the use of a property changes from owner-occupied to investment property.

 

3.7      Projects under construction

Projects under construction are recognized initially at cost, the book value is amended by any impairment concerning the value of these projects cost includes all expenditures directly attributable to bringing the asset to a working condition for its intended use. Property and equipment under construction are transferred to property and equipment caption when they are completed and are ready for their intended use.

 

3.8      Intangible assets and goodwill

 

Goodwill

Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred or in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

 

 

3       Summary of material accounting policies (continued)

 

3.8      Intangible assets and goodwill (continued)

 

Goodwill (continued)

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units ("CGU") that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

 

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

 

Research and development

Expenditure on research activities is recognized in profit or loss as incurred.

 

Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset.

Otherwise, it is recognized in profit or loss as incurred.

 

Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.

 

Other intangible assets

Other intangible assets, are measured at cost less accumulated amortisation and any accumulated impairment losses.

 

3.9      Investment property

Investment properties are measured initially at cost, including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and (only in case of investment property held under a lease) initial leasing commissions to bring the properties to the condition necessary for them to be capable of operating.

 

Subsequent to initial recognition investment property is measured at cost less accumulated depreciation and impairment loss, if any. Investment property is depreciated on a straight line basis over its useful life. The estimated useful life of investment property is 33 years.

 

3.10    Assets held for sale

Non-current assets, or disposal Groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.

 

Such assets, or disposal Groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal Group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group's accounting policies. Impairment losses on initial classification as held-for-sale or held-for distribution and subsequent gains and losses on remeasurement are recognised in profit or loss.

 

 

3       Summary of material accounting policies (continued)

 

3.10    Assets held for sale (continued)

Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortized or depreciated, and any equity-accounted investee is no longer equity accounted.

 

3.11    Financial instruments

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

Classification and subsequent measurement

Financial assets

On initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

-      it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

-      its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

-      it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

-      its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

 

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an instrument‑by‑instrument basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

 

 

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.11    Financial instruments (continued)

 

Classification and subsequent measurement (continued)

Financial assets (continued)

 

Financial assets - Business model assessment

 

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

-      The stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

-      How the performance of the portfolio is evaluated and reported to the Group's management;

-      The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

-      How managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

-      The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group's continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

-    Contingent events that would change the amount or timing of cash flows;

-    terms that may adjust the contractual coupon rate, including variable rate‑ features;

-    Prepayment and extension features; and

-    Terms that limit the Group's claim to cash flows from specified assets (e.g. non‑recourse features)

 

 

 

 

 

3       Summary of material accounting policies (continued)

3.11    Financial instruments (continued)

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest (continued)

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

Financial assets - Subsequent measurement and gains and losses

Financial assets at FVTPL	These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortized cost	These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Debt investments at FVOCI	These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
Equity investments at FVOCI	These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

Financial liabilities - Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held‑for‑trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.

 

Derecognition

 

Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

3       Summary of material accounting policies (continued)

 

3.11    Financial instruments (continued)

 

Derecognition (continued)

 

Financial assets (continued)

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

 

Financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non‑cash assets transferred or liabilities assumed) is recognised in profit or loss.

 

Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

 

3.12    Fair value measurement

The fair value of financial instruments are determined based on the market value of the financial instrument or similar financial instruments at the date of the financial statements without deducting any estimated future selling costs.

 

3.13    Share capital

 

Ordinary shares

Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity. Income tax relating to transaction costs of an equity transaction are accounted for in accordance with IAS 12.

 

Repurchase and reissue of ordinary shares (treasury shares)

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is presented within share premium.

 

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.14    Legal reserve

The Group's statutes provide for deduction of a sum equal to 5% of the annual net profit for formation of the legal reserve. Such deduction will be ceased when the total reserve reaches an amount equal to half of the Group's issued capital and when the reserve falls below this limit, it shall be necessary to resume.

 

3.15    Impairment

 

Non-derivative financial assets

Financial instruments and contract assets

The Group recognizes loss allowances for Expected Credit Loss (ECLs) on:

-    Financial assets measured at amortized cost;

-    Debt investments measured at FVOCI;

-    Contract assets.

 

The Group also recognizes loss allowances for ECLs on loans receivables.

 

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12‑month ECLs:

-    Debt securities that are determined to have low credit risk at the reporting date; and

-    Other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group's historical experience and informed credit assessment, that includes forward‑looking information.

 

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. unless it can be rebutted.

 

The Group considers a financial asset to be in default when:

-    The debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held); or

-    The financial asset is more than 90 days past due unless it can be rebutted.

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. 12‑month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months). The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

 

Measurement of ECLs

ECLs are an unbiased probability‑weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e., the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

ECLs are discounted at the effective interest rate of the financial asset.

 

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.15    Impairment (continued)

 

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit‑impaired. A financial asset is 'credit‑impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Evidence that a financial asset is credit‑impaired includes the following observable data:

-    Significant financial difficulty of the debtor;

-    A breach of contract such as a default or being more than 90 days past due;

-    The restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

-    It is probable that the debtor will enter bankruptcy or other financial reorganisation; or

-    The disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in OCI.

 

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write‑off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due.

 

Non-financial assets

-    At each reporting date, the Group reviews the carrying amounts of its non‑financial assets (other than, investment property, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.

-    For impairment testing, assets are Grouped together into the smallest Group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or Groups of CGUs that are expected to benefit from the synergies of the combination.

-    The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

-    An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.15    Impairment (continued)

 

Non-financial assets (continued)

-    Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

-    An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

3.16    Provisions

Provisions are recognized when the Group has a legal or constructive current obligation as a result of a past event and it's probable that a flow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessment of the time value of money and, where appropriate, the risks specific to the liability. Provisions are reviewed at the financial position date and amended (when necessary) to represent the best current estimate.

 

3.17    Treasury bills

Treasury bills are recorded at nominal value and the accrued revenues is recorded under the item of "Other assets".  Treasury bills are presented on the financial position net of the accrued revenues.

 

3.18    Trade, and notes receivables, debtors and other debit balances

Trade, notes receivables, debtors and other debit balances are stated at nominal value less impairment losses.

 

The Group's lessees and the leased assets are regularly classified & evaluated and their obligations are reduced by the rent value paid in each financial period, and with the assurance of the availability of adequate guarantee to collect the client's rent values.

 

3.19    Cash and cash equivalents

For the purpose of preparing the statement of cash flows, cash and cash equivalents includes the balances, whose maturity do not exceed three months from the date of acquisition, cash on hand, cheques under collection and due from banks and financial institutions.

 

3.20    Profit sharing to employees

The holding company pays 10% of its dividends as profit sharing to its employees provided that it will not exceed total employees' annual salariesand directly charged on the consolidated statement of profit or loss as per IFRS.

 

3.21    Employees benefits

 

Share based payments

Equity settled transactions

For equity-settled share-based payment transactions, the Group measure the services received, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at grant date.

 

Vesting conditions, other than market conditions, are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognized for services received as consideration for the equity instruments granted are based on the number of equity instruments that eventually vest. Hence, on a cumulative basis, no amount is recognized for services received if the equity instruments granted do not vest because of failure to satisfy a vesting condition.

 

3       Summary of material accounting policies (continued)

 

3.21    Employees benefits (continued)

 

Share based payments (continued)

Equity settled transactions (continued)

For equity-settled share-based payment transactions, the Group measure the services received, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. The fair value of those equity instruments is measured at grant date.

 

Vesting conditions, other than market conditions, are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognized for services received as consideration for the equity instruments granted are based on the number of equity instruments that eventually vest. Hence, on a cumulative basis, no amount is recognized for services received if the equity instruments granted do not vest because of failure to satisfy a vesting condition.

 

The Group recognize an amount for the services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest and revise that estimate, if necessary, if subsequent information indicates that the number of equity instruments expected to vest differs from previous estimates. On vesting date, the entity shall revise the estimate to equal the number of equity instruments that ultimately vested

 

3.22    Micro-enterprises receivables

 

Credit policy

Funding Consideration

-    Funding are granted to clients who have previous experience not less than one year in his current activity which is confirmed by the client with adequate documentation and field inquiry.

-    Funding are granted to the client which it's installment is suitable according to his predictable income activity and this is done through analyzing client's revenues and expenses and his foreseeable marginal income, and this is done by the specialists of the Group on the prepared form for this purpose(financial study form and credit decision).

-    Before grant funding, a client activity field inquiry is done.

-    Recording inquiries results about client and guarantor with inquiring forms of the Group which reveal client's activity (visit form & Inquiry form).

-    The Group prohibit grant funding for new client unless the activity is existing with previous one year experience where the granted funds be within a minimum 1 000 EGP and maximum
30 000 EGP with loan duration of 12 months.

-    Inquiries for clients are performed by I-Score Group before granting and in case of approval on granting. The credit limit of the client is considered when calculating the client's revenue and expenses.

 

Client's Life Insurance

The insurance process on the client is performed with the authorized companies from insurance supervisory authority.

 

 

 

 

 

 

 

 

 

3       Summary of material accounting policies (continued)

 

3.22    Micro-enterprises Receivables (continued)

 

Impairment loss of micro financed loans

The Group at the date of the financial statements estimates the impairment loss of micro financed loans, in the light of the basis and rules of granting credit and forming the provisions according to the Board of Directors decision of the Financial Supervisory Authority No. (173) issued on December 21, 2014, to deal with the impairment loss.

 

The accounting policies relating to micro-enterprises receivables are detailed under note 3.11.

 

3.23    Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.

 

As a lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand‑alone prices. However, for the leases of property the Group has elected not to separate non‑lease components and account for the lease and non‑lease components as a single lease component.

 

The Group recognizes a right‑of‑use asset and a lease liability at the lease commencement date. The right‑of‑use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right of use asset is subsequently depreciated using the straightline method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the rightofuse asset reflects that the Group will exercise a purchase option. In that case the rightofuse asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the rightofuse asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

 

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the fixed payments, including in‑substance fixed payments; variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; amounts expected to be payable under a residual value guarantee; and the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

 

 

3       Summary of material accounting policies (continued)

 

3.23    Leases (continued)

As a lessee (continued)

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option or if there is a revised in‑substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right‑of‑use asset or is recorded in profit or loss if the carrying amount of the right‑of‑use asset has been reduced to zero.

The Group presents right‑of‑use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.

 

Short-term leases and leases of low-value assets

The Group has elected not to recognize right‑of‑use assets and lease liabilities for leases of low - value assets and short‑term leases, including IT equipment. The Group recognizes the lease payments associated with these leases as an expense on a straight‑line basis over the lease term.

 

As a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand- alone prices.

 

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

 

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for a major part of the economic life of the asset.

 

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

 

If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.

 

The Group applies the derecognition and impairment requirements of IFRS 9 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease. The Group recognizes lease payments received under operating leases as income on a straight- line basis over the lease term as part of 'other revenue'.

 

Sale and leaseback transactions are tested under IFRS 15 at the date of the transaction, and if the transaction qualifies as a sale, the underlying asset is derecognised and a right-of-use asset with a corresponding liability is recognised equal to the retained interest in the asset. Any gain or loss is recognised immediately in the consolidated income statement for the interest in the asset transferred to the lessor. If the transaction does not qualify as a sale under IFRS 15, a financial liability equal to the sale value is recognised in the consolidated financial statements

 

3    Summary of material accounting policies (continued)

 

3.24    Operating segment

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group's primary format for segment reporting is based on business segment.

 

3.25    Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

 

3.26    Standards, interpretations and amendments to existing standards that are not yet effective and are not early adopted

Amendments effective for accounting periods beginning on or after 1 January 2024

• In January 2020 the IASB published 'Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)' which clarify the Standard's guidance on whether a liability should be classified as either current or noncurrent.

• In September 2022, the IASB issued amendments to IFRS 16, adding requirements for accounting for a sale and leaseback after the date of the transaction.

• In October 2022, the IASB issued some amendments to IAS 1 that aim to improve disclosures about long-term debt with covenants.

• In May 2023, the IASB issued Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) to add

disclosure requirements regarding qualitative and quantitative information about supplier finance arrangements.

• In June 2023, the IASB issued IFRS S1 General Requirements for Disclosure of Sustainability-related

Financial Information which requires an entity to disclose information about its sustainability-related risks and opportunities; and IFRS S2 Climate-related disclosures which requires an entity to disclose information about its climate-related risks and opportunities. The disclosed information as per these standards is useful to users of general purpose financial reports in making decisions relating to providing resources to the entity

 

Amendments effective for accounting periods beginning on or after 1 January 2025

 

• In August 2023, the IASB issued Lack of Exchangeability (Amendments to IAS 21) to specify when a currency is exchangeable and how to determine the spot exchange rate if it is not.

The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

 

 

 

 

 

 

 

 

 

 

 

 

4    Significant management judgements and estimates

 

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

 

Information about significant areas of estimation and uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described below:

 

Impairment charge on financial assets

Impairment losses are evaluated as described in accounting policy 3.15.

 

The measurement of impairment losses both under IFRS 9 across all categories of financial assets requires judgement, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. The Group's ECL calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the ECL models that are considered accounting judgements and estimates include:

·   The Group's internal credit grading model, which assigns PDs to the individual grades

·   The Group's criteria for assessing if there has been a significant increase in credit risk and so allowances for financial assets should be measured on a lifetime ECL basis and the qualitative assessment

·   The segmentation of financial assets when their ECL is assessed on a collective basis

·   Development of ECL models, including the various formulas and the choice of inputs

·   Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment levels, GDP and inflation rate and the effect on PDs, EADs and LGDs

 

Selection of forward-looking macroeconomic scenarios and their probability weightings, to derive the economic inputs into the ECL models It is the Group's policy to regularly review its models in the context of actual loss experience and adjust when necessary.

 

Fair value measurement

The Group's determination of fair value hierarchy of financial instruments is discussed in note 36.

 

The value of financial assets is determined by the the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

·   In the absence of an active market to determine the fair value of financial instruments, the fair value is estimated using various valuation techniques, taking into consideration the prices of the transactions occurred recently, and guided by the current fair value of other similar tools substantially - discounted cash flow method - or any other evaluation method to get resulting values that can rely on.

·   When using the discounted cash flow method to evaluate, the future cash flows are estimated based on the best estimates of management. The discount rate used is determined in the light of the prevailing market price at the date of the financial statements that are similar in nature and conditions.

 

 

 

 

4    Significant management judgements and estimates (continued)

 

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair values using other valuation techniques.

 

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

 

Valuation of financial instruments

The valuation techniques of financial instruments may require certain unobservable inputs to be estimated by the management. These are discussed in detail in note 36.

 

The Group measures fair values using the fair value hierarchy outlined in note 36, which reflects the significance of the inputs used in making the measurements. The Group has an established control framework with respect to the measurement of fair values.

 

This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including level 3 fair values, and reports directly to the CFO. The valuation team regularly reviews significant unobservable inputs and valuation adjustments.

 

The Group recognizes transfers between levels of the fair value hierarchy at the end of reporting period during which the change has occurred. Valuation techniques include net present value and discounted cash flow models, comparison with similar instruments for which market observable prices exist.

 

Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

 

The Group uses widely recognized valuation models for determining the fair value of common and more simple financial instruments, like interest rate and currency swaps that use only observable market data and require little management judgment and estimation. Observable prices or model inputs are usually available in the market for listed debt and equity securities, exchange-traded derivatives and simple over the counter derivatives such as interest rate swaps. Availability of observable market prices and model inputs reduces the need for management judgment and estimation and also reduces the uncertainty associated with determining fair values.

 

Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4    Significant management judgements and estimates (continued)

 

Determination of prelimianry values of assets and liabilities acquired in business combinations

While the Group uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Group records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates it has made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets acquired include; future expected cash flows, estimated market royalty rates, customer attrition rates, cost of developed technology and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred.

 

 

5    Cash and cash equivalents

 

	31 December 2023		31 December 2022
Cash on hand	255,811		209,095
Cheques under collection	141,951		140
Obligatory reserve balance with Central Bank of Egypt ( note 5.1)	4,030,033		1,906,215
Banks - current accounts	10,027,157		10,943,423
Banks - time deposits	17,801,324		13,158,396
Balance	32,256,276		26,217,269
Impairment loss	(4,033)		(3,019)
Total cash and time deposits (note 5.3)	32,252,243		26,214,250

 

5.1 Obligatory reserve balance with CBE relates to balances with the Central Bank within the statutory reserve ratio.

5.2 The cash and cash equivalents disclosed above and in the statement of cash flows include EGP 4,030,033 (31 December 2022: EGP 1,906,215) which are held by CBE. These deposits are subject to regulatory restrictions and are therefore not available for general use by the other entities within the Group.

5.3 For the purposes of presenting the statement of cash flows, cash and cash equivalents include balances whose maturity dates do not exceed three months from the date of placement

5.4 The above figures reconcile to the amount of cash shown in the statement of cash flows at the end of the financial year as follows:

	31 December 2023		31 December 2022
Cash and time deposits as above	32,252,243		26,214,250
ECL For Cash and cash equivalents	4,033		3,019
Time Deposit - (Arab Investment Bank)	(18,538)		-
Obligatory reserve balance with CBE	(4,030,033)		(1,906,215)
Bank overdraft	(11,474,569)		(11,544,331)
Treasury bills maturing in less than 90 days from date of purchase	3,435,942		312,861
Cash and cash equivalents	20,169,078		13,079,584

 

 

6   Investments at fair value through profit or loss

 

	31 December 2023		31 December 2022
Mutual fund certificates	7,355,442		5,231,021
Equity securities	108,293		165,787
Debt securities	832,915		660,607
Treasury bills	219,222		336,439
Structured notes	680,319		379,039
	9,196,191		6,772,893

 

	31 December 2023		31 December 2022
Listed	864,104		699,066
Unlisted	8,332,087		6,073,827
	9,196,191		6,772,893

 

 

Amounts recognized in profit or loss

Net change in the fair value of investments at FVPL as at 31 December 2023 amounted to EGP Thousands 1,411,890 (year ended 31 December 2022: EGP Thousands 923,031) being EGP Thousands 1,516,810 (31 Decemeber 2022: EGP Thousands 940,515) gains and fair value losses of EGP Thousands 104,920 (31 Decemeber 2022: EGP Thousands 17,484). Those are recognized under net changes in the fair value of the investment at fair value through profit and loss on the consolidated statement of profit or losss.

 

7   Accounts receivable

	31 December 2023		31 December 2022
Accounts receivable	7,230,156		5,613,136
Other brokerage companies	57		870,168
Balance	7,230,213		6,483,304
Impairment loss (ECL)	(459,251)		(315,048)
Balance	6,770,962		6,168,256

 

8    Funded facilities to customers

	31 December 2023		31 December 2022
Micro finance	5,059,721		3,081,638
Finance lease	9,306,990		6,842,562
Consumer finance	6,293,816		3,900,888
Factoring	2,401,033		2,553,049
Other loans	2,350,756		1,441,312
Unearned interest	(5,787,545)		(3,565,032)
Balance	19,624,771		14,254,417
Impairment loss	(507,116)		(349,705)
	19,117,655		13,904,712

 

	31 December 2023		31 December 2022
Current	10,649,674		8,384,658
Non-current	8,467,981		5,520,054
	19,117,655		13,904,712

 

 

 

 

 

8.1    Banking loans and facilities (aiBank)

	31 December 2023		31 December 2022
Retail
Overdraft	220,707		453,437
Credit Cards	80,550		38,316
Personal loans	6,142,400		4,222,276
Mortgage Loans	1,063,049		630,737
	7,506,706		5,344,766
Corporate loans including small loans for economic activities
Debit current accounts	447,007		1,816,153
Direct loans	11,473,182		11,750,598
Syndicated loans	3,332,907		1,929,715
	15,253,096		15,496,466
Gross loans and facilities to customers	22,759,802		20,841,232
Less:
Expected credit losses	(1,613,012)		(1,410,813)
Suspended interest	(643)		(52,480)
Unearned interest	(66,831)		(60,509)
	1,680,486		1,523,802
Banking loans and facilities (aiBank) - net	21,079,316		19,317,430

 

	31 December 2023		31 December 2022
Current	6,630,556		4,510,080
Non-current	14,448,760		14,807,350
	21,079,316		19,317,430

 

 

 

9    Investments at fair value through OCI

	31 December 2023		31 December 2022
Non-current investments
Equity securities	187,146		159,532
Mutual fund certificates	138,264		116,119
Debt instruments	4,256,243		5,117,914
	4,581,653		5,393,565
Current investments
Debt instruments	7,065,958		8,686,556
	11,647,611		14,080,121

 

	31 December 2023		31 December 2022
Listed	4,299,771		5,157,079
Unlisted	7,347,840		8,923,042
	11,647,611		14,080,121

 

Financial assets at fair value through other comprehensive income (FVOCI) comprise:

-     Equity securities and mutual funds certificates are not held for trading and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic investments, and the Group considers this classification to be more relevant.

-     Debt securities where the contractual cash flows are solely principal, and interest and the objective of the Group's business model is achieved both by collecting contractual cash flows and selling financial assets.

 

 

10  Equity accounted investees

			31 December 2023
	Loacation	Assets	Liabilities	Net gain (losses)	Gross Profit	Ownership %	Value
(a)    Joint ventures
Bedaya Mortgage Finance Co	Egypt	1,602,404	1,374,318	9,854	41,946	33.34	81,069
EFG-EV Finech	Egypt	55,433	4,773	13,086	21,347	50	23,418
Paytabs	Egypt	22,522	22,781	(11,255)	7,788	51	48,852
API Capital Management Limited	UAE	21,376	6,021	(6,563)	775	50	9,139
(b)   Associates
Kaf Life Insurance takaful	Egypt	370,168	256,611	(28,391)	27,957	37.5	49,648
Zahraa Elmaadi Company*	Egypt	2,531,888	871,390	219,016	311,089	20.33	337,646
Middle East Land Reclamation Company*	Egypt	47,974	192,215	(24,763)	-	24.47	-
Prime for investment fund management*	Egypt	2,637	159	297	21	20	512
Enmaa Financial Leasing company*	Egypt	1,701,904	1,394,764	56,155	108,973	31.4	96,530
Paytech 3100 BV	Netherlands	486,877	1,112	(1,112)	-	40.66	197,979
Total							844,793

 

 

		31 December 2022
	Loacation	Assets	Liabilities	Net gain (losses)	Gross Profit	Ownership %	Value
(a)    Joint ventures
Bedaya Mortgage Finance Co	Egypt	2,363,820	2,108,838	89,692	147,297	33.34	84,814
EFG-EV Finech	Egypt	62,329	5,442	15,460	24,595	50	18,449
Paytabs	Egypt	55,817	41,912	(10,859)	3,518	51	41,929
API Capital Management Limited	UAE	18,582	3,742	(2,180)	-	50	10,248
(b)   Associates
Kaf Life Insurance takaful	Egypt	340,318	196,555	(25,517)	12,521	37.5	62,030
Zahraa Elmaadi Company*	Egypt	2,563,500	1,032,639	216,266	307,688	20.30	311,285
Middle East Land Reclamation Company*	Egypt	47,974	192,215	(24,763)	-	24.47	-
Prime for investment fund management*	Egypt	2,752	199	377	265	20	511
Enmaa Financial Leasing company*	Egypt	1,982,674	1,737,141	22,113	52,041	31.40	77,167
Total							606,433

 

* Equity accounted investees acquired through Arab Investment Bank (aiBank).

 

 

11  Assets held for sale

 

Assets held for sale represented in the assets that has been acquired by Arab Investment Bank (aiBank) amounted to EGP 330,652 (31 December 2022: EGP 349,701) in exchange of debt account receivables.

 

 

12  Investments at amortized cost

	31 December 2023		31 December 2022
Debt instruments - Listed	7,209,859		10,964,941
Debt instruments - Un-listed	4,064,121		581,157
Impairment loss	(40,120)		(27,406)
	11,233,860		11,518,692

 

13  Investment properties

	2023		2022
Cost
As at 1 January	169,540		169,540
Disposal for the year	(20,203)		-
As at 31 December	149,337		169,540
Accumulated deprecations
As at 1 January	50,555		44,010
Disposal for the year	(6,464)		-
Depreciation charge for the year (note 31.2)	6,545		6,545
As at 31 December	50,636		50,555
Net book amount	98,701		118,985

 

 

Investment properties comprise the following:-

 

-     EGP Thousand 93,457 the book value of the area owned by EFG Holding Company ("Previously"    EFG - Hermes Holding Company) in Nile City building, and with a fair value of EGP Thousand 513,600.

-     EGP Thousand 2,817 the book value of the area owned by Hermes Securities Brokerage, one of the subsidiaries, in Elmanial branch and with a fair value of EGP Thousand 13,000.

-      EGP Thousand 2,427 the book value of the area owned by Hermes Securities Brokerage, one of the subsidiaries, in Elharam branch and with a fair value of EGP Thousand  21,716.