Saudi Finance Company: Interim Condensed Financial Statements - 30 September 2020

Transcription

4. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) INTERIM STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) Notes ASSETS Cash and cash equivalents Prepayments and other receivables Net investment in Islamic financings Investment carried at FVOCI Assets repossessed held for sale Restricted cash deposit Property and equipment Intangible assets Right-of-use assets TOTAL ASSETS 7,11 30 September 2020 31 December 2019 (Unaudited) (Audited) 46,966,319 2,730,396 743,122,817 892,850 5,616,454 6,894,150 9,246,593 6,858,917 10,369,604 832,698,100 43,208,272 1,821,305 510,146,422 892,850 5,616,454 5,460,377 4,957,662 4,428,622 5,125,858 581,657,822 100,000,000 8,400,375 75,993,973 100,000,000 8,400,375 79,118,421 154,474 154,474 184,548,822 187,673,270 83,817 40,060,635 11,595,058 11,442,824 7,990,663 4,311,298 11,278,869 5,729,272 10,667,912 930,175 487,538 572,733,825 3,312,281 648,149,278 832,698,100 358,744,576 2,765,087 393,984,552 581,657,822 EQUITY AND LIABILITIES EQUITY Share capital Statutory reserve Retained earnings Actuarial gain on employees’ post-employment benefits TOTAL EQUITY LIABILITIES Due to a related party Trade payables Other payables and accruals Lease liabilities Provision for zakat Shari’a alternatives for financial derivative instruments Financial facilities Employees' post-employment benefits TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 8 6 9 10,6 The accompanying notes 1 to 15 form part of these interim condensed financial statements 2|Page
5. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) INTERIM STATEMENT OF COMPREHENSIVE (LOSS) / INCOME FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) For the three-month period For the nine-month period ended ended 30 September 30 September 30 September 30 September 2020 2019 2020 2019 Notes (Unaudited) (Unaudited) (Unaudited) (Unaudited) INCOME FROM ISLAMIC FINANCING 27,119,544 21,796,155 72,392,093 63,858,292 OPERATING (EXPENSES) / INCOME Finance cost General and administrative expenses Selling and marketing expenses Impairment on Islamic financing, net Unrealized loss on shari’a alternatives for financial derivative instruments Other (expenses) / income, net 11 12 (LOSS) / INCOME BEFORE ZAKAT Zakat (LOSS) / INCOME FOR THE PERIOD Other Comprehensive Income TOTAL COMPREHENSIVE (LOSS) / INCOME FOR THE PERIOD 9 (4,901,149) (3,081,724) (10,881,100) (9,434,408) (11,686,615) (10,206,241) (31,234,889) (29,427,674) (2,497,199) (2,684,613) (7,730,572) (8,061,500) (1,159,259) (75,950) (5,278,593) (2,612,892) 281,904 (35,668) (442,637) (421,480) (4,129,190) 470,499 (18,981,500) 1,550,512 3,028,036 6,182,458 (2,157,198) 15,450,850 - (791,499) (967,250) (2,808,497) 3,028,036 5,390,959 (3,124,448) 12,642,353 - - - - 3,028,036 5,390,959 (3,124,448) 12,642,353 The accompanying notes 1 to 15 form part of these interim condensed financial statements 3|Page
6. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) INTERIM STATEMENT OF CHANGES IN EQUITY FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) For the nine-month period ended 30 September 2019 Balance as at 1 January 2019 – (Audited) Comprehensive income for the period Balance as at 30 September 2019 (Unaudited) Share capital 100,000,000 100,000,000 Statutory reserve 6,323,372 6,323,372 Retained Earnings 60,425,394 12,642,353 73,067,747 Actuarial gain on post-employment benefits 195,576 195,576 Total equity 166,944,342 12,642,353 179,586,695 For the nine-month period ended 30 September 2020 Balance as at 1 January 2020 (Audited) Comprehensive loss for the period Balance as at 30 September 2020 (Unaudited) Share capital 100,000,000 100,000,000 Statutory reserve 8,400,375 8,400,375 Actuarial gain on post-employment benefits 79,118,421 154,474 (3,124,448) 75,993,973 154,474 Retained Earnings Total equity 187,673,270 (3,124,448) 184,548,822 The accompanying notes 1 to 15 form part of these interim condensed financial statements 4|Page
7. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) INTERIM STATEMENT OF CASH FLOWS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) Notes CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) / income before zakat Adjustments for: Depreciation of right of use assets Depreciation of property and equipment Amortization of intangible assets Finance cost Impairment on Islamic financing, net Net loss on modification of financial instruments Loss on the fair value of financial assets Government grant for SAMA funding for lending program Unrealized loss on shari’a alternatives for financial derivative instruments Provision for employees’ post-employment benefits (Increase) / decrease in operating assets Prepayments and other receivables Due from a related party Net investment in Islamic financing Restricted cash deposit (Decrease)/ increase in operating liabilities Trade payables Other payables and accruals Due to a related party Cash (used in) / generated from operations Zakat paid Employees’ post-employment benefits paid Net cash (used in) / generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment Purchase of intangible assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from financial facilities Repayment of financial facilities Finance cost paid Net cash generated from / (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period 11 7.1,10.5 7.2 10.4 9 For the nine-month period ended 30 September 30 September 2020 2019 (Unaudited) (Unaudited) (2,157,198) 15,450,850 1,765,868 1,519,165 1,132,126 10,881,100 5,278,593 18,881,448 23,523,845 (20,485,903) 1,426,473 1,451,752 882,330 9,434,408 2,612,892 - 442,637 421,480 810,000 789,586 (2,424,147) (286,133,258) (1,433,773) (673,907) 191,790 (38,394,450) 499,996 35,749,337 316,189 83,817 (212,250,154) (3,644,499) (262,806) (216,157,459) 13,150,545 719,200 (111,560) 7,851,385 (2,464,902) (426,595) 4,959,888 (3,562,421) (5,808,096) (9,370,517) (311,476) (991,187) (1,302,663) 476,061,468 (238,752,495) (8,022,950) 229,286,023 3,758,047 43,208,272 46,966,319 228,000,000 (220,564,703) (10,070,267) (2,634,970) 1,022,255 50,298,496 51,320,751 The accompanying notes 1 to 15 form part of these interim condensed financial statements 5|Page
8. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 1. LEGAL STATUS AND OPERATIONS Saudi Finance Company (formerly known as “Saudi Installment House Company”) (the “Company”) is a Saudi Closed Joint Stock Company registered in the Kingdom of Saudi Arabia under commercial registration number 7001351779 dated 23 Muharram 1411H (corresponding to 14 August 1990). The Company is engaged in leasing, commercial financing, small and medium business financing, and retail financing in accordance with the Saudi Arabian Monetary Authority (“SAMA”) approval number 351000071328 dated 3 Jumad Thani 1435H and license number 114102 dated 27 Muharram 1436H. Pursuant to the Ministry of Commerce and Investment Resolution numbered 291 dated 4 Muharram 1436H (corresponding to 28 October 2014), the Company has been converted from a Limited Liability Company to a Saudi Closed Joint Stock Company and changed its name from “Saudi Installment House Company” to “Saudi Finance Company”. The activities of the Company are conducted in accordance with Islamic Shari’a, which prohibits usury as determined by the Shari’a Supervisory Board of the Company. The Company carries out financing activities through various Shari'a-compliant instruments. The Company’s Head Office is located at the following address: Saudi Finance Company Sultan Center, Prince Sultan St, Alma’athar P.O. Box 18331 Riyadh 11415 Kingdom of Saudi Arabia The Company has the following branches S. No 1 2 3 4 5 6 7 8 9 Branch Olaya, Riyadh* Khurais, Riyadh Buraidah Dammam Jeddah Al-Ahsa Medina Hail* Badiya Riyadh* C.R. No. 1010366245 7006384437 7012640483 7011934028 7006393552 7007700193 7006257864 3350042118 1010391633 Date 23 Rabi Thani 1434H 17 Rabi Thani 1416H 26 Dhul-Hijjah 1417H 24 Rabi Awal 1423H 23 Rabi Thani 1434H 16 Jumad Awal 1435H 11 Sha’aban 1435H 11 Sha’aban 1435H 23 Dhul-Hijjah 1434H *The commercial registration of these branches has been expired. As of 30 September 2020, the Company is in under process of cancellation of these commercial registrations. 2. BASIS OF PREPARATION 2.1. STATEMENT OF COMPLIANCE These interim condensed financial statements of the Company have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting” that is endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements endorsed by the Saudi Organization for Certified Public Accountants (“SOCPA”). The results for the nine-month period ended 30 September 2020 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2020. These interim condensed financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s financial statements for the year ended 31 December 2019. Assets and liabilities in the interim statement of financial position are presented in the order of liquidity. 6|Page
9. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 2. BASIS OF PREPARATION (Continued) 2.2. BASIS OF MEASUREMENT These interim condensed financial statements are prepared under the historical cost method except for the following: a) Shari’a alternatives for financial derivative instruments measured at fair value; b) Investments measured at fair value; c) Assets repossessed held for sale measured at lower of carrying value and fair value less cost to sell; and d) Employees' post-employment benefits are recognized at the present value of future obligations using the Projected Unit Credit Method. 2.3. FUNCTIONAL AND PRESENTATION CURRENCY These interim condensed financial statements have been presented in Saudi Riyals (SR) which is the Company's functional and presentation currency. All financial information presented in SR has been rounded to the nearest SR, unless otherwise mentioned. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company’s annual financial statements as at 31 December 2019, except for the policy explained below: 3.1. Government Grant Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants are recognized in the interim statement of comprehensive (loss) / income on a systematic basis over the periods in which the Company recognizes the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable. The benefit of a government loan at a below-market rate of profit is treated as a government grant, measured as the difference between proceeds received and the fair value of the financing based on prevailing market profit rates. 4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS In preparing these interim condensed financial statements, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements. 7|Page
10. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES, AND ASSUMPTIONS (Continued) IMPACT OF COVID-19 ON EXPECTED CREDIT LOSSES (“ECL”) On 11 March 2020, the World Health Organization (“WHO”) declared the Coronavirus (“COVID19”) outbreak as a pandemic in recognition of its rapid spread across the globe. This outbreak has also affected the GCC region including the Kingdom of Saudi Arabia. Governments all over the world took steps to contain the spread of the virus. Saudi Arabia, in particular, has implemented closure of borders, released social distancing guidelines, and enforced countrywide lockdowns and curfews. Oil prices have also witnessed significant volatility during the current period, owing not just to demand issues arising from COVID-19 as the world economies go into lockdown, but also supply issues driven by volume which had predated the pandemic. The economic impacts of the above events, though the scale and duration of which remains uncertain, primarily include:    Significant business interruption arising from hindrance in generating new originations travel restrictions and unavailability of personnel etc.; Deterioration in the creditworthiness of customers in particular to those working or involved in ‘highly exposed sectors’ such as transportation, tourism, hospitality, entertainment, construction and retail; and A significant increase in economic uncertainty, evidenced by more volatile asset prices and currency exchange rates, and a general decline in interest rates globally. Collectively, these current events and the prevailing conditions require the Company to analyze the likely impact of these events on the Company’s business operations. The Company has adjusted the macroeconomic factors in the ECL model on the basis of the available data on 30 September 2020 but the same will be subject to change in the year ended 31 December 2020. The Board of Directors and the management of the Company have evaluated the current situation and accordingly, have activated its business continuity planning and other risk management practices to manage the potential business disruption COVID-19 outbreak may have on its operations and financial performance. Under the current situation, the scale and duration of this outbreak and its impact on credit, market and operational risks remain uncertain and the board of directors and management of the Company is continuously evaluating the evolving situation in liaison with the regulatory authorities and the related quantification of impact cannot be ascertained at this point. 5. NEW AMENDED STANDARDS AND INTERPRETATIONS THAT ARE NOT YET EFFECTIVE: There are no new standards issued, however, there are a number of amendments to standards that are effective from 1 January 2020, but they do not have a material effect on the Company’s interim condensed financial statements. 8|Page
11. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 6. RELATED PARTY TRANSACTIONS AND BALANCES Transactions during the period For the nine-month period ended 30 September 30 September Names of Nature of Nature of transactions 2020 2019 Related Party Relationship (Unaudited) (Unaudited) Financial facilities obtained 158,000,000 168,000,000 Financial facilities repaid (208,000,000) (178,000,000) Abu Dhabi Islamic Finance cost 3,936,586 4,803,132 Affiliate Bank Reimbursed for expenses 222,445 257,173 (ADIB), UAE paid on behalf of associates Expenses paid on behalf of (222,445) (65,383) associates Rent expense 106,500 166,500 Abdullah Ibrahim Collection on behalf of a Al Khorayef Sons Shareholder 97,817 184,715 shareholder Company, KSA Repaid to shareholder (14,000) (296,275) For the nine-month period ended 30 September 30 September 2020 2019 (Unaudited) (Unaudited) Key management personnel Salaries and other short-term employee benefits 7,333,662 6,182,349 Balances as at the period-end 30 September 2020 (Unaudited) Due to a related party Abdullah Ibrahim Al Khorayef Sons Company, KSA 83,817 30 September 2020 (Unaudited) Financial Facilities ADIB, UAE Accrued finance cost 31 December 2019 (Audited) 31 December 2019 (Audited) 118,000,000 168,000,000 2,170,710 120,170,710 4,611,419 172,611,419 6.1. Net Investment in Islamic Financings Nature of Relationship Key management Profit rate Tenure 9%-9.6% 24 – 60 months 30 September 31 December 2019 2020 (Audited) (Unaudited) 164,457 128,580 164,457 128,580 9|Page
12. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 7. NET INVESTMENT IN ISLAMIC FINANCINGS Gross investment in Islamic financings Unearned / deferred Islamic financing income Net investment in Islamic financings before provision for impairment Less: Provision for impairment Net investment in Islamic financings 30 September 2020 (Unaudited) 973,852,353 (208,189,000) 31 December 2019 (Audited) 715,350,569 (190,163,611) 765,663,353 525,186,958 (22,540,536) 743,122,817 (15,040,536) 510,146,422 7.1. In response to Covid-19, SAMA launched the Private Sector Financing Support Program (“PSFSP”) in March 2020 to provide the necessary support to the Micro Small and Medium Enterprises (“MSME”) as per the definition issued by SAMA. As part of the Deferred Payment Program (“DPP”), the Company deferred payments for 6 months to contracts that qualify as MSME with extending the tenure of the facility. During September 2020, SAMA further extended the same for additional 3 months for qualifying MSME. The accounting impact of these changes in terms of the net investment in Islamic Financing has been assessed and account for as per the requirements of IFRS 9 as a modification in terms of the arrangements (see note 12). Modification loss has been recognized under other income / (expenses) in interim statement of comprehensive (loss) / income. 7.2. During the period, the Company has provided financing amounting to SR 284.69 million to Small and Medium-Sized Entities (SME) that qualify for the facility under SAMA funding for lending program on profit rates below-market. These facilities are 95% secured under the Kafala program and these facilities are repayable in 30 monthly installments with the first installment is due after 6 months’ grace period from the date of the contract, which are discounted using average market prevailing profit rates for similar financing facilities to determine the fair value. The fair value of these amounts to SR 261.16 million. The difference between financing provided and its fair value is recorded in the interim statement of comprehensive (loss) / income as per the requirements of IFRS 9 (see Note 12). 7.3. The movement in the provision for impairment of Islamic financings during the period is as follows: Balance at beginning of the period / year Provided during the period / year Written off during the period / year Balance at the end of the period / year For the nine-month period ended 30 September 2020 (Unaudited) 15,040,536 7,500,000 22,540,536 For the year ended 31 December 2019 (Audited) 10,861,091 7,968,382 (3,788,937) 15,040,536 7.4. Investment in Islamic financing includes financing facilitates provided to key management (see Note 6.1). 10 | P a g e
13. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 8. SHARE CAPITAL The Company’s subscribed and paid-up share capital of SR. 100,000,000 is divided into 10,000,000 equity shares of SR. 10 each fully subscribed and paid, and distributed among shareholders as follows: Shareholders ADIB Two Financial Invest LLC, UAE Abdullah Ibrahim Al Khorayef Sons Company, KSA Mohamed Abdullah Al Khorayef Saad Abdullah Al Khorayef Hamad Abdullah Al Khorayef 9. 30 September 2020 and 31 December 2019 No. of Holding % Amount Shares 51% 5,100,000 51,000,000 46% 4,600,000 46,000,000 1% 100,000 1,000,000 1% 100,000 1,000,000 1% 100,000 1,000,000 100% 10,000,000 100,000,000 PROVISION FOR ZAKAT The movement in the provision for zakat is as follows: Balance at the beginning of the period / year Provided during the period / year Payment during the period / year Balance at the end of the period / year For the nine-month period ended 30 September 2020 (Unaudited) 10,667,912 967,250 (3,644,499) 7,990,663 For the year ended 31 December 2019 (Audited) 10,017,032 3,636,798 (2,985,918) 10,667,912 STATUS OF ASSESSMENTS During 2016, zakat assessments have been raised by the GAZT for the year’s 2005 to 2007 assessing additional zakat of SR 2,621,509 against which the Company has filed an appeal. No provision has been recorded in these financial statements in this respect, as the Company is confident of a favorable outcome on this matter. During 2018 the Company received certain queries related to appeal filed for 2005 to 2007 and the response was submitted to GAZT. Additionally, during the year ended 31 December 2019, GAZT provided a settlement assessment for the year 2014 to 2017 with zakat liability of SR 3,256,349 based on the methodology of 10% zakat calculated on the net profit before zakat. This has resulted in the reversal of the excess zakat provision of SR 12,382,326 held by the Company for these years. There has been no assessment rendered to the Company by GAZT from the years 2008 to 2013. The Company has submitted its Zakat declaration to GAZT for the year ended 31 December 2019 and has obtained the certificate valid until 18 Ramadan 1442H corresponding to 30 April 2021. 11 | P a g e
14. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 10. FINANCIAL FACILITIES Note Short-term financial facilities Long-term financial facilities Finance Cost payable 6 10.1 30 September 2020 (Unaudited) 118,000,000 452,527,247 2,206,578 572,733,825 31 December 2019 (Audited) 168,000,000 185,762,503 4,982,073 358,744,576 30 September 2020 (Unaudited) 31 December 2019 (Audited) 10.1. Long-term financial facilities Current portion Long-term financial facilities Non-current portion Long-term financial facilities 123,537,369 77,331,907 328,989,878 452,527,247 108,430,596 185,762,503 10.2. The Company obtained bank financial facilities from local Islamic banks for the purpose of financing working capital needs. These bank facilities bear finance costs at market prevailing rates and also have restricted cash deposits. 10.3. The Company has obtained long-term financial facilities amounting to SR 120 million from Social Development Bank (“SDB”), a Saudi Government-owned financial institution. The facilities obtained by the Company from Social Development Bank are in accordance with the provision of Islamic Sharia and according to the approval of the Sharia supervisory board of the Company. The Company is also required to pay an administrative fee of SR 2.505 million over the period of the financial facility which has been incorporated in 36 equal monthly installments commencing from March 2019. The terms of the financial facility require the management to disburse the amount to its customer which meets the criteria defined in the facility agreement with Social Development Bank. During the period, SDB has rescheduled the repayments of the facilities by deferring and extending the tenure of the facilities by12months. The accounting impact of these changes in terms of the Financial Facilities has been assessed and account for as per the requirements of IFRS 9 as a modification in terms of the arrangements (see Note 12). Modification gain has been recognized under other income in the interim statement of comprehensive (loss) / income. 10.4. During the period, the Company has obtained government financing amounting to SR 252.58 million from SAMA at a zero-profit rate to finance the Small and Medium-Sized Entities (SME) under SAMA funding for a lending program. These financings are repayable in 30 monthly installments with the first installment is due after 6 months’ grace period from the date of the contract, which is discounted using average market prevailing profit rates for similar financing facilities. The present value of these amounts to SR 232 million. The difference between financing received and its present value is recorded as a government grant and has been accounted for as per the requirements of IFRS. 12 | P a g e
15. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 10. FINANCIAL FACILITIES (Continued) 10.5. During the period, in accordance with the instructions of SAMA, Banks rescheduled the repayments of the financial facilities by deferring and extending the tenure of the facilities by 6-months. During September 2020, Banks further extended the same for additional 3 months. The accounting impact of these changes in terms of the financial facilities has been assessed and account for as per the requirements of IFRS 9 as a modification in terms of the arrangements (see Note 12). Modification gain has been recognized under other income in the interim statement of comprehensive (loss) / income. 10.6. The facility agreements include covenants which, among other things, require the Company to maintain certain financial ratios. As of 30 September 2020, the Company was not in compliance with certain covenants of the financing agreements. However, the management has secured the necessary waiver from the respective bank and accordingly believes that the financers will not exercise their right to demand accelerated / immediate payment of the outstanding balance from the Company. 11. IMPAIRMENT ON ISLAMIC FINANCING, NET Note Impairment on Islamic financing Write-off recoveries 12. 7.3 OTHER (EXPENSES) / INCOME, NET Note Government grant on SAMA funding for lending program Modification gain on financial liabilities Management fees and other income Modification loss on financial assets Loss on the fair value of financial assets 13. For the nine-month period ended 30 September 30 September 2020 2019 (Unaudited) (Unaudited) 7,500,000 7,218,382 (2,221,407) (4,605,490) 5,278,593 2,612,892 For the nine-month period ended 30 September 30 September 2020 2019 (Unaudited) (Unaudited) 10.4 20,485,903 - 10.5 5,472,977 2,937,890 (24,354,425) (23,523,845) (18,981,500) 1,550,512 1,550,512 7.1 7.2 FAIR VALUES OF FINANCIAL INSTRUMENTS The Company’s financial assets consist of cash and bank balances, investment, net investment in Islamic financing, restricted cash deposits and other receivables, its financial liabilities consist of trade payables, financial facilities, due to related party and other liabilities. The Company’s management determines the policies and procedures for both recurring fair value measurement and non-recurring measurement. 13 | P a g e
16. SAUDI FINANCE COMPANY (A Saudi Closed Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020 (All amounts in Saudi Riyals unless otherwise stated) 13. FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) All financial assets and liabilities are measured at amortized cost except investment carried at FVOCI and Shari’a alternatives for financial derivative instruments. The carrying amounts of all other financial assets and financial liabilities measured at amortized cost approximate to their fair values. Fair value Level 2 3 30 September 2020 1 FINANCIAL ASSET FVOCI designated Investment carried at FVOCI FINANCIAL LIABILITIES FVTPL mandatorily Shari’a alternatives for financial derivative instruments - - 892,850 892,850 - 930,175 - 930,175 Fair value Level 2 3 31 December 2019 1 FINANCIAL ASSET FVOCI designated Investment carried at FVOCI FINANCIAL LIABILITIES FVTPL mandatorily Shari’a alternatives for financial derivative instruments Total Total - - 892,850 892,850 - 487,538 - 487,538 14. SUBSEQUENT EVENTS There have been no significant subsequent events since the period-ended that would require additional disclosure or adjustment in these interim condensed financial statements (see Note 3). 15. DATE OF AUTHORIZATION FOR ISSUE These interim condensed financial statements were approved and authorized for issue on 27 October 2020G (corresponding to 10 Rabi’al Awwal 1442H) by the Board of Directors of the Company. 14 | P a g e