Bank Islam Brunei Darussalam: Financial Statements 2021

Transcription

1. Financial Statements 2021 DRIVING PROGRESS TOWARDS A SUSTAINABLE FUTURE , TOGETHER
2. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Contents Directors ' Report.….......................................................................................................................................1 Statement by Directors.….............................................................................................................................4 Shariah Advisory Body Report….................................................................................................................5 Independent Auditors' Report…....................................................................................................................7 Income Statements…........................................................................................................................... FS1 Statements of Comprehensive Income….............................................................................................. FS2 Statements of Financial Position…........................................................................................................ FS3 Statement of Changes in Equity - Group…......................................................................................................... FS5 Statement of Changes in Equity - Bank….......................................................................................... FS7 Statements of Cash Flows…................................................................................................................ FS9 Notes to the financial statements…....................................................................................................... FS12 1 Principal activities and general information…................................................................................... FS12 2 Summary of significant accounting policies…..................................................................................FS12 3 Profit from financing, leasing and investments….............................................................................. FS37 4 Profit paid/payable to depositors…................................................................................................ FS37 5 Net fee and commission income…................................................................................................. FS38 6 (Loss)/gain from derivative and investments…................................................................................FS38 7 Other operating income…............................................................................................................. FS39 8 Personnel expenses….................................................................................................................... FS39 9 Other expenses….......................................................................................................................... FS40 10 Allowance for impairment on financial assets…...............................................................................FS41 11 Zakat…......................................................................................................................................... FS41 12 Income tax expense…................................................................................................................... FS42 13 Dividend per ordinary share…....................................................................................................... FS43 14 Earnings per share…...................................................................................................................... FS43 15 Cash and cash equivalents….......................................................................................................... FS44 16 Balances with Brunei Darussalam Central Bank…..…....................................................................FS44 17 Placements with and financing and advances to banks….................................................................FS44 18 Government sukuks…................................................................................................................... FS44 19 Investments…............................................................................................................................... FS45 20 Derivative financial assets/(liabilities)…...........................................................................................FS46 21 Financing and advances….............................................................................................................. FS47 22 Finance lease receivables…............................................................................................................ FS50 23 Investments in subsidiaries….......................................................................................................... FS51 24 Investments in associate and joint ventures….................................................................................... FS52 25 Other assets…............................................................................................................................... FS55 26 Property and equipment…............................................................................................................. FS56 27 Investment property…................................................................................................................... FS58 28 Deferred tax assets/(liabilities)….................................................................................................... FS59 29 Deposits from customers…............................................................................................................ FS61 30 Deposits from banks and other financial institutions…...................................................................... FS61 31 Placements from other financial institutions…..................................................................................FS62
3. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 32 33 34 35 36 37 38 39 40 41 42 Contents Other liabilities …........................................................................................................................... FS62 Share capital….............................................................................................................................. FS63 Statutory and other reserves…....................................................................................................... FS64 Related party transactions…........................................................................................................... FS66 Financial risk management….......................................................................................................... FS71 Fair value of financial assets and liabilities….................................................................................... FS116 Leases........................................................................................................................................... FS123 Non-current assets and liabilities….................................................................................................FS125 Commitments….............................................................................................................................FS126 Capital adequacy…....................................................................................................................... FS126 Contingent liabilities…....................................................................................................................FS128
4. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Directors ’ Report Directors’ Report The directors have pleasure in presenting this report together with the audited financial statements of Bank Islam Brunei Darussalam Berhad (“the Bank”) and its subsidiaries (“the Group”) for the financial year ended 31 December 2021. Principal activities The Bank is principally engaged in the provision of Islamic banking business as allowed under the Islamic Banking Order, 2008 and Shariah principles. The subsidiaries are principally engaged in the provision of investment banking, Islamic hirepurchase, stockbroking, asset and fund management, leasing and management services. There were no significant changes in these activities during the financial year. Results Profit for the year Attributable to: Equity holders of the Bank Group B$’000 149,167 Bank B$’000 136,933 Dividends The amount of dividends paid by the Bank since 31 December 2020 are as follows: In respect of the financial year ended 31 December 2020: Final dividend of 17.40 cents per ordinary share paid on 19 August 2021 B$’000 126,106 1
5. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Directors ’ Report Directors The names of directors of the Bank at the date of this report and during the period under this report are: Dato Seri Setia Dr Awang Haji Mohd Amin Liew bin Abdullah Junaidi bin Hj Masri Dr Jan Hendrik van Greuning Hj Sofian bin Mohammad Jani Hajah Noraini binti Haji Sulaiman (Appointed on 1 December 2021) Dato Paduka Iqbal Ahmad Khan (Resigned on 30 November 2021) Mubashar Khokhar (Resigned on 30 November 2021) Directors’ benefits Neither at the end of the financial year, nor at any time during that year, did there exist any arrangements to which the Bank was a party, whereby the directors might acquire benefits by means of acquisition of shares in the Bank or any other corporate body. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefit included in the aggregate amount of emoluments received or due receivable by directors, or the fixed salary of a full time employee of the Bank as disclosed in Note 35 to the financial statements) by reason of a contract made by the Bank or a related corporation with any director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest. Directors’ interests The following directors who held office at the end of the financial year had, according to the register required to be kept under Section 145 (A), of the Companies Act, Chapter 39, an interest in shares of the Bank, as stated below: 2
6. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Directors ’ Report 3
7. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Statement by Directors 4
8. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Shariah Advisory Body Report 5
9. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Shariah Advisory Body Report 6
10. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Independent Auditors ’ Report 7
11. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Independent Auditors ’ Report 8
12. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Independent Auditors ’ Report 9
13. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Income Statements Year ended 31 December 2021 Group Note 2021 B $’000 Profits from financing, leasing and investments 3 Profits paid/payable to depositors 4 Net profit margin Bank 2020 2021 2020 B$’000 B$’000 B$’000 278,968 315,806 224,887 265,682 (21,358) (39,789) (18,741) (36,809) 257,610 276,017 206,146 228,873 Fee and commission income 5 39,679 36,479 39,135 35,849 Fee and commission expense 5 (9,539) (8,888) (9,539) (8,888) 30,140 27,591 29,596 26,961 Net fee and commission income (Loss)/gain from derivative and investments 6 (63,224) 36,592 (63,224) 36,592 Net foreign exchange gain/(loss) 6 71,421 (30,988) 71,421 (30,988) Other operating income 7 21,009 19,643 43,990 45,314 316,956 328,855 287,929 306,752 Total income Less: Personnel expenses 8 (74,727) (73,346) (64,803) (65,146) Other expenses 9 (67,507) (68,068) (64,132) (64,325) (142,234) (141,414) (128,935) (129,471) 174,722 187,441 158,994 177,281 (8,217) (17,997) (7,491) (15,180) 166,505 169,444 151,503 162,101 4,519 1,455 171,024 170,899 151,503 162,101 Total operating expenses Operating profit before allowances Less: Allowance for impairment on financial assets 10 Operating profit Share of profits of associate and joint ventures (net of tax) 24 Profit before zakat and tax - - Less: Zakat 11 (3,322) (3,141) (3,322) (3,141) Income tax expense 12 (18,535) (31,731) (11,248) (26,170) Total zakat and income tax expense (21,857) (34,872) (14,570) (29,311) Profit for the year 149,167 136,027 136,933 132,790 Equity holders of the Bank 149,167 136,027 136,933 132,790 Profit for the year 149,167 136,027 136,933 132,790 Profit for the year attributable to: Earnings per share Basic earnings per share (dollars) 14 0.21 0.19 Diluted earnings per share (dollars) 14 0.21 0.19 The accompanying notes form an integral part of these financial statements. FS1
14. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Statements of Comprehensive Income Year ended 31 December 2021 2021 B $’000 Group 149,167 Profit for the year Other comprehensive income: Items that will not be reclassified subsequently to profit or loss - Net change in fair value of equity investments at FVOCI 3,734 2020 B$’000 2021 B$’000 136,027 - Bank 136,933 3,734 2020 B$’000 132,790 - Items that are or may be reclassified subsequently to profit or loss - Net change in fair value of debt investments at FVOCI - Reclassified to profit or loss - Foreign currency translation differences Share of other comprehensive income of associate Tax on other comprehensive income Other comprehensive income for the year, net of tax (4,801) 8,311 (4,801) (6,215) 8,311 (6,215) (946) (11) (58) - - 775 (2,444) - - 1,811 (997) 1,811 (5,471) (946) (997) (4,707) 3,866 6,368 Total comprehensive income for the year 144,460 139,893 131,462 139,158 Attributable to: Equity holders of the Bank Total comprehensive income for the year 144,460 144,460 139,893 139,893 131,462 131,462 139,158 139,158 The accompanying notes form an integral part of these financial statements. FS2
15. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Statements of Financial Position As at 31 December 2021 Group Note Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments Derivative financial assets Financing and advances Finance lease receivables Investments in subsidiaries Investments in associate and joint ventures Other assets Property and equipment Investment property Deferred tax assets Equity Share capital Statutory reserves fund Other reserves Total equity attributable to equity holders of the Bank Total equity Total liabilities and equity 2020 B $’000 2021 B$’000 2020 B$’000 15 3,264,565 2,622,110 3,263,506 2,621,144 16 492,042 488,898 452,343 449,900 17 1,180,555 1,045,882 1,623,803 1,463,555 18 19 20 21 22 23 24 25 26 27 28 59,986 1,141,901 27,869 4,182,666 12,559 46,691 42,106 89,804 22,431 7,718 10,570,893 10,000 1,263,279 48,393 4,009,238 12,588 41,843 47,996 89,654 23,927 6,268 9,710,076 59,986 1,141,901 27,869 3,457,657 12,559 32,844 22,358 39,947 72,942 22,431 6,105 10,236,251 10,000 1,263,279 48,393 3,282,279 12,588 32,844 22,358 46,311 76,271 23,927 5,026 9,357,875 29 8,369,389 6,736,910 8,261,628 6,631,417 30 580,548 749,206 492,665 622,480 31 20 32 113,775 13,173 143,716 3,978 58,079 9,282,658 733,824 11,511 132,708 3,285 72,751 8,440,195 113,775 13,173 133,026 3,978 43,438 9,061,683 733,824 11,511 126,813 3,285 59,333 8,188,663 33 507,325 507,325 507,325 507,325 34 34 571,971 208,939 563,516 199,040 527,114 140,129 520,267 141,620 1,288,235 1,269,881 1,174,568 1,169,212 1,288,235 1,269,881 1,174,568 1,169,212 10,570,893 9,710,076 10,236,251 9,357,875 Total assets Liabilities and equity Deposits from customers Deposits from banks and other financial institutions Placements from other financial institutions Derivative financial liabilities Other liabilities Zakat Provision for taxation Total liabilities 2021 B$’000 Bank The accompanying notes form an integral part of these financial statements. FS3
16. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS4
17. At 31 December 2021 13 507 ,325 - 571,971 - 8,455 - 563,516 8,465 - (2,751) (4,696) (4,696) 15,912 (110) - - (11) (11) (99) Foreign currency Statutory Fair value translation reserve reserve reserve B$’000 B$’000 B$’000 200,584 (126,106) (126,106) (5,704) 149,167 149,167 183,227 Retained profits B$’000 --------------Other reserves------------- The accompanying notes form an integral part of these financial statements. Transactions with owners of the Bank Contributions and distributions Dividends paid on ordinary shares Total contributions and distributions - Transfers to statutory and other reserves 507,325 Share capital B$’000 34 Note Profit for the year Other comprehensive income Total comprehensive income for the year At 1 January 2021 Group Statement of Changes in Equity Year ended 31 December 2021 1,288,235 (126,106) (126,106) - 149,167 (4,707) 144,460 1,269,881 Total shareholders’ funds B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS5
18. At 31 December 2020 13 507 ,325 - 563,516 - 8,041 - 555,475 15,912 - - 3,924 3,924 11,988 (99) - - (58) (58) (41) Foreign currency Statutory Fair value translation reserve reserve reserve B$’000 B$’000 B$’000 183,227 (133,209) (133,209) (8,041) 136,027 136,027 188,450 Retained profits B$’000 --------------Other reserves------------- The accompanying notes form an integral part of these financial statements. Transactions with owners of the Bank Contributions and distributions Dividends paid on ordinary shares Total contributions and distributions - Transfers to statutory reserve 507,325 Share capital B$’000 34 Note Profit for the year Other comprehensive income Total comprehensive income for the year At 1 January 2020 Group Statement of Changes in Equity (Cont'd) 1,269,881 (133,209) (133,209) - 136,027 3,866 139,893 1,263,197 Total shareholders’ funds B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS6
19. At 31 December 2021 Transactions with owners of the Bank Contributions and distributions Dividends paid on ordinary shares Total contributions and distributions 507 ,325 - 527,114 - 6,847 - 520,267 Statutory reserve B$’000 3,765 - (2,751) (5,471) (5,471) 11,987 136,364 (126,106) (126,106) (4,096) 136,933 136,933 129,633 -------Other reserves-------Fair value Retained reserve profits B$’000 B$’000 The accompanying notes form an integral part of these financial statements. 13 - Transfers to statutory and other reserves 507,325 Share capital B$’000 34 Note Profit for the year Other comprehensive income Total comprehensive income for the year At 1 January 2021 Bank Statement of Changes in Equity Year ended 31 December 2021 1,174,568 (126,106) (126,106) - 136,933 (5,471) 131,462 1,169,212 Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS7
20. At 31 December 2020 Transactions with owners of the Bank Contributions and distributions Dividends paid on ordinary shares Total contributions and distributions 507 ,325 520,267 - 6,640 - 513,627 Statutory reserve B$’000 11,987 - - 6,368 6,368 5,619 129,633 (133,209) (133,209) (6,640) 132,790 132,790 136,692 --------Other reserves--------Fair value Retained reserve profits B$’000 B$’000 The accompanying notes form an integral part of these financial statements. 13 - Transfers to statutory reserve 507,325 Share capital B$’000 34 Note Profit for the year Other comprehensive income Total comprehensive income for the year At 1 January 2020 Bank Statement of Changes in Equity (cont'd) 1,169,212 (133,209) (133,209) - 132,790 6,368 139,158 1,163,263 Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS8
21. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Statements of Cash Flows Year ended 31 December 2021 Cash flows from operating activities Profit before zakat and tax Adjustments for : Dividend income from subsidiaries Dividend income from associate Allowance for impairment on financing and advances made Allowance for impairment on receivables (reversed)/made Change in fair value of derivatives and investments Depreciation/amortisation of property and equipment and investment property Allowance for impairment on investments made, net Loss on disposal of property and equipment Share of profits of associate and joint ventures Changes in: Deposits from customers Deposits from banks and other financial institutions Other liabilities Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments Placements from other financial institutions Financing and advances Other assets Zakat paid Taxes paid Net cash generated from/(used in) operating activities Group 2021 B$’000 171,024 2020 B$’000 2021 B$’000 170,899 Bank 2020 B$’000 151,503 162,101 - - (25,406) (446) (27,200) (362) 8,319 14,498 7,761 12,800 (359) 352 (359) 352 (8,197) (5,604) (8,197) (5,604) 17,930 19,990 15,184 17,092 257 3,147 89 2,028 131 (1,455) 201,958 8 140,137 161,207 (1,712,576) 1,621,146 138 (4,519) 184,593 1,623,414 (1,718,821) (168,658) 10,516 211,817 (82,713) (129,815) 6,363 184,069 (74,296) (3,144) (53,872) (2,443) (49,520) (125,483) 82,518 (150,890) 58,618 (49,986) 125,086 (620,049) (178,490) 5,919 803,718 (3,042) (32,322) (102) (209,847) 612,355 (26,965) 53,780 (923,647) (3,109) (35,570) (49,986) 125,086 (620,049) (179,882) 6,393 766,060 (3,042) (25,889) (102) (209,847) 612,355 (4,464) 80,824 (959,977) (3,109) (28,647) 768,354 (962,326) 737,129 (991,733) The accompanying notes form an integral part of these financial statements. FS9
22. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Statements of Cash Flows (Cont'd) Year ended 31 December 2021 Group 2021 B$’000 Cash flows from investing activities Proceeds from sale of property and equipment Purchase of property and equipment Acquisition of investment property Dividend income from subsidiaries Dividend income from associate Net cash (used in)/generated from investing activities Cash flows from financing activities Dividends paid Payment of lease liabilities Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash and cash equivalents held Cash and cash equivalents at 31 December Bank 2020 B$’000 2021 B$’000 2020 B$’000 1,545 (14,213) (12) 446 (7,477) (1,284) 362 (7,332) (12) 25,406 446 (5,810) (1,284) 27,200 362 (12,234) (8,399) 18,508 20,468 (126,106) (3,992) (130,098) (133,209) (3,622) (136,831) 626,022 2,622,110 (1,107,556) 3,732,366 625,929 2,621,144 (1,107,735) 3,731,579 16,433 (2,700) 16,433 (2,700) 3,263,506 2,621,144 3,264,565 2,622,110 (126,106) (3,602) (129,708) (133,209) (3,261) (136,470) The accompanying notes form an integral part of these financial statements. FS10
23. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS11
24. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Notes to the financial statements These notes form an integral part of and should be read in conjunction with the accompanying financial statements . 1 Principal activities and general information Bank Islam Brunei Darussalam Berhad (“the Bank”) is incorporated and domiciled in Negara Brunei Darussalam and the registered office of the Bank is Bangunan BIBD, Lot 159, Jalan Pemancha, Bandar Seri Begawan BS8711, Negara Brunei Darussalam. The Bank is principally engaged in the provision of Islamic banking business in accordance with Shariah principles as allowed under the Islamic Banking Order, 2008. The subsidiaries are principally engaged in the provision of Islamic hire-purchase, stockbroking, asset and fund management, leasing and management services. There were no significant changes in these activities during the financial year. The consolidated financial statements of the Bank and its subsidiaries (together referred to as “the Group” and individually as “Group entities”) as at and for the year ended 31 December 2021 comprise the results and financial position of the Bank, its subsidiaries and the Group's interest in equity-accounted investees. 2 Summary of significant accounting policies 2.1 Basis of preparation The accounting policies set out below have been applied consistently to all periods presented in these financial statements, unless otherwise indicated. The accounting policies have been applied consistently by Group entities. (a) Statement of compliance The financial statements of the Group and of the Bank have been prepared in accordance with the International Financial Reporting Standards (“IFRS”). FS12
25. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Standards adopted during the year 31 December 2021 The Group have applied the following IFRSs , amendments to and interpretations of IFRS for the first time for the annual period beginning on 1 January 2021: ● Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) ● Covid-19-Related Rent Concessions (Amendment to IFRS 16) The Group has limited balance sheet exposures to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. The Group is in the process of amending or preparing to amend contractual terms in response to IBOR reform. This transition will be dependent on the progress of the IBOR reform in the various jurisdictions that the Group has exposure to. For existing contracts that are indexed to an IBOR that mature after the expected cessation of the IBOR rate, the Group will amend the contractual terms of affected contracts based on prevailing market practice in the respective jurisdiction. See Note 36(b) for related disclosures about risks. The application of these amendments to standards and interpretations does not have a material effect on the financial statements. Standards and interpretations issued but not yet adopted There are no relevant standards, interpretations, and amendments that are effective for annual periods beginning after 1 January 2021 that are expected to have a material impact on the Group’s financial statements. (b) Basis measurement The financial statements have been prepared under the historical cost convention except for derivative financial instruments, financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income ("FVOCI"), which have been measured at fair value. (c) Functional and presentation currency The financial statements are presented in Brunei dollars (B$), which is the Bank’s functional currency and all values are rounded to the nearest thousand (B$’000), unless otherwise stated. FS13
26. Bank Islam Brunei Darussalam Berhad and its Subsidiaries (d) Financial Statements Use of estimates and judgements 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 critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following note: ● Financial instruments - Financing and advances (Note 21) Coronavirus (COVID-19) pandemic The COVID-19 pandemic has increased the estimation uncertainty in the preparation of the financial statements. The estimation uncertainty is associated with: ● the extent and duration of the expected economic downturn (and forecasts for key economic factors including gross domestic product (GDP)); ● the extent and duration of the disruption to business arising from the containment measures by government, businesses and consumers to contain the spread of the virus; ● the effectiveness of government measures that have and will be put in place to support businesses and consumers through this disruption and economic downturn. The Group and Bank have developed accounting estimates based on forecasts of economic conditions which reflect expectations and assumptions as at 31 December 2021 about future events that management believes are reasonable in the circumstances. There is a considerable degree of judgement involved in preparing forecasts. The underlying assumptions are also subject to uncertainties which are often outside the control of the Group and Bank. Accordingly, actual economic conditions are likely to be different from those forecast since anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting estimates included in these financial statements. The significant accounting estimate impacted by these forecasts and associated uncertainties is predominantly related to expected credit losses. FS14
27. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .2 Basis of consolidation Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures goodwill at the acquisition date as: ● ● the fair value of the consideration transferred; plus the recognised amount of any non-controlling interest in the acquiree; plus ● if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less ● the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at proportionate share of the acquiree’s identifiable net assets at the acquisition date. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. Acquisition of non-controlling interest The Group treats all changes in its ownership interest in subsidiary that do not result in loss of control as equity transactions between Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is recognised in Group reserves. Subsidiaries Subsidiaries are entities controlled by the Bank. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control exists when the Group is exposed, 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. Potential voting rights are considered when assessing control only when such rights are substantive. FS15
28. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The Group considers it has de facto power over an investee when , despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. Investments in subsidiaries are stated in the Bank’s statement of financial position at cost less impairment losses, if any. Where there is indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount. Loss of control Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee. Joint ventures Joint venture is an entity in which the Group has joint control. In the Bank’s financial statements, investment in joint ventures is stated at cost less allowance for impairment, if any. The investment in a joint venture is accounted for in the consolidated financial statements using the equity method less any impairment losses. The consolidated financial statements include the Group’s share of the profit or loss of the joint venture, to align the accounting policies with those of the Group, from the date that joint control commences until the date that joint control ceases. Under the equity method, the Group’s investment in joint ventures is carried in the balance sheet at cost, plus post-acquisition changes in the Group’s share of net assets of the joint ventures, less allowance for impairment, if any. The Group recognises its share of the results of operations of the joint venture in the consolidated income statement. Associate An associate is an entity in which the Group has significant influence, but not control or joint control, over the financial and operating policies of these entities. Significant influence is presumed to exist when the Group holds 20% or more of the voting power of another entity. FS16
29. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Investment in associate is accounted for in the Group ’s consolidated financial statements using the equity method less any impairment losses. The cost of the investment includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the associate, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in the associate, the carrying amount of that interest including any long-term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and the carrying amount of the investment at the date when equity method is discontinued is recognised in the profit or loss. When the Group’s interest in an associate decreases but does not result in a loss of significant influence, the retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to profit or loss if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities. In the Bank’s separate financial statements, the investment in associate is stated at cost less impairment losses, if any. The cost of the investment includes transaction costs. Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly to the equity holders of the Bank, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the equity holders of the Bank. Non-controlling interest in the results of the Group is presented in the consolidated profit or loss and other comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and equity holders of the Bank. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. Transactions eliminated on consolidation In preparing the consolidated financial statements, intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated. FS17
30. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group ’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. 2.3 Foreign currency Foreign currency transactions and balances In preparing the financial statements of the individual entities, transactions in foreign currencies are translated into the respective entity’s functional currency at the exchange rate prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between the amortised cost in the functional currency at the beginning of the year, adjusted for effective yield and payments during the year, and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the year. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the reporting date, except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of an equity investment designated at fair value through other comprehensive income ("FVOCI") which are recognised in other comprehensive income. 2.4 Cash and cash equivalents Cash and cash equivalents include cash in hand, balances with banks and other financial institutions and money-at-call and short notice and interbank placements with original maturities not exceeding three months. 2.5 Financial instruments Recognition and initial measurement Receivables and debt securities 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. FS18
31. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements A financial asset or financial liability is initially measured at fair value plus , for an item not at fair value through profit or loss ("FVTPL"), transaction costs that are directly attributable to its acquisition or issue. The Group categorises its financial instruments as follows: Financial assets (a) Classification On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Group changes its business model for managing financial assets. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: ● the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and ● the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and profit on the principal amount outstanding. A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: ● the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and ● the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and profit 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 fair value in OCI. This election is made on an investment-byinvestment basis. The Bank fair values the equity investments at each of the subsequent reporting dates and gains and losses are recognised in OCI. However, dividends are recognised in profit or loss unless they clearly represent a repayment of part of the cost of the investment. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss. However, the Bank may transfer the cumulative gain or loss within equity. All other financial assets are classified as measured at FVTPL. FS19
32. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements In addition , on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. 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 profit, maintaining a particular yield rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets; ● how the performance of the portfolio is evaluated and reported to 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 management is 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. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group’s stated objective for managing the financial assets is achieved and how cash flows are realised. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Assessment whether contractual cash flows are solely payments of principal and profit For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Profit’ 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 profit, 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; FS20
33. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements ● ● ● leverage features; prepayment and extension features; terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features); and ● features that modify consideration of the time value of money (e.g. periodic reset of yield rates). The Group holds a portfolio of long-term fixed rate financing for which the Group has the option to propose to revise the yield rate at periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the revised rate or redeem the financing at par without penalty. The Group has determined that the contractual cash flows of these financing are solely payments of principal and profit because the option varies the yield rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding. Non-recourse financing In some cases, financing made by the Group that are secured by collateral of the borrower limit the Group’s claim to cash flows of the underlying collateral (non-recourse financing). The Group applies judgment in assessing whether the non-recourse financing meet the SPPP criterion. The Group typically considers the following information when making this judgement: ● whether the contractual arrangement specifically defines the amounts and dates of the cash payments of the financing; ● the fair value of the collateral relative to the amount of the secured financial asset; ● the ability and willingness of the borrower to make contractual payments, notwithstanding a decline in the value of collateral; ● whether the borrower is an individual or a substantive operating entity or is a special-purpose entity; ● the Group’s risk of loss on the asset relative to a full-recourse financing; ● the extent to which the collateral represents all or a substantial portion of the borrower’s assets; and ● whether the Group will benefit from any upside from the underlying assets. Reclassifications Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing financial assets. FS21
34. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements (b) Impairment The Group recognises loss allowances for ECLs on the following financial instruments that are not measured at FVTPL: ● ● financing and advances; placements with and financing and advances to banks; ● financial instruments that are debt instruments; ● ● ● lease receivables; financial guarantee contracts issued; and commitments issued. No impairment loss is recognised on equity investments. The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, which are measured as 12-month ECL: ● debt investment securities that are determined to have low credit risk at the reporting date; and ● other financial instruments (other than lease receivables) on which credit risk has not increased significantly since their 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 and including 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. The Group considers a financial asset to be in default when: ● ● the borrower 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. Loss allowances for lease receivables are always measured at an amount equal to lifetime ECL. The Group considers a debt security to have low credit risk when their credit risk rating is equivalent to the globally understood definition of 'investment grade'. The Group considers this to be BBB- or higher. FS22
35. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date . Measurement of ECLs ECL are a probability-weighted estimate of credit losses. They are measured as follows: ● financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive); ● financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows; ● undrawn commitments: as the present value of the difference between the contractual cash flows that are due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive; and ● financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover. Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised and ECL are measured as follows: ● if the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. ● if the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective yield rate of the existing financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt financial assets carried 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. FS23
36. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Evidence that a financial asset is credit-impaired includes the following observable data : ● ● ● ● ● significant financial difficulty of the borrower or issuer; a breach of contract such as a default or past due event; the restructuring of a financing or advance by the Group on terms that the Group would not consider otherwise; it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or the disappearance of an active market for a security because of financial difficulties. A financing that has been renegotiated due to a deterioration in the borrower's condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a retail financing that is overdue for 90 days or more is considered impaired. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Group considers the following factors. ● ● ● the rating agencies' assessments of creditworthiness. the country's ability to access the capital markets for new debt issuance. the probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. ● the international support mechanisms in place to provide the necessary support as 'lender of last resort' to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria. Presentation of allowance for ECL in the consolidated statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: ● financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; ● commitments and financial guarantee contracts: generally, as a provision; ● where a financial instrument includes both a drawn and an undrawn component, and the Group cannot identify the ECL on the commitment component separately from those on the drawn component: the Group presents a combined loss allowance for both components. The combined amount is presented as a deduction from the gross carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn component is presented as a provision; and ● debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve. FS24
37. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Write-off Financing and advances and debt securities are written off (either partially or in full) when there is no realistic prospect of recovery. This is generally the case when the Group determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-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. Financial liabilities Financial liabilities are initially recognised on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument, at fair value, net of transaction cost incurred. Subsequent to initial recognition, these financial liabilities are carried at amortised cost, using the effective yield rate method, except for trading liabilities and liabilities designated at fair value, which are held at fair value through profit or loss. (a) Deposits and balances of banks and other financial institutions Deposits and balances of banks and other financial institutions comprise money market deposits. These deposits and balances are classified as financial liabilities held at amortised cost. (b) Deposits of non-bank customers Deposits of non-bank customers comprise money market deposits placed with the Group. These deposits are classified as financial liabilities held at amortised cost. The Group designates certain financial liabilities as at FVTPL in either of the following circumstances: ● the liabilities are managed, evaluated and reported internally on a fair value basis, or ● the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise. As at financial years ended 31 December 2020 and 2021, there are no financial liabilities that have been designated at FVTPL. FS25
38. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Derivative financial instruments The Group holds derivative financial instruments to hedge its foreign currency and yield rate risk exposures . Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Derivatives are initially measured at fair value and any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss. Non-integral financial guarantee contracts The Group assesses whether a financial guarantee contract held is an integral element of a financial asset that is accounted for as a component of that instrument or is a contract that is accounted for separately. The factors that the Group considers when making this assessment include whether: ● ● ● ● the guarantee is implicitly part of the contractual terms of the debt instrument; the guarantee is required by laws and regulations that govern the contract of the debt instrument; the guarantee is entered into at the same time as and in contemplation of the debt instrument; and the guarantee is given by the parent of the borrower or another company within the borrower’s group. If the Group determines that the guarantee is an integral element of the financial asset, then any premium payable in connection with the initial recognition of the financial asset is treated as a transaction cost of acquiring it. The Group considers the effect of the protection when measuring the fair value of the debt instrument and when measuring ECL. If the Group determines that the guarantee is not an integral element of the debt instrument, then it recognises an asset representing any prepayment of guarantee premium and a right to compensation for credit losses. A prepaid premium asset is recognised only if the guaranteed exposure neither is creditimpaired nor has undergone a significant increase in credit risk when the guarantee is acquired. These assets are recognised in ‘other assets’. The Group presents gains or losses on a compensation right in profit or loss in the line item ‘impairment losses on financial instruments’. Fair value measurement The fair values of financial instruments traded in active markets (such as over-the-counter securities and derivatives) are based on quoted market prices at the reporting date derived from market prices. For unquoted financial instruments, fair value is determined using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models. FS26
39. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial assets expire , or it transfers the right 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 risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss. A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party 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 legal 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. Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity. 2.6 Property and equipment (a) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of selfconstructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. FS27
40. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements When significant parts of an item of property and equipment have different useful lives , they are accounted for as separate items (major components) of property and equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of property and equipment and is recognised net within “other income” and “other expenses” respectively in profit or loss. (b) Subsequent costs The cost of replacing a component of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Bank, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. (c) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated separately. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group or the Bank will obtain ownership by the end of the lease term. Land is not depreciated. Property and equipment under construction are not depreciated until the assets are ready for their intended use. The estimated useful lives for the current period are as follows: ● ● ● ● ● Leasehold improvements Equipment, furniture and fittings Motor vehicles Asset under lease Computer software Over the lease term and not more than 10 years 3-5 years 7 years 4 years or lease terms which ever is shorter 5 years Depreciation methods, useful lives and residual values are reassessed at end of the reporting period. FS28
41. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .7 Investment property Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the supply of services or for administrative purposes. The Group holds investment property which has been acquired through the enforcement of security over financing and advances. Investment property is initially measured at cost and subsequently at cost less accumulated depreciation and impairment loss. The cost of replacing a component of an item of investment property is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Bank, and its cost can be measured reliably. Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting. Depreciation on investment property is recognised in profit or loss on a straight-line basis over the lease term and not more than 50 years. 2.8 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. i. 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. FS29
42. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The Group recognises a right-of-use asset and a lease liability at the lease commencement date . The rightof-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 straight-line 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 right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use 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 right-of-use 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 profit rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental profit rate. Generally, the Group uses its incremental profit rate as the discount rate. The Group determines its incremental borrowing rate by obtaining profit 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 following: ● ● ● ● 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. The lease liability is measured at amortised 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. FS30
43. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 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 and equipment’ and lease liabilities in ‘other liabilities’ in the statement of financial position. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. ii. 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 standalone 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 of 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 the 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 in IFRS 9 to the net investment in the lease (see Note 22). The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease. The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’. FS31
44. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .9 Impairment for non-financial assets The carrying amount of the Group's non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or cashgenerating units (“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 is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are 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. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised. 2.10 Deposits, financing and other liabilities Deposits and financing are the Group’s sources of funding. When the Group sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (collateralised Murabahah or repurchase agreement), the arrangement is accounted for as a deposit, and the underlying asset continues to be recognised in the Group’s financial statements. Deposits and financing are initially measured at fair value minus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective profit method. Other liabilities are stated at cost which is the fair value of the amounts expected to be paid in future for the goods and services received or to transfer the liability. FS32
45. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .11 Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract. 2.12 Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is not recognised in the statement of financial position and is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. 2.13 Contingent assets A contingent asset is a possible asset that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. The Group does not recognise contingent assets in the financial statements but discloses its existence where inflows of economic benefits are probable, but not virtually certain. 2.14 Share capital Ordinary shares and the golden share are classified as equity in the statement of financial position. Costs directly attributable to the issuance of new equity shares are taken to equity as a deduction from the proceeds. FS33
46. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .15 Recognition of income and expense Profit from financing and leasing and profit paid/payable to depositors Profit from financing and leasing and profit paid/payable to depositors are recognised in the profit or loss using the effective yield rate method. The effective yield rate is exactly the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments to: ● ● the gross carrying amount of the financial asset; or the amortised cost of the financial liability. When calculating the effective yield rate, the Group estimated future cash flows considering all contractual terms of financial instruments, but not ECL. For purchased or originated credit-impaired financial assets, a credit-adjusted yield rate is calculated using estimated future cash flows including ECL. The calculation includes all fees and transaction costs integral to the effective yield rate, as well as premium or discounts. Once a financial asset or a group of financial assets have been written down as a result of an impairment loss, income is recognised using the yield rate used to discount the future cash flows for the purpose of measuring the impairment loss. Fee and commission Fee and commission income and expense that are integral to the effective yield rate on a financial asset or financial liability are included in the effective yield rate. Other fee and commission income, including financing arrangements, participation fees, underwriting commissions and brokerage fees are recognised as income earned. Fees from advisory and corporate finance activities are recognised net of service taxes and discounts on completion of each stage of the assignment. Other fee and commission expense relate mainly to transaction and service fees, which are expensed as the services are received. Profit from placements and investments Profit from deposit placements and investments are recognised on an effective yield basis. Dividend income Dividend income from subsidiaries and other investments are recognised when the Bank’s rights to receive payment is established. FS34
47. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .16 Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years. Provision for taxation is made on the basis of the profit for the year as adjusted for taxation purposes in accordance with the provisions of the Income Tax Act (Chapter 35) and amendments thereto. Deferred tax is recognised 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 recognised 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 ventures to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that they will not reverse in the foreseeable future; and taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are recognised 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 the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversal of existing temporary differences, are considered, based on the 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 realised; such reductions are reversed when the probability of future taxable profit improves. The measurement of deferred taxes reflects the tax consequences that would allow the manner in which the Group expects, at reporting date, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the carrying amount of the investment property is presumed to be recovered through sale, and the Group has not rebutted this presumption. 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, and reflects uncertainty related to income taxes, if any. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. FS35
48. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2 .17 Zakat This represents tithes payable by the Group to comply with the principles of Shariah and as approved by the Shariah Advisory Board. 2.18 Employee benefits Short term employee benefits Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Defined contribution plan The Group contributes to the Tabung Amanah Pekerja (“TAP”) and the Supplemental Contributory Pension scheme (“SCP”), both defined contribution plans regulated and managed by the Government of Negara Brunei Darussalam, which applies to the majority of the employees. Obligations for contributions to defined contribution plans are recognised as an employee benefits expense in income statement in the period during which related services are rendered by employees. The Bank operates an Employee Retirement Fund (“ERF”) with monthly contributions made to the pension fund based on a percentage of the gross emoluments excluding certain allowances. The Bank matches employees’ contributions up to a maximum of 12% (inclusive of TAP contribution) of contribution made by the employee. The contributions to TAP and ERF are charged to profit or loss in the period to which the contributions relate. Other long-term employee benefits The Group’s net obligation in respect of other long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise. 2.19 Earnings per ordinary share The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”). 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 that is attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. FS36
49. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 3 Profits from financing , leasing and investments 2021 B$’000 Financing and leasing Securities - Profit from sukuk - Dividend income Balances and placements with banks and other financial institutions Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 225,217 232,269 170,068 176,709 36,391 1,769 38,875 1,967 36,391 1,769 38,875 1,967 15,591 42,695 16,659 48,131 278,968 315,806 224,887 265,682 Financing and leasing profits comprise profits and expenses calculated using the effective yield method that relate to financial assets not carried at fair value through profit or loss. During the year, the Group's and Bank's profits from financing, leasing and investments are from financial assets at amortised cost with the exception of profit from sukuk and dividend income from investments at FVTPL of B$5,838,000 (2020: B$2,572,000) and profit from investments at FVOCI of B$17,321,000 (2020: B$17,522,000). 4 Profits paid/payable to depositors Deposits from customers: - Mudharabah fund - Non-Mudharabah fund 2021 B$’000 Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 159 18,215 18,374 152 32,899 33,051 159 16,850 17,009 152 31,507 31,659 2,984 21,358 6,738 39,789 1,732 18,741 5,150 36,809 Deposits and placements of banks and other financial institutions: - Non-Mudharabah fund Total During the year, the Group and Bank's profits paid/payable to depositors are entirely from financial liabilities measured at amortised cost. FS37
50. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 5 Net fee and commission income 2021 B $’000 Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 Fees and commission income: - Trade finance and Al-Kafalah (guarantee) - Ar-Rahnu (pawn/pledge) - Credit and debit cards - Commission - Others Total fee and commission income 3,710 2,957 3,710 2,957 2,421 21,880 4,999 6,669 39,679 2,395 20,624 4,761 5,742 36,479 2,421 21,880 4,720 6,404 39,135 2,395 20,624 4,498 5,375 35,849 Fee and commission expense: - Credit and debit cards (9,539) (8,888) (9,539) (8,888) Total fee and commission expense (9,539) (8,888) (9,539) (8,888) Net fee and commission income 30,140 27,591 29,596 26,961 The Group and Bank's net fee and commission income are entirely from financial assets and liabilities measured at amortised cost. 6 (Loss)/gain from derivative and investments 2021 B$’000 Net fair value (loss)/gain on derivatives Fair value (loss)/gain on investments designated at fair value through profit and loss Gain from sale of debt securities at fair value through other comprehensive income Gain from sale of investment securities at amortised cost Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 (64,677) 33,502 (64,677) 33,502 (4,275) 1,918 (4,275) 1,918 5,705 1,027 5,705 1,027 23 145 23 145 Total Net foreign exchange gain/(loss) Total (63,224) 71,421 8,197 36,592 (30,988) 5,604 (63,224) 71,421 8,197 36,592 (30,988) 5,604 Net fair value (loss)/gain on derivatives Net foreign exchange gain/(loss) Net effect from derivatives and foreign exchange gain (64,677) 71,421 33,502 (30,988) (64,677) 71,421 33,502 (30,988) 6,744 2,514 6,744 2,514 FS38
51. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The foreign exchange risk exposure is managed through the use of foreign exchange forwards and swaps to hedge currency risk as set out in Note 36 . The Bank does not adopt hedge accounting for such currency hedges, so in accordance with the accounting policies in Note 2, the foreign exchange gains or losses on assets are recognised in net foreign exchange loss in the income statements and the fair value movements in the forward currency contracts are included in gain or loss from derivatives and investments. 7 Other operating income 2021 B$’000 Dividend income from subsidiaries and associate Rental income from investment property Recovery of financing written off Others Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 - - 25,852 27,562 2,665 3,004 2,665 3,004 15,423 2,921 21,009 15,223 1,416 19,643 14,093 1,380 43,990 13,654 1,094 45,314 Others include finance lease income of B$511,613 (2020: B$693,128) on finance lease receivables for the current financial year. 8 Personnel expenses 2021 B$’000 Salaries and wages Allowances and bonuses Contributions to defined contribution plans Others Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 43,618 22,144 42,942 22,069 37,511 19,316 37,364 19,569 5,920 4,452 4,991 4,077 3,045 74,727 3,883 73,346 2,985 64,803 4,136 65,146 FS39
52. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 9 Other expenses 2021 B $’000 Promotion Advertisement and publicity Operational Office rental Depreciation/amortisation of property and equipment and investment property Electronic data processing expenses Office expenses Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 2,052 1,770 1,816 1,320 925 1,387 1,133 1,631 17,930 19,990 15,184 17,092 14,040 9,982 42,877 13,489 9,627 44,493 11,439 9,335 37,091 10,778 9,226 38,727 625 40 5,733 5,870 5,745 4,565 22,578 642 40 4,273 5,093 4,259 7,498 21,805 523 40 6,576 5,595 5,695 6,796 25,225 535 40 4,842 5,088 4,252 9,521 24,278 67,507 68,068 64,132 64,325 General expenses Auditors’ remuneration: - Statutory audit fees - Audit related fees - Non-audit services Professional fees Takaful, repair and maintenance License Others Total FS40
53. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 10 Allowance for impairment on financial assets Note Allowance for impairment on financing and advances Allowance for impairment on receivables (reversed)/made Allowance for impairment on investment made, net Total 21(g) 2021 B$’000 Group 8,319 (359) 257 8,217 2020 B$’000 14,498 352 2021 B$’000 Bank 7,761 (359) 2020 B$’000 12,800 352 3,147 89 2,028 17,997 7,491 15,180 11 Zakat The amount of zakat is determined by using 2.5775% based on the net invested fund method and is payable by the Bank to comply with the principles of Shariah. FS41
54. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 12 Income tax expense Tax recognised in profit or loss Current tax expense Current year Reversal of overprovision of tax in prior years Deferred tax expense Origination and reversal of temporary differences Total tax expense recognised in profit or loss Tax recognised in other comprehensive income Investments at fair value through other comprehensive income 2021 B $’000 Group 32,854 2020 B$’000 2021 B$’000 33,343 (14,680) - Bank 2020 B$’000 25,196 27,093 (14,680) - 18,174 33,343 10,516 27,093 361 (1,612) 732 (923) 18,535 31,731 11,248 26,170 (1,811) 997 (1,811) 997 A reconciliation of effective tax expense for the Group and Bank is as follows: 2021 B$’000 Profit before zakat and taxation Income tax using the domestic corporate tax rate of 18.5% (2020: 18.5%) Tax effect of non-deductible expenses Tax effect of non-taxable revenue Tax incentives Tax effect of zakat Reversal of overprovision of tax in prior years Others Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 171,024 170,899 151,503 162,101 31,639 31,616 28,028 29,989 210 (791) (614) 276 (537) (581) 210 (4,783) (791) (614) 276 (5,099) (537) (581) (14,680) 2,771 18,535 957 31,731 (14,680) - 3,878 11,248 2,122 26,170 FS42
55. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 13 Dividend per ordinary share Group and Bank 2021 2020 B $’000 On ordinary shares Net dividend paid on ordinary shares B$’000 126,106 133,209 ------------------------------Group and Bank------------------------------2020 2021 Authorised: Final dividend paid Gross dividend per share Dividend net of tax B$ B$’000 0.1740 126,106 Gross dividend Dividend net of per share tax B$ B$’000 0.1838 133,209 At the Annual General Meeting on 23 July 2021, a final dividend in respect of financial year ended 31 December 2020 of B$0.174 on 724,749,512 ordinary shares, amounting to B$126,106,415 was approved and paid on 19 August 2021. 14 Earnings per share Basic Earnings per Share (“EPS”) The basic earnings per share of the Group has been calculated by dividing the net profit for the year attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the financial year. Group 2021 2020 Profit for the year attributable to equity holders of the Group (B$’000) 149,167 136,027 Weighted average number of ordinary shares of the Group and Bank (‘000) 724,750 724,750 0.21 0.19 Basic EPS (B$) Diluted Earnings per Share The calculation of diluted earnings per share is based on the profit attributable to equity holders of the Group divided by the weighted average number of ordinary shares in issue at the reporting date, after adjusting for the effects of all potentially dilutive ordinary shares. The diluted earnings per share is the same as basic earnings per share. FS43
56. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 15 Cash and cash equivalents 2021 B $’000 Cash in hand Balances with banks and other financial institutions Money at call and short notice and interbank placements with original maturity not exceeding three months Cash and cash equivalents in the statements of financial position Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 73,859 66,121 73,290 65,884 1,198,228 319,504 1,197,738 318,775 1,992,478 2,236,485 1,992,478 2,236,485 3,264,565 2,622,110 3,263,506 2,621,144 16 Balances with Brunei Darussalam Central Bank As required by the provisions of Section 45 of the Islamic Banking Order, 2008 and Section 13A of the Finance Companies Act, a cash balance is maintained with the Brunei Darussalam Central Bank (BDCB). At present, the minimum cash reserve requirement is 6% of the weighted average deposit liabilities as defined by the BDCB. 17 Placements with and financing and advances to banks This comprises interbank placements with original maturities greater than three months. 18 Government sukuks Government sukuks are classified as fair value through other comprehensive income and have maturities less than one year. FS44
57. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 19 Financial Statements Investments Note Investments at amortised cost Investments at fair value through profit or loss Investments at fair value through other comprehensive income Total 2021 B $’000 Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 19.1 322,759 474,209 322,759 474,209 19.2 185,585 160,959 185,585 160,959 19.3 633,557 628,111 633,557 628,111 1,141,901 1,263,279 1,141,901 1,263,279 19.1 Investments at amortised cost 2021 B$’000 Quoted debt securities Less: Expected Credit Losses Total Group 327,251 (4,492) 322,759 2020 B$’000 476,057 (1,848) 474,209 2021 B$’000 Bank 327,251 (4,492) 322,759 2020 B$’000 476,057 (1,848) 474,209 19.2 Investments at fair value through profit or loss 2021 B$’000 Unquoted fund Structured notes Quoted debt securities Total Group 665 54,537 130,383 185,585 2020 B$’000 689 28,048 132,222 160,959 2021 B$’000 Bank 665 54,537 130,383 185,585 2020 B$’000 689 28,048 132,222 160,959 19.3 Investments at fair value through other comprehensive income 2021 B$’000 Quoted debt securities Equity securities Total Group 551,528 82,029 633,557 2020 B$’000 421,836 206,275 628,111 2021 B$’000 Bank 551,528 82,029 633,557 2020 B$’000 421,836 206,275 628,111 FS45
58. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Equity investments designated as at FVOCI The Group designated the investments shown below as equity securities at FVOCI because these equity securities represent investments that the Group intends to hold for the long term for strategic purposes . Fair value at 31 December 2021 B$’000 Quoted equity securities Unquoted equity securities Total 81,708 321 82,029 Group and Bank Fair value Dividend at 31 income December recognised 2020 during 2021 B$’000 B$’000 205,934 341 206,275 9,466 9,466 Dividend income recognised during 2020 B$’000 8,065 8,065 The fair value of investments in quoted securites in Note 19.1 and 19.3 includes B$134,461,084 (2020: B$236,582,777) recognised in the statement of financial position being pledged as collateral for interbank placements. 20 Derivative financial assets/(liabilities) The following table summarises the contractual or underlying principal amounts of derivative financial instruments held at fair value through profit or loss. The principal or contractual amount of these instruments reflects the volume of transactions outstanding at the reporting date and do not necessarily represent amounts at risk. Trading derivative financial instruments are revalued on a gross position and the unrealised gains or losses are reflected as derivative financial assets and liabilities respectively. Group and Bank Principal / Nominal Carrying amount amount 2021 2020 2021 2020 B$’000 B$’000 B$’000 B$’000 Derivative assets Derivative liabilities Total 3,463,623 2,139,076 5,602,699 3,633,301 924,856 4,558,157 27,869 (13,173) 14,696 48,393 (11,511) 36,882 The Group uses foreign exchange forward contracts to manage its foreign exchange risk as set out in Note 36. FS46
59. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 21 Financing and advances (a) By type of product 2021 B$’000 Cash line/Naqad (overdrafts) Mortgages Hire purchase Lease receivables Other term financing Bills receivable Staff financing Credit/charge cards Others Gross financing and advances Less: Allowances for losses on financing and advances Net financing and advances Group 117,529 740,548 685,418 143,168 2,069,530 411,452 17,982 42,192 18,871 4,246,690 2020 B$’000 2021 B$’000 118,211 677,286 678,779 137,561 2,123,439 257,414 20,342 44,099 19,325 4,076,456 117,529 740,548 143,168 2,025,333 411,452 17,982 42,192 18,316 3,516,520 (64,024) 4,182,666 Bank (67,218) 4,009,238 (58,863) 3,457,657 2020 B$’000 118,211 677,286 137,561 2,069,805 257,414 20,342 44,099 18,553 3,343,271 (60,992) 3,282,279 (b) By contract 2021 B$’000 Al-Kafalah bil Mal dan Al-Bai Al-Wakalah bil Ujrah Bal’ Bithaman Ajil (deferred payment sale ) Ijarah (lease ) Ijarah Muntahiah Bittamlik/AITAB (lease ended with ownership ) Murabahah (cost-plus ) Musharakah (profit and loss sharing ) Qard (Advances ) Tawarruq Others Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 1,569 40,623 1,136 42,963 1,569 40,623 1,136 42,963 571,871 593,161 571,871 593,161 143,168 137,561 143,168 137,561 730,170 733,185 1,123,456 893,451 1,123,456 893,451 257,129 208,688 257,129 208,688 935 1,360,386 17,383 4,246,690 1,096 1,447,756 17,459 4,076,456 935 1,360,386 17,383 3,516,520 1,096 1,447,756 17,459 3,343,271 - - FS47
60. Bank Islam Brunei Darussalam Berhad and its Subsidiaries (c) Financial Statements By security 2021 B$’000 Unsecured Credit enhanced by: - Assignment of salary or income - Assignment of fixed or floating charge Secured by: - Cash - Properties - Vessels - Motor vehicles - Others Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 220,212 120,280 220,212 120,280 999,093 1,085,441 999,093 1,085,441 68,097 60,172 68,097 60,172 541,310 1,234,447 434,828 695,330 53,373 4,246,690 390,985 1,183,473 483,233 692,346 60,526 4,076,456 541,310 1,234,447 434,828 1,247 17,286 3,516,520 390,985 1,183,473 483,233 2,410 17,277 3,343,271 (d) By sector 2021 B$’000 Agricultural Financial Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Telecommunication and information technology Personal and consumption financing Oil and gas Total Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 26,618 175,742 67,814 875,648 21,841 101,124 78,294 857,156 400,241 9,016 17,442 79,442 72,490 917,996 32,664 103,020 69,482 812,936 404,323 9,047 26,618 175,742 67,814 181,023 21,802 101,124 78,294 857,156 400,241 9,016 17,442 79,442 72,490 227,542 32,585 103,020 69,482 812,936 404,323 9,047 2,205 2,279 2,205 2,279 960,735 670,256 4,246,690 1,043,519 511,816 4,076,456 925,229 670,256 3,516,520 1,000,867 511,816 3,343,271 Included in Transportation sector is the Group’s car financing portfolio. FS48
61. Bank Islam Brunei Darussalam Berhad and its Subsidiaries (e) Financial Statements Non-performing financing and advances Movements in the non-performing financing and advances are as follows: 2021 B$’000 At 1 January Classified as impaired during the year Reclassified as performing Amount received Amount written off against allowances At 31 December Gross impaired financing as a percentage of gross financing and advances Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 167,892 75,060 (31,131) (51,970) (11,513) 148,338 146,689 64,837 (7,169) (19,596) (16,869) 167,892 162,213 73,526 (30,539) (51,970) (9,890) 143,340 140,468 62,719 (6,548) (19,596) (14,830) 162,213 3.5% 4.1% 4.1% 4.9% The Group considers a financing as non-performing when the financing is credit impaired under IFRS 9. (f) Non-performing financing and advances by sector 2021 B$’000 Agricultural Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Telecommunication and information technology Personal and consumption financing Oil and gas Total Group 4,761 16,638 6,561 1,319 9,859 39,237 36,173 11,793 585 387 15,972 5,053 148,338 2020 B$’000 5,317 33,155 7,431 6,252 10,556 37,819 35,775 9,797 527 14,716 6,547 167,892 2021 B$’000 Bank 4,761 16,638 2,352 1,319 9,859 39,237 36,173 11,793 585 387 15,183 5,053 143,340 2020 B$’000 5,317 33,155 2,763 6,252 10,556 37,819 35,775 9,797 527 13,705 6,547 162,213 FS49
62. Bank Islam Brunei Darussalam Berhad and its Subsidiaries (g) Financial Statements Movements in the allowances for losses on financing and advances Note As at 1 January 2020 Allowance made during the year Amount written off during the year At 31 December 2020 Allowance made during the year Amount written off during the year At 31 December 2021 22 10 10 Group B$’000 69,589 14,498 (16,869) 67,218 8,319 (11,513) 64,024 Bank B$’000 63,022 12,800 (14,830) 60,992 7,761 (9,890) 58,863 Finance lease receivables The Bank was granted the lease of the land and a hotel building for a period of 40 years commencing 1 May 2014, for waiving and releasing its rights to enforce the judgment debt against one of its borrowers. The Bank then entered into a sub-lease agreement with a third party, leasing the land together with the hotel building for 40 years. The finance lease receivables are as follows: 2021 Within one year Between one and five years More than five years Total ------------Group and Bank -------------Future minimum Present value lease of minimum payments Profit lease payments B$’000 B$’000 B$’000 720 3,040 24,020 27,780 21 467 14,733 15,221 699 2,573 9,287 12,559 ------------Group and Bank -------------- 2020 Within one year Between one and five years More than five years Total Future minimum lease payments B$’000 720 2,980 24,800 28,500 Profit B$’000 21 458 15,433 15,912 Present value of minimum lease payments B$’000 699 2,522 9,367 12,588 FS50
63. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 23 Financial Statements Investments in subsidiaries Bank 2021 B $’000 Unquoted equity investments, at cost Less: Allowance for impairment loss 34,559 (1,715) 32,844 2020 B$’000 34,559 (1,715) 32,844 Details of the Group's subsidiaries are as follows: Name of Company Principal activities Country of incorporation/ Place of business Effective ownership interest 2021 % 2020 % BIBD At-Tamwil Bhd Lease financing Negara Brunei Darussalam 100 100 Better Sdn Bhd Car rental Negara Brunei Darussalam 100 100 BIBD Securities Sdn Bhd Stockbrokers/ sharebrokers Negara Brunei Darussalam 100 100 BIBD Management & Services Sdn Bhd Management services Negara Brunei Darussalam 100 100 Saujana Sdn Bhd (dissolved on 23 January 2021) Aircraft leasing Negara Brunei Darussalam - 100 BIBD Middle East Limited Advisory services United Arab Emirates 100 100 FS51
64. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 24 Financial Statements Investments in associate and joint ventures Group Note Investment in associate Investments in joint ventures Total 24 .1 24.2 2021 B$’000 26,819 19,872 46,691 Bank 2020 B$’000 23,475 18,368 41,843 2021 B$’000 7,080 15,278 22,358 2020 B$’000 7,080 15,278 22,358 24.1 Investment in associate Group 2021 B$’000 At cost Unquoted shares Share of post-acquisition reserves Investment in associate Bank 2020 B$’000 7,080 19,739 26,819 7,080 16,395 23,475 2021 B$’000 2020 B$’000 7,080 7,080 7,080 7,080 Details of the associate, which is unquoted, are as follows: Name of Company Principal activities Country of incorporation/ Place of business Effective ownership interest 2021 % Syarikat Takaful Brunei Darussalam Sdn Bhd Family and general takaful businesses Group’s share in net assets of associate at the beginning of the year Group’s share of: - profit from continuing operations - dividend received - other comprehensive income Carrying amount of interest in associate at the end of the year Negara Brunei Darussalam 2020 % 31 2021 B$’000 23,475 3,015 (446) 775 26,819 31 2020 B$’000 24,757 1,524 (362) (2,444) 23,475 FS52
65. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The summarised financial information of the associate , not adjusted for the percentage ownership held by the Group is as follows: 2021 B$’000 Current assets Non-current assets Current liabilities Non-current liabilities Net assets 2020 B$’000 192,353 211,959 (23,628) (294,177) 86,507 2021 B$’000 323,615 54,926 (20,919) (281,904) 75,718 2020 B$’000 Revenue 39,305 32,401 Profit from continuing operations Other comprehensive income Total comprehensive income 10,902 125 11,027 5,916 (7,883) (1,967) Included in balances above are the following amounts: 2021 B$’000 Cash and cash equivalents Current financial liabilities excluding trade, other payables and provisions Non-current financial liabilities excluding trade, other payables and provisions Depreciation and amortisation Income tax expense or income 2020 B$’000 150,548 288,650 (3,008) (2,247) (294,177) (838) (1,571) (281,904) (858) (805) The aggregate amounts of the Group’s share in the associate are as follows: 2021 B$’000 Profit from continuing operations Dividend received Other comprehensive income Total comprehensive income Group 3,015 (446) 775 3,344 2020 B$’000 1,524 (362) (2,444) (1,282) FS53
66. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 24 .2 Investments in joint ventures Group 2021 B$’000 At cost Unquoted shares Share of post-acquisition reserves Investments in joint ventures 15,278 4,594 19,872 Bank 2020 B$’000 15,278 3,090 18,368 2021 B$’000 15,278 15,278 2020 B$’000 15,278 15,278 Details of the joint ventures, which are unquoted, are as follows: Name of Company Principal activities Belait CSS Sdn Bhd Vessel leasing Belait Barakah Sdn Bhd Vessel leasing Group’s share in net assets of joint ventures at the beginning of the year Group’s share of: - profit/(loss) from continuing operations Carrying amount of interest in joint ventures at the end of the year Country of incorporation/ Place of business Negara Brunei Darussalam Negara Brunei Darussalam Effective ownership interest 2021 2020 % % 49.99 49.99 49.99 49.99 2021 B$’000 18,368 2020 B$’000 18,437 1,504 19,872 (69) 18,368 The summarised financial information of the joint ventures, not adjusted for the percentage ownership held by the Group is as follows: 2021 B$’000 Current assets Non-current assets Current liabilities Non-current liabilities Net assets 10,347 101,736 (20,023) (35,747) 56,313 2020 B$’000 9,810 110,028 (21,677) (45,676) 52,485 FS54
67. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2021 B $’000 Revenue Profit from continuing operations 2020 B$’000 23,362 22,424 3,827 3,075 Included in balances above are the following amounts: 2021 B$’000 Cash and cash equivalents Current financial liabilities excluding trade, other payables and provisions Non-current financial liabilities excluding trade, other payables and provisions Depreciation and amortisation Income tax expense or income 2020 B$’000 6,520 4,996 (13,111) (13,111) (30,639) (40,568) (8,037) (821) (7,511) - The aggregate amounts of the Group’s share in the joint ventures are as follows: 2021 B$’000 Profit/(loss) from continuing operations 25 Group 2020 B$’000 1,504 (69) Other assets 2021 B$’000 Receivables Accrued income and bills receivable Foreign acceptance receivables Sundry debtors Intercompany receivables Prepayments Total Group 25,406 9,846 3,023 1,738 40,013 2,093 42,106 2020 B$’000 31,230 11,333 1,618 1,776 45,957 2,039 47,996 2021 B$’000 Bank 23,663 10,188 3,023 1,059 190 38,123 1,824 39,947 2020 B$’000 29,991 11,492 1,618 1,187 186 44,474 1,837 46,311 FS55
68. 38 ,739 3,446 (94) 42,091 24,026 3,174 27,200 16,346 14,035 12,118 Carrying amounts At 1 January 2020 At 31 December 2020 At 31 December 2021 Assets under lease include motor vehicles under finance lease. 4,448 3,205 9,867 8,243 9,142 34,291 43,433 634 2,915 46,982 2,365 (94) 2,705 51,958 B$’000 20,821 37,167 1 893 38,061 419 838 39,318 B$’000 Equipment, Leasehold furniture and improvements fittings Accumulated depreciation At 1 January 2020 Depreciation/Amortisation for the year Disposals At 31 December 2020 Depreciation/Amortisation for the year Disposals At 31 December 2021 Group Cost At 1 January 2020 Additions Disposals Transfers At 31 December 2020 Additions Disposals Transfers At 31 December 2021 26 Property and equipment - 6 15 133 6 127 9 118 133 133 133 B$’000 Motor vehicles 4,635 7,012 8,206 791 (794) 4,126 (38) 4,129 1,063 3,104 11,310 (169) 11,141 (2,380) 8,761 B$’000 Assets under lease 14,410 6,856 5,588 - - - - 5,588 6,776 (5,508) 6,856 11,417 (3,863) 14,410 B$’000 Work-inprogress 7,362 12,537 17,554 5,507 (785) 67,036 62,314 6,783 55,531 73,085 66 1,700 74,851 12 (785) 320 74,398 B$’000 Computer software 41,412 40,965 41,172 3,498 (1,857) 6,529 (378) 4,888 3,087 2,179 43,351 2,880 (378) 45,853 4,042 (1,954) 47,941 B$’000 Right-of-use assets 89,804 89,654 98,023 16,422 (3,530) 147,115 (416) 134,223 18,595 116,044 214,067 10,357 (547) 223,877 18,255 (5,213) 236,919 B$’000 Total Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS56
69. 2 ,468 (94) 35,296 3,014 25,563 15,533 13,373 11,197 Carrying amounts At 1 January 2020 At 31 December 2020 At 31 December 2021 6,986 5,939 5,237 32,922 22,549 - 3,552 3,053 - 29,370 36,356 2,505 38,861 (94) 1,766 40,533 19,496 35,029 893 35,922 838 36,760 At 31 December 2020 Depreciation/Amortisation for the year Disposals At 31 December 2021 Disposals Accumulated depreciation At 1 January 2020 Depreciation/Amortisation for the year Cost At 1 January 2020 Additions Disposals Transfers At 31 December 2020 Additions Disposals Transfers At 31 December 2021 Bank Leasehold improvements B$’000 Equipment, furniture and fittings B$’000 16 7 - 133 7 126 - 9 117 133 133 133 4,840 5,552 9,961 - - - - - 4,840 5,810 (5,098) 5,552 7,332 (2,923) 9,961 15,954 11,334 6,583 5,070 (785) 65,407 61,122 - 6,320 54,802 70,756 1,700 72,456 (785) 319 71,990 Work-in- Computer Motor vehicles progress software B$’000 B$’000 B$’000 40,137 40,066 39,964 3,117 (1,647) 5,723 4,253 (378) 2,763 1,868 42,005 2,692 (378) 44,319 3,023 (1,655) 45,687 Right-ofuse assets B$’000 83,466 76,271 72,942 13,676 (2,526) 132,122 120,972 (378) 15,697 105,653 189,119 8,502 (378) 197,243 10,355 (2,534) 205,064 Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS57
70. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 27 Investment property Cost At 1 January 2020 Additions At 31 December 2020 Additions At 31 December 2021 Financial Statements Group and Bank B $’000 33,207 1,284 34,491 12 34,503 Accumulated amortisation At 1 January 2020 Charge for the year At 31 December 2020 Charge for the year At 31 December 2021 9,169 1,395 10,564 1,508 12,072 Carrying amounts At 31 December 2020 At 31 December 2021 23,927 22,431 In 2011, the Bank entered into a lease agreement with a customer pursuant to which the Bank was granted rights to the lease with a remaining term of 49 years in consideration for the Bank agreeing to waive its right to repayment of a financing extended to the customer. As a result, the Bank recorded its interest in the investment property based on the carrying amount of the outstanding financing amount as at the date of the agreement. This amount also approximated the fair value of the investment property at that date. Fair value hierarchy, valuation technique and unobservable inputs Based on the latest available valuation report from November 2020, the fair value of the investment property is B$34,500,000 (2020: B$34,500,000). The fair value of the investment property was based on the valuation report provided by a firm of external, independent professional valuers, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued. The valuation technique applied is the discounted cash flow approach (Level 3). Fair value of the investment property is derived from the potential cash flows from the building based on the remaining lease term. The key unobservable input includes an estimated occupancy rate of 78% (2020: 76.1%). FS58
71. (133) 543 410 1,612 (1,232) (543) (6,357) 5,653 Total deferred tax assets 57 594 551 1,202 (4,582) 11,544 149 317 12,010 Recognised in profit or loss B$’000 Deferred tax liabilities Property and equipment Investments at fair value through other comprehensive income Others Total Deferred tax assets Allowance for financing and advances Allowance for investment Allowance for investment in subsidiary Others Total Group At 1 January 2020 B$’000 Deferred tax assets and liabilities are attributed to the following: 28 Deferred tax assets/(liabilities) (997) (997) (997) - - Recognised in other comprehensive income B$’000 6,268 (6,944) (2,229) (4,715) 11,601 743 317 551 13,212 At 31 December 2020 B$’000 (361) (2,054) 96 - 2,150 (283) 127 (301) (457) Recognised in profit or loss B$’000 1,811 1,811 1,811 - - Recognised in other comprehensive income B$’000 7,718 (2,054) (5,037) (418) (2,565) 11,318 870 317 250 12,755 At 31 December 2021 B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS59
72. 882 (696) 186 923 (1,232) (947) (6,219) 5,100 Total deferred tax assets (376) 594 519 737 (4,040) 10,853 149 317 11,319 Recognised in profit or loss B$’000 Deferred tax liabilities Property and equipment Investments at fair value through other comprehensive income Others Total Deferred tax assets Allowance for financing and advances Allowance for investment Allowance for investment in subsidiary Others Total Bank At 1 January 2020 B$’000 (997) (997) (997) - - Recognised in other comprehensive income B$’000 5,026 (1,643) (7,030) (2,229) (3,158) 10,477 743 317 519 12,056 At 31 December 2020 B$’000 (732) (1,271) (259) - 1,012 (283) 127 (317) (473) Recognised in profit or loss B$’000 1,811 1,811 1,811 - - Recognised in other comprehensive income B$’000 6,105 (2,914) (5,478) (418) (2,146) 10,194 870 317 202 11,583 At 31 December 2021 B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS60
73. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 29 Deposits from customers Non-Mudharabah Demand deposits Saving deposits General investment deposits Mudharabah (profit sharing ) Demand deposits Savings deposits Total Group 2021 B$’000 3,602,895 1,560,103 3,206,391 8,369,389 - 2020 B$’000 2021 B$’000 2,305,335 1,276,420 2,968,425 6,550,180 3,605,872 1,500,657 3,155,099 8,261,628 79,111 107,619 186,730 8,369,389 Bank 6,736,910 - 2020 B$’000 2,306,070 1,222,116 2,916,501 6,444,687 79,111 107,619 186,730 8,261,628 6,631,417 30 Deposits from banks and other financial institutions Non-Mudharabah Licensed conventional banks and financial institutions in Brunei Darussalam Licensed Islamic banks and financial institutions in Brunei Darussalam Licensed finance companies in Brunei Darussalam Licensed insurance companies in Brunei Darussalam Licensed Islamic insurance companies Other banks and financial institutions abroad Group 2021 B$’000 Total 2021 B$’000 - 2020 B$’000 70,000 70,000 293,250 298,343 163,389 203,615 6,856 2 185,834 88,004 963 687 963 687 196,980 355,481 129,980 305,481 12,499 21,507 12,499 21,507 746,020 492,665 619,294 580,548 Mudharabah (profit sharing ) Licensed Islamic banks and financial institutions in Brunei Darussalam Licensed insurance companies in Brunei Darussalam Licensed Islamic insurance companies in Brunei Darussalam 2020 B$’000 Bank - - 419 - 419 - 48 - 48 - 2,719 - 2,719 - 3,186 - 3,186 580,548 749,206 492,665 622,480 FS61
74. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 31 Placements from other financial institutions Interbank placements include collateralised placements of B $95,411,273 (2020: B$202,231,732) secured by the investment in quoted securities amounted to B$124,843,242 (2020: B$236,582,777) with its counterparties. 32 Other liabilities Group 2021 B$’000 Other creditors Employee benefits Account payable Lease liabilities Others Total 30,708 21,204 27,383 41,059 23,362 143,716 Bank 2020 B$’000 21,118 20,032 28,433 39,767 23,358 132,708 2021 B$’000 24,505 19,569 29,872 39,536 19,544 133,026 2020 B$’000 18,440 18,337 30,086 38,855 21,095 126,813 Reconciliation of movements of liabilities of cash flows arising from lease liabilities 2021 Lease liabilities B$’000 Group Opening balance at 1 January 2021 Changes from financing cash flow Payment of lease liabilities Other changes - Liability-related New leases Profit expense on leases Termination of leases Balance at 31 December 2021 39,767 (3,992) 4,042 1,312 (70) 41,059 2020 Lease liabilities B$’000 Group Opening balance at 1 January 2020 Changes from financing cash flow Payment of lease liabilities Other changes - Liability-related New leases Profit expense on leases Balance at 31 December 2020 39,134 (3,622) 2,927 1,328 39,767 FS62
75. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2021 Lease liabilities B $’000 Bank Opening balance at 1 January 2021 Changes from financing cash flow Payment of lease liabilities Other changes - Liability-related New leases Profit expense on leases Termination of leases Balance at 31 December 2021 38,855 (3,602) 3,023 1,269 (9) 39,536 2020 Lease liabilities B$’000 Bank Opening balance at 1 January 2020 Changes from financing cash flow Payment of lease liabilities Other changes - Liability-related New leases Profit expense on leases Balance at 31 December 2020 38,098 (3,261) 2,734 1,284 38,855 33 Share capital Number of shares 2021 2020 2021 B$ 2020 B$ 1,428,571,429 1,428,571,429 1,428,571,429 1,428,571,429 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 724,749,512 724,749,512 724,749,512 724,749,512 507,324,659 507,324,659 507,324,659 507,324,659 Group and Bank Authorised: Ordinary shares of B$0.70 each Total Issued and fully paid: Ordinary shares of B$0.70 each Total Amount The holders of the ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders meetings of the Bank. All ordinary shares rank equally with regard to the Bank’s residual assets. FS63
76. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 34 Statutory and other reserves Statutory reserves Group At 1 January 2020 Transfer in respect of current year ’s profit At 31 December 2020 Transfer in respect of current year’s profit At 31 December 2021 Bank At 1 January 2020 Transfer in respect of current year’s profit At 31 December 2020 Transfer in respect of current year’s profit At 31 December 2021 Total B$’000 555,475 8,041 563,516 8,455 571,971 Total B$’000 513,627 6,640 520,267 6,847 527,114 The statutory reserves are maintained in compliance with Section 24(1) of the Islamic Banking Order, 2008, and Section 13 of the Finance Companies Act, Chapter 89 and are not distributable as dividend. FS64
77. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Other reserves Fair value reserve Foreign currency translation reserve Retained profits Total B $’000 B$’000 B$’000 B$’000 Group At 1 January 2020 Profit for the year Other comprehensive income Transfer to statutory reserves Dividends paid on ordinary shares At 31 December 2020 Profit for the year Other comprehensive income Transfers to statutory and other reserves Dividends paid on ordinary shares At 31 December 2021 11,988 3,924 - (41) (58) - 188,450 136,027 (8,041) (133,209) 200,397 136,027 3,866 (8,041) (133,209) 15,912 (4,696) (2,751) 8,465 (99) (11) (110) 183,227 149,167 (5,704) (126,106) 200,584 199,040 149,167 (4,707) (8,455) (126,106) 208,939 196,667 3,917 200,584 196,667 3,917 200,584 Distributable retained profits Non-distributable retained profits for PRCL At 31 December 2021 Fair value reserve Retained earnings Total B$’000 B$’000 B$’000 Bank At 1 January 2020 Profit for the year 5,619 - Other comprehensive income 6,368 Transfer to statutory reserves Dividends paid on ordinary shares At 31 December 2020 Profit for the year Other comprehensive income Transfers to statutory and other reserves Dividends paid on ordinary shares At 31 December 2021 Distributable retained profits Non-distributable retained profits for PRCL At 31 December 2021 11,987 (5,471) (2,751) 3,765 136,692 132,790 - 142,311 132,790 6,368 (6,640) (133,209) 129,633 136,933 (4,096) (126,106) 136,364 (6,640) (133,209) 141,620 136,933 (5,471) (6,847) (126,106) 140,129 132,483 3,881 136,364 132,483 3,881 136,364 FS65
78. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The fair value reserve includes the cumulative net change in the fair value of financial assets measured at fair value through other comprehensive income , including impairment losses, until the financial asset is derecognised. Non-distributable retained profits comprise prudential reserve for credit losses (PRCL) which relates to accrued profit income on non-performing financing and advances. In compliance with BDCB regulations, the reserves are not distributable until they are collected. 35 Related party transactions Identity of related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control. Related parties may be individuals or other entities. The Group and Bank have related party relationships with its subsidiaries, substantial shareholders, associate and key management personnel. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group, and certain senior management members of the Group. Key management have banking relationships with Group entities which are entered into in the normal course of business and on substantially the same terms, including profit rates and security, as for comparable transactions with other persons of a similar standing or, where applicable, with other employees. These transactions did not involve more than the normal risk of repayment or present other unfavourable features. (a) The significant outstanding balances of the Group and the Bank with related parties are as follows: 2021 B$’000 Joint Ventures Amount due from Financing Amount due to Deposits Group 2020 B$’000 42,677 52,735 6,523 4,995 FS66
79. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Associate Amount due to Financial Statements 2021 B $’000 Group 2020 B$’000 170,962 244,365 Key management personnel Amount due from Financing (ex. Credit cards) Credit cards 2,372 62 2,526 52 Amount due to Deposits 1,786 4,467 265,482 288,908 Other related parties Amount due to Deposits 2021 B$’000 Joint Ventures Amount due from Financing Bank 2020 B$’000 42,677 52,735 6,523 4,995 Subsidiaries Amount due from Placements Others 443,306 429 417,900 345 Amount due to Deposits Others 180,006 3,914 89,125 3,097 Associate Amount due to 105,855 249,453 Amount due to Deposits FS67
80. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Bank 2021 B $’000 2020 B$’000 Key management personnel Amount due from Financing (ex. Credit cards) Credit cards 2,372 62 1,987 55 Key management personnel Amount due to Deposits 1,786 3,027 265,482 288,908 Other related parties Amount due to Deposits (b) The significant related party transactions of the Group and the Bank are as follows: Subsidiaries Income Other income Expenditure Profit paid/payable to depositors Other expenditure Joint ventures Income Income on financing Expenditure Profit paid/payable to depositors Associate Income Fees and commission 2021 B$’000 Group 2020 B$’000 Bank 2021 B$’000 2020 B$’000 - - 26,555 32,725 - - 61 3,859 260 3,709 3,173 3,825 3,173 1 279 3,825 - 263 1 - - - FS68
81. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2021 B $’000 Expenditure Profit paid/payable to depositors Other expenditure Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 1,158 113 2,392 99 713 - 1,557 - 78 123 44 92 Expenditure Profit paid/payable to depositors 157 151 13 16 Other related parties Expenditure Profit paid/payable to depositors 1,117 1,205 1,117 1,205 Key management personnel Income Income on financing Key management personnel Key management personnel compensation including Directors’ remuneration is as follows: 2021 B$’000 Directors’ fees and other remuneration Other key management personnel: - Salary and employee benefits Withholding tax paid Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 939 1,074 939 1,074 5,295 214 5,781 323 5,011 214 5,477 323 Number of shares held by key management personnel is as follows: 2021 Number of shares held ('000) Group 49 2020 49 FS69
82. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Interest held by associate The number of shares of the Bank held by the associate as at 31 December 2021 is 11 ,706,000 (2020: 11,706,000). Interest held by the government and government controlled entities The government of Brunei Darussalam through its various ministries and statutory boards has control over the Group via the shareholdings. As a result, the government of Brunei Darussalam and other government controlled bodies are related parties of the Group. The Group enters into transactions with many of these bodies based on agreed terms between the parties in the normal course of business. Individually significant transactions Transactions include the payment of Brunei Darussalam corporation tax (Note 12) and banking transactions such as financing and deposits undertaken in the normal course of banker-customer relationships. FS70
83. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 36 Financial risk management As the Group ’s statements of financial position, income statements, statements of comprehensive income, changes in equity and cash flows comprise mainly the Bank and a material subsidiary, the financial risk management policies disclosed relates to the Bank, unless otherwise stated. Overview of risk management The Group has exposure to the following risks from financial instruments: ● Credit risk ● Market risk ● Liquidity risk ● Operational risk Risk management functional and governance structure The Bank has aligned its risk organisational responsibilities with the objective of ensuring a common view of risks across the Bank. As a matter of good business practice and prudence, the Bank’s core risk management functions, which report to the Audit, Finance and Risk Committee (“AFRC”) through its Credit Risk Committee (“CRC”), Asset Liability Committee (“ALCO”) and Enterprise Risk Committee (“ERC”), are independent and clearly segregated from the business divisions. (a) Credit risk Overview of credit risk of the Bank Credit risk arises as a result of the failure of customers or counterparties to a financial instruments to meet their contractual obligations when they fall due. These obligations arise from the Bank’s direct financing operations, trade finance and investments undertaken by the Bank. The Bank’s exposure to credit risk is primarily from its financing activities to retail, corporate borrowers, including small & medium enterprises (“SMEs”) and financial institutions. Management of credit risk The Board of Directors of the Bank has delegated responsibility for oversight of credit risk to its Credit Risk Committee. A separate Risk Management Division, reporting to the Credit Risk Committee, is responsible for managing the Bank’s credit risk, including the following: - To support management in building a healthy credit portfolio in line with the Bank’s overall strategy and risk appetite; FS71
84. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements - To develop an increasing ability to recognise , measure and avoid or mitigate potential credit risk issues; and - To conform with statutory, regulatory and internal credit requirements. Corporate credit risks are assessed by business units and evaluated and approved in accordance to the Bank’s Credit Risk Governance. Each borrower is assigned a credit rating based on the assessment of relevant qualitative and quantitative factors including a borrower’s financial position, types of facilities and proposed securities or collateral. Bank wide hierarchy of credit approving authorities and committee structures are in place to ensure appropriate underwriting standards are enforced consistently within the Bank. Reviews are conducted on a regular basis with updated information on a borrower’s financial position, market position, industry and economic condition and conduct of account. Corrective actions are taken when there are signs of credit deterioration. Retail credit exposures are managed on a programme basis. Credit programmes are assessed jointly between credit risk and business units. Reviews on credit programmes are conducted on a regular basis to assess the performance of the portfolio. Counterparty credit risk exposures are managed via counterparty limits either on a single name basis or counterparty group basis which adheres to the Guidance on Single Borrowing Limit issued by BDCB. The Bank monitors and manages its exposures to counterparties on a day-to-day basis. To avoid concentration of credit risk in its financing and advances portfolio, the Bank imposes limits and related lending guidelines on: - Country limits; Business segments; Single customer groups; Counterparties; and Collateral valuation. The Bank has established a dedicated team of Collections and Recovery to effectively manage vulnerable borrowers. Special attention is given to vulnerable borrowers where frequent and intensive monitoring are performed to accelerate remedial action. FS72
85. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Internal credit rating reviews Internal credit rating reviews are an integral part of the Bank ’s credit risk management, decision making process, adequacy of provision and capital assessment. The credit risk grades for Corporates, SMEs, Financial Institutions and Banks are assessed using the Standard & Poor’s (“S&P”) rating methodology. The ratings are linked to the Bank’s risk appetite and allow the Bank to map the ratings to default statistics. Overview of credit risk of the subsidiary Credit risk arises as a result of the failure of customers’ or counterparties’ to a financial instruments to settle their, financial or non-financial, contractual obligations. During the reporting period, the subsidiary’s highest credit risks exposures are from its hire-purchase financing activities followed by its cash placements with the Bank and the regulator, and to lesser extent, its other accounts receivables. (a) Business rules committee To manage its most significant credit risk, the subsidiary board, through the business rules committee, has established a sales policy, with business rules and approval authority matrix operationalised by the use of a decision support system, which ensure consistency and compliance in its credit underwriting process. The performance of the decision support system is monitored, monthly, by the committee and policies adjustments are made as necessary. (b) Internal credit rating scorecard Internal credit rating scorecard models are an integral part of the subsidiary’s credit risk management, decision making process, adequacy of provision and capital assessment. Retail exposure is assigned a rating utilising customised application and behavioural scorecard model, based on assessment of relevant predictive characteristics. The predictive performance of the two scorecards are validated monthly by the business rules committee using established methods, including rank ordering, PSI statistics, K factor and Gini coefficient. (c) Recovery department The subsidiary has established a dedicated recovery department function comprising three units to deal with the different stages of default; the front-end negotiation team, the repossession and collateral disposal team and the litigation team. The teams report to the Head of Recovery who, in turn, report to the business rules committee its performance to minimise the incurred credit losses. FS73
86. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Maximum exposure to credit risk The following table presents the Group ’s and Bank’s maximum exposure to credit risk of recognised assets and unrecognised financial instruments, without taking into account of any collateral held or other credit enhancements. For recognised assets, the exposure to credit risk equals their carrying amount. For contingent liabilities, the maximum exposure to credit risk is the maximum amount that the Group and Bank would have to pay if the obligations of the instruments issued are called upon. For credit commitments, the maximum exposure to credit risk is the full amount of the undrawn credit facilities granted to customers. 2021 B$’000 Credit risk exposure of recognised assets: Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments * Derivative financial assets Financing and advances Finance lease receivables Other assets * Sub-total Group Bank 2020 B$’000 2021 B$’000 2020 B$’000 3,264,565 2,622,110 3,263,506 2,621,144 492,042 488,898 452,343 449,900 1,180,555 59,986 1,059,207 27,869 4,182,666 12,559 40,013 10,319,462 1,045,882 10,000 1,056,315 48,393 4,009,238 12,588 45,957 9,339,381 1,623,803 59,986 1,059,207 27,869 3,457,657 12,559 38,123 9,995,053 1,463,555 10,000 1,056,315 48,393 3,282,279 12,588 44,474 8,988,648 386,475 364,895 751,370 298,314 328,920 627,234 386,475 364,895 751,370 298,314 328,920 627,234 11,070,832 9,966,615 10,746,423 9,615,882 Credit risk exposure of unrecognised financial instruments: Credit commitments Contingent liabilities Sub-total Total credit exposures * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. FS74
87. (i) - - 492,042 492,042 - 4,445,120 - - - - - 4,445,120 - 59,986 59,986 - - - - - 381,816 1,059,207 - 8,778 51,301 - - 473,494 5,711 6,782 131,325 - 27,869 - - - - 27,869 - 666,206 4,182,666 943,255 2,187 395,663 8,949 838,570 25,139 175,107 67,386 868,180 21,618 95,819 74,587 Balances with Brunei Darussalam Derivative Financing Central Government financial and Bank sukuks advances Investments * assets B$’000 B$’000 B$’000 B$’000 B$’000 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Total Personal and consumption financing Oil and gas Others Telecommunication and information technology 2021 Agricultural Financial Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Group Cash and short- term funds and deposits and placements with financial institutions B$’000 12,559 - - - - 12,559 Financing lease receivables B$’000 40,013 40,013 - - - - - Other assets * B$’000 The Group monitors concentrations of credit risk by sector. An analysis of concentrations of credit risk from the assets is shown below: Concentration of credit risk for Group and Bank 666,206 973,857 10,319,462 943,255 10,965 446,964 8,949 838,570 25,139 5,121,590 73,097 874,962 152,943 95,819 87,146 271,542 751,370 80,592 4,524 17,418 2,414 53,403 21,028 137,159 5,983 20,357 46,093 31,608 59,249 Commitments and On-balance sheet total contingencies B$’000 B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS75
88. 488 ,898 488,898 - - 3,667,992 - - - - - - - 3,667,992 - 10,000 10,000 - - - - - 438,674 1,056,315 - 9,638 25,061 - - 518,591 5,708 33,499 25,144 48,393 - - - - 48,393 - 509,760 4,009,238 1,024,422 2,269 401,297 9,017 795,236 15,908 79,434 66,062 911,521 31,219 97,234 65,859 Balances with Brunei Darussalam Derivative Financing Central Government financial and Bank advances sukuks Investments * assets B$’000 B$’000 B$’000 B$’000 B$’000 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Total Personal and consumption financing Oil and gas Others 2020 Agricultural Financial Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Telecommunication and information technology Group B$’000 Cash and short- term funds and deposits and placements with financial institutions 12,588 - - - - 12,588 B$’000 Financing lease receivables 45,957 45,957 - - - - - B$’000 Other assets * 509,760 983,529 9,339,381 1,024,422 11,907 426,358 9,017 795,236 15,908 4,314,410 71,770 945,020 31,219 97,234 103,591 B$’000 68,716 627,234 79,563 2,158 17,808 3,233 41,307 11,922 145,629 129,986 9,963 71,346 21,483 24,120 B$’000 Commitments On-balance and sheet total contingencies Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS76
89. 452 ,343 452,343 - - 4,887,309 - - - - - - - 4,887,309 - 59,986 59,986 - - - - - 381,816 1,059,207 - 8,778 51,301 - - 473,494 5,711 6,782 131,325 - 27,869 - - - - 27,869 - 666,206 3,457,657 907,749 2,187 395,663 8,949 838,570 25,139 175,107 67,386 178,716 21,579 95,819 74,587 Balances with Brunei Darussalam Derivative Financing Central Government financial and Bank assets advances sukuks Investments * B$’000 B$’000 B$’000 B$’000 B$’000 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Total Personal and consumption financing Oil and gas Others 2021 Agricultural Financial Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Telecommunication and information technology Bank B$’000 Cash and short- term funds and deposits and placements with financial institutions 12,559 - - - - 12,559 B$’000 Financing lease receivables 38,123 38,123 - - - - - B$’000 Other assets * 666,206 932,268 9,995,053 907,749 10,965 446,964 8,949 838,570 25,139 5,563,779 73,097 185,498 152,904 95,819 87,146 B$’000 271,542 751,370 80,592 4,524 17,418 2,414 53,403 21,028 137,159 5,983 20,357 46,093 31,608 59,249 B$’000 Commitments On-balance and sheet total contingencies Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS77
90. 449 ,900 449,900 - - 4,084,699 - - - - - - - 4,084,699 - 10,000 10,000 - - - - - 438,674 1,056,315 - 9,638 25,061 - - 518,591 5,708 33,499 25,144 48,393 - - - - 48,393 - 509,760 3,282,279 981,771 2,269 401,297 9,017 795,236 15,908 79,434 66,062 227,292 31,140 97,234 65,859 Balances with Brunei Darussalam Derivative Financing Central Government financial and Bank assets advances sukuks Investments * B$’000 B$’000 B$’000 B$’000 B$’000 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Total Personal and consumption financing Oil and gas Others 2020 Agricultural Financial Manufacturing Transportation Infrastructure Traders Services Residential property (personal) Commercial Tourism Telecommunication and information technology Bank B$’000 Cash and short- term funds and deposits and placements with financial institutions 12,588 - - - - 12,588 B$’000 Financing lease receivables 44,474 44,474 - - - - - B$’000 Other assets * 509,760 943,048 8,988,648 981,771 11,907 426,358 9,017 795,236 15,908 4,731,117 71,770 260,791 31,140 97,234 103,591 B$’000 68,716 627,234 79,563 2,158 17,808 3,233 41,307 11,922 145,629 129,986 9,963 71,346 21,483 24,120 B$’000 Commitments On-balance and sheet total contingencies Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS78
91. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements (ii) Collateral The main types of collateral obtained by the Group and the Bank to mitigate credit risk are as follows: - For programme lending – assignment of income; For mortgages – charges over residential properties; For auto financing – ownership claims over the vehicles financed; For commercial property financing – charges over the properties financed; and For other financing – charges over business assets such as premises, inventories, assignment of receivables or under lien deposits. Based on the secured financings, the fair values of collaterals held by the Group and Bank for which they are entitled to sell or pledge in the event of default is as follows: (Refer to Note 21 for the breakdown of financings by security) Group Type of collateral Cash Properties Vessels Motor vehicles and others Total Bank Type of collateral Cash Properties Vessels Motor vehicles and others Total 2021 2020 Carrying Carrying amount of amount of financing and Fair value of financing and Fair value of advances collateral advances collateral B$’000 B$’000 B$’000 B$’000 541,310 1,234,447 434,828 746,104 2,956,689 541,310 1,177,578 423,982 607,040 2,749,910 390,985 1,183,474 483,232 751,866 2,809,557 390,985 1,124,157 480,517 612,844 2,608,503 2021 2020 Carrying Carrying amount of amount of financing and Fair value of financing and Fair value of advances collateral advances collateral B$’000 B$’000 B$’000 B$’000 541,310 1,234,447 434,828 18,533 2,229,118 541,310 1,177,578 423,982 18,533 2,161,403 390,985 1,183,474 483,232 19,687 2,077,378 390,985 1,124,157 480,517 19,687 2,015,346 The fair value of collateral excludes the effect of over-collateralisation. The carrying amount of properties and motor vehicles that have been repossessed during the year amount to B$3,452,115 (2020: B$11,386,629) for the Group and B$2,088,109 (2020: B$9,077,366) for the Bank. FS79
92. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements (iii) Credit quality of gross financing and advances Gross financing and advances are classified by the following internal risk category as described below: Neither past due nor impaired a) Excellent to good Obligors rated in this category have an excellent to good capacity to meet financial commitments with very low credit risk. b) Fair Obligors rated in this category have a fairly acceptable capacity to meet financial commitments with moderate credit risk. Past due but not impaired Obligors rated in this category have financial commitments that are past due but no objective evidence of impairment. Impaired Obligors with objective evidence of impairment as a result of one or more events that have an impact on the estimated future cash flows of the obligors that can be reliably estimated. The table below summarises the credit quality of the Group’s and the Bank’s gross financing according to the above classifications. 2021 B$’000 Neither past due nor impaired Past due but not impaired Impaired Allowance for impairment on financing and advances Total Group Bank 2020 B$’000 2021 B$’000 2020 B$’000 3,978,543 119,809 148,338 4,246,690 3,833,740 74,824 167,892 4,076,456 3,271,515 101,665 143,340 3,516,520 3,130,672 50,386 162,213 3,343,271 (64,024) 4,182,666 (67,218) 4,009,238 (58,863) 3,457,657 (60,992) 3,282,279 FS80
93. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Credit quality analysis Group Neither past due nor impaired Excellent to good Fair Past due but not impaired Impaired Total Allowance for impairment on financing and advances Total Group Neither past due nor impaired Excellent to good Fair Past due but not impaired Impaired Total Allowance for impairment on financing and advances Total 2021 12-month ECL B $’000 Lifetime ECL – not creditimpaired B$’000 Lifetime ECL – creditimpaired B$’000 Total B$’000 3,239,376 704,070 28,005 3,971,451 13,667 21,430 91,804 126,901 148,338 148,338 3,253,043 725,500 119,809 148,338 4,246,690 (16,588) 3,954,863 (1,991) 124,910 (45,445) 102,893 (64,024) 4,182,666 12-month ECL B$’000 2020 Lifetime Lifetime ECL – not ECL – creditcreditimpaired impaired B$’000 B$’000 Total B$’000 2,963,063 769,572 36,777 3,769,412 78,878 22,227 38,047 139,152 167,892 167,892 3,041,941 791,799 74,824 167,892 4,076,456 (13,285) 3,756,127 (4,207) 134,945 (49,726) 118,166 (67,218) 4,009,238 FS81
94. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The following table sets out information about the ageing status of gross financing and advances facilities for obligors categorised as past due but not impaired : Group By ageing: Current 1 month-in-arrears (1 to 30 days) 2 months-in-arrears (31 to 60 days) 3 months-in-arrears (61 to 90 days) Total Group By ageing: Current 1 month-in-arrears (1 to 30 days) 2 months-in-arrears (31 to 60 days) 3 months-in-arrears (61 to 90 days) Total 12-month ECL B$’000 1,544 26,461 28,005 12-month ECL B$’000 24,172 12,605 36,777 2021 Lifetime ECL – not creditimpaired B$’000 29,606 40,578 15,091 6,529 91,804 2020 Lifetime ECL – not creditimpaired B$’000 4,054 22,197 9,376 2,420 38,047 Total B$’000 31,150 67,039 15,091 6,529 119,809 Total B$’000 28,226 34,802 9,376 2,420 74,824 FS82
95. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 2021 Bank Neither past due nor impaired Excellent to good Fair Past due but not impaired Impaired Total Allowance for impairment on financing and advances Total 12-month ECL B $’000 Lifetime ECL – not creditimpaired B$’000 Neither past due nor impaired Excellent to good Fair Past due but not impaired Impaired Total Allowance for impairment on financing and advances Total Total B$’000 2,735,855 500,563 28,005 3,264,423 13,667 21,430 73,660 108,757 143,340 143,340 2,749,522 521,993 101,665 143,340 3,516,520 (15,885) 3,248,538 (1,824) 106,933 (41,154) 102,186 (58,863) 3,457,657 2020 Bank Lifetime ECL – creditimpaired B$’000 12-month ECL B$’000 Lifetime ECL – not creditimpaired B$’000 Lifetime ECL – creditimpaired B$’000 Total B$’000 2,472,450 557,117 36,777 3,066,344 78,878 22,227 13,609 114,714 162,213 162,213 2,551,328 579,344 50,386 162,213 3,343,271 (12,290) 3,054,054 (3,855) 110,859 (44,847) 117,366 (60,992) 3,282,279 FS83
96. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The following table sets out information about the ageing status of gross financing and advances facilities for obligors categorised as past due but not impaired : Bank By ageing: Current 1 month-in-arrears (1 to 30 days) 2 months-in-arrears (31 to 60 days) 3 months-in-arrears (61 to 90 days) Total 12-month ECL 2021 Lifetime ECL – not credit-impaired Total B$’000 B$’000 B$’000 1,544 26,461 28,005 Bank By ageing: Current 1 month-in-arrears (1 to 30 days) 2 months-in-arrears (31 to 60 days) 3 months-in-arrears (61 to 90 days) Total 27,046 25,376 14,709 6,529 73,660 28,590 51,837 14,709 6,529 101,665 12-month ECL 2020 Lifetime ECL – not credit-impaired Total B$’000 B$’000 B$’000 24,172 12,605 36,777 653 1,444 9,092 2,420 13,609 24,825 14,049 9,092 2,420 50,386 A table showing a reconciliation between the movement of ECL/ IFRS9 staging is disclosed as per below: Group Balance at 1 January Transfer from Stage 1 Transfer from Stage 2 Transfer from Stage 3 Net remeasurement of loss allowance New financial assets originated or purchased Financial assets that have been derecognised Write-offs Balance at 31 December Stage 1 Stage 2 B$’000 B$’000 13,285 1,402 (120) (40) (526) 3,814 (1,225) (2) 16,588 2021 4,207 (1,088) 946 (589) (1,064) 209 (426) (204) 1,991 Stage 3 Total B$’000 B$’000 49,726 (5,380) (363) 8,265 5,632 1,310 (2,438) (11,307) 45,445 67,218 (5,066) 463 7,636 4,042 5,333 (4,089) (11,513) 64,024 FS84
97. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Group Balance at 1 January Transfer from Stage 1 Transfer from Stage 2 Transfer from Stage 3 Net remeasurement of loss allowance New financial assets originated or purchased Financial assets that have been derecognised Write-offs Balance at 31 December Bank Balance at 1 January Transfer from Stage 1 Transfer from Stage 2 Transfer from Stage 3 Net remeasurement of loss allowance New financial assets originated or purchased Financial assets that have been derecognised Write-offs Balance at 31 December Bank Balance at 1 January Transfer from Stage 1 Transfer from Stage 2 Transfer from Stage 3 Net remeasurement of loss allowance New financial assets originated or purchased Financial assets that have been derecognised Write-offs Balance at 31 December Financial Statements Stage 1 B $’000 12,933 (497) 76 4 1,989 3,033 (1,307) (2,946) 13,285 Stage 1 B$’000 12,290 1,445 (146) (40) (29) 3,528 (1,163) 15,885 Stage 1 B$’000 11,955 (426) 27 3 2,166 2,654 (1,242) (2,847) 12,290 Stage 2 B$’000 2020 3,776 2,787 (1,058) 32 305 540 (378) (1,797) 4,207 Stage 2 B$’000 2021 3,855 (1,151) 1,113 (589) (955) 160 (411) (198) 1,824 Stage 2 B$’000 2020 3,361 2,642 (858) 32 336 454 (351) (1,761) 3,855 Stage 3 B$’000 52,880 4,733 1,558 (4,642) 680 8,499 (1,856) (12,126) 49,726 Stage 3 B$’000 44,847 (5,887) (680) 8,334 5,180 1,227 (2,175) (9,692) 41,154 Stage 3 B$’000 47,706 4,042 1,080 (4,480) 107 8,334 (1,720) (10,222) 44,847 Total B$’000 69,589 7,023 576 (4,606) 2,974 12,072 (3,541) (16,869) 67,218 Total B$’000 60,992 (5,593) 287 7,705 4,196 4,915 (3,749) (9,890) 58,863 Total B$’000 63,022 6,258 249 (4,445) 2,609 11,442 (3,313) (14,830) 60,992 FS85
98. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Transfers from Stage 1 , Stage 2 or Stage 3 are due to financial instruments experiencing significant increases or decreases of credit risk or becoming credit-impaired in the period, and the subsequent increase or decrease in the ECL as financial assets move from one stage to another. Since April 2020, the regulator has issued several notices that sets out certain temporary initiatives and reliefs to assist and reduce the financial burden of customers that have been affected by COVID-19 pandemic. Following these measures and initiatives, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of customers to meet their financing obligations. These include temporary deferral of principal and extension of financing maturity dates. The financing repayment deferral is considered to be a financing modification which either results in the financing being derecognized and replaced with a new financing (substantial modification) or the existing financing continuing to be recognised (non-substantial modification). The carrying amount of financing at the date of modification was considered as non-substantial. No gains or loss was recognised as a result of the modification. (iv) Credit quality of other financial assets (excluding equity securities) The Group managed its exposure to credit risk by investing only in liquid debt securities majority with counterparties that have a credit rating of at least BBB- or its rating equivalent from BDCB approved External Credit Assessment Institution (ECAI), and a small portion to below investment grade or unrated Sukuk. If no such ECAI is available, the Sukuk (obligor) will be assessed using internal model and at least be rated BBB-. The Group monitors changes in credit risk by tracking published external credit ratings. To determine whether published ratings remain up to date and to assess whether there has been a significant increase in credit risk at the reporting date that has not been reflected in published ratings, the Group supplements this by reviewing changes in bond yields and, where available, credit default swap (CDS) prices together with available press and regulatory information about issuers which include quarterly earning updates, and the operating environment. 12‑month and lifetime probabilities of default are based on historical data supplied by Moody’s Investor Service for each credit rating and are recalibrated based on current bond yields. Loss given default (LGD) parameters generally reflect recovery rate depending on the type of asset and sukuk feature which range between 20% to 50% except when a security is credit‑impaired, in which case the estimate of loss is based on the instrument’s current market price and original effective yield rate. The following table presents an analysis of the credit quality of debt securities at amortised cost, FVOCI and FVTPL. It indicates whether assets measured at amortised cost or FVOCI were subject to a 12‑month ECL or lifetime ECL allowance and, in the latter case, whether they were credit‑impaired. FS86
99. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Credit quality of other financial assets (excluding equity securities) due from external parties are as follows: Amortised cost Group and Bank 2021 Debt securities Rated AAA Rate AA+ to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total Gross carrying amount B$’000 Total B$’000 103,963 (12) - - 103,951 143,936 78,968 384 327,251 (31) (4,443) (4,486) - - 143,905 74,519 384 322,759 Gross carrying amount B$’000 2020 Debt securities Rated AAA Rate AA+ to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total 12-month ECL B$’000 Lifetime ECLLifetime not credit ECL- credit impaired impaired B$’000 B$’000 12-month ECL B$’000 239,427 (180) 128,991 107,012 627 476,057 (120) (1,393) (1) (1,694) - (6) (6) Lifetime ECLLifetime not credit ECL- credit impaired impaired B$’000 B$’000 (154) (154) Total B$’000 - 239,247 - 128,871 105,465 626 474,209 FS87
100. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Fair value through profit and loss Group and Bank 2021 Quoted securities Rated AAA Rate AA + to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total Gross carrying amount B$’000 Lifetime ECLLifetime not credit ECL-credit impaired impaired B$’000 B$’000 Total B$’000 5,810 74,750 - - - 5,810 74,750 47,116 2,707 54,537 184,920 - - - 47,116 2,707 54,537 184,920 Gross carrying amount B$’000 2020 Quoted securities Rated AAA Rate AA+ to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total 12-month ECL B$’000 12-month ECL B$’000 Lifetime ECLLifetime not credit ECL-credit impaired impaired B$’000 B$’000 Total B$’000 5,730 68,990 - - - 5,730 68,990 52,788 4,714 28,048 160,270 - - - 52,788 4,714 28,048 160,270 FS88
101. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Fair value through other comprehensive income Group and Bank 2021 Quoted securities Rated AAA Rate AA + to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total Gross carrying amount B$’000 Lifetime ECLLifetime not credit ECL-credit impaired impaired B$’000 B$’000 Total B$’000 4,004 292,212 (37) - - 4,004 292,175 124,752 13,184 36,291 81,085 551,528 (31) (27) (9) (1) (105) - - 124,721 13,157 36,282 81,084 551,423 Gross carrying amount B$’000 2020 Quoted securities Rated AAA Rate AA+ to AARate A+ to ARated BBB+ to BBBRated BB+ or below Unrated-Quasi-government Unrated-Others Other investments Total 12-month ECL B$’000 12-month ECL B$’000 Lifetime ECLLifetime not credit ECL-credit impaired impaired B$’000 B$’000 Total B$’000 54,969 186,710 (17) (229) - - 54,952 186,481 132,557 12,120 35,480 421,836 (487) (262) (62) (1,057) - - 132,070 11,858 35,418 420,779 FS89
102. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Government sukuks held by the Group (refer to Note 18) are issued by Brunei Darussalam Central Bank. Derivative financial assets held with other counterparties (refer to Note 20) are generally above the rating of A-. For other assets, impairment on these balances has been measured on the 12-month expected loss basis which reflects the low credit risk of the exposures. The amount of the allowance on these balances is insignificant. (v) Offsetting financial assets and financial liabilities The disclosures set out in the table below include financial assets and liabilities that: ● ● are offset in the statements of financial position of the Group and Bank; or are subject to an enforceable master netting arrangement, irrespective of whether are offset in the statements of financial position. Financial instruments such as financing and advances, deposits, other assets and other liabilities do not offset in the statements of financial position of the Group and Bank. The derivative transactions of the Group and Bank that are not transacted on an exchange are entered into under Master Agreement for Islamic Transactions. In general, under such agreement the amounts owed by each counterparty that are due on a single day in respect of all transactions outstanding in the same currency under the agreement are aggregated into a single net amount being payable by one party to the other. In certain circumstances, for example when a credit event such as a default occurs, all outstanding transactions under the agreement are terminated, the termination value is assessed and only a single net amount is due or payable in settlement of all transactions. The above agreement does not meet the criteria for offsetting in the statements of financial position. This is because they create a right of set-off recognised amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group and Bank or the counterparties. In addition, the Group and Bank and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously. FS90
103. 48 ,393 10,819 2020 Derivative financial assets Derivative financial liabilities - - Gross amounts of recognised financial instruments offset in the statements of financial position B$’000 48,393 10,819 27,869 12,006 (7,272) (7,272) (8,240) (8,240) Financing instruments B$’000 - - Financing collateral B$’000 41,121 3,547 19,629 3,766 Net amount B$’000 The gross amounts of financial assets and financial liabilities and their net amounts as presented in the statements of financial position that are disclosed in the above tables are measured in the statements of financial position at fair value. 27,869 12,006 2021 Derivative financial assets Derivative financial liabilities Group and Bank Gross amounts of recognised financial instruments B$’000 Net amounts of financial instruments presented in the statements of financial position B$’000 Related amounts not offset in the statements of financial position Financial assets and financial liabilities subject to offsetting, enforceable master agreement for Islamic transactions Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS91
104. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements (b) Market risk Overview of the Bank’s market risk Market risk is defined as the uncertainty of market value and earnings from changes in yield rates, exchange rates, market prices and volatilities. The Bank assumes market risk from trading and investment activities and from retail and corporate financings. The Bank's asset and liability profile can be characterised as that of a standard retail bank. Trading activities are negligible, with an investment portfolio of no more than 15% of the Bank's total assets. Stress testing and sensitivity analysis are performed to assess the impact from changes in the yield curve for income on a monthly basis and for market value on a quarterly basis. Management of market risk Market risk of the Bank is managed by the Market Risk unit of the Risk Management Division. Market risk report is presented monthly to the Bank’s ALCO and quarterly to the AFRC committee. ALCO provides general guidelines to the parameters and limits applied in deriving the report’s outcome. ALCO maintains the policy and procedures with regards to the market risk framework that are consistent and in-line with the short and long-term strategic goals and directions of the Board of Directors. The objective of the Bank’s market risk management is to manage and control market risk exposures in order to optimise return on risk while maintaining a market risk profile consistent with the Bank’s approved risk appetite. A fundamental reform of major profit rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). The Group has limited balance sheet exposures to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. The Group is in the process of amending or preparing to amend contractual terms in response to IBOR reform. This transition will be dependent on the progress of the IBOR reform in the various jurisdictions that the Group has exposure to. For existing contracts that are indexed to an IBOR that mature after the expected cessation of the IBOR rate, the Group will amend the contractual terms of affected contracts based on prevailing market practice in the respective jurisdiction. These amendments may include but not limited to addition of fallback clauses or replacement of the IBOR rate with an alternative benchmark rate. The Group has established a cross functional IBOR Committee (also known as ‘LIBOR Task Force’) to coordinate its transition to alternative rates. FS92
105. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The Bank is exposed to the following risks : Profit Rate Risk: Changes in the market wide yield rate i.e. yield curve will have an impact on the income of the Bank. This depends on how quickly the Bank can absorb the change in yield rate and price this in the composition of assets and liabilities. Stress test and sensitivity analysis is performed at 1%, 3% and 8% parallel shift in market yield rates and the resulting change in 1 year net income position of the Bank. Fair Value/Duration Risk: The fair value of assets and liabilities changes as the discount factor i.e. the yield curve moves up or down. The composition and duration of the assets and liabilities will determine the net change in net asset value. The base discount factor is the market SGD yield curve, to which a premium is added to reflect the market perception of the Bank’s credit standing. The changes in fair value will not have a material impact on the financial statements of the Group and the Bank. Foreign Exchange Risk: The Bank has substantial exposure in foreign exchange denominated assets, particularly the United States Dollar (“USD”). This foreign exchange risk is managed through foreign exchange forward currency hedges, whereby all foreign exchange assets are required to be covered by either liabilities in the same currency and/or foreign exchange forward hedge with a reputable international counterparty. The Bank’s Executive Committee has given approval for only B$10 million equivalent in total aggregate of foreign currency open position. Overview of the subsidiary’s market risk All the subsidiary’s financing assets are fixed rate and is not subject to future movement. However, the subsidiary’s deposit from customers are subject to future repricing risk and the risk that prices and rates will move, resulting in profit or loss to the subsidiary. The subsidiary is exposed to the following risks: Rate of return or profit risk: risk that changes in prevailing yield rate for deposits will adversely affect the earnings stream of the subsidiary, thus resulting in reduced net financing income. Price Risk: risk that changes in prevailing yield rate will adversely affect the values of assets, liabilities, and capital. Price risk is the valuation effect due to changes in rates and other market factors both internal and external to the subsidiary. The objective of the subsidiary’s market risk management is to manage and control market risk exposures in order to optimise return on risk while maintaining a market risk profile consistent with the subsidiary’s approved risk appetite. Market risk governance and management The board of the subsidiary reviews these risks at least annually, and more often as conditions may warrant. This helps to provide for growth that is sound, profitable and balanced without sacrificing the quality of service and to manage and maintain policies and procedures that are consistent with the subsidiary’s and Group’s strategic goals. FS93
106. 449 ,560 22,898 51,488 295,990 1,390,491 145,666 49,999 40,474 214,198 1,872,750 570,555 - 1,422,413 1–3 months B$’000 253,642 891,127 4,004 - 9,987 38,165 585,329 - - 3 – 12 months B$’000 1,673,168 2,307,440 419,257 - 215,015 - - - 1–5 years B$’000 1,745,668 12,559 1,841,199 36,291 - 46,681 - - - Over 5 years B$’000 40,013 1,885,374 81,722 - - - 492,042 1,271,597 Non profit bearing B$’000 27,869 212,789 - 184,920 - - - - Trading book B$’000 27,869 4,182,666 12,559 40,013 10,401,170 633,236 184,920 59,986 322,759 1,180,555 492,042 3,264,565 Total B$’000 * Financial assets at fair value through profit or loss and at other comprehensive income exclude unquoted fund and investments in unquoted equity securities, respectively. * Financing and advances is arrived at after deducting allowances for losses from the outstanding gross impaired financing. * Other assets exclude prepayments. Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments at amortised cost Investments at fair value through profit or loss * Investments at fair value through other comprehensive income * Derivative financial assets Financing and advances * Finance lease receivables Other assets * Total Group 2021 Up to 1 month B$’000 The tables below summarise the Group’s and Bank’s exposure to profit rate risk and gap position on non-trading portfolio. The tables indicate the periods in which the financial instruments reprice or mature, whichever is earlier. (i) Profit rate risk Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS94
107. Recognised assets profit sensitivity gap Unrecognised financial instruments profit sensitivity gap Total profit sensitivity gap Liabilities Deposits from customers Deposits from banks and other financial institutions Derivative financial liabilities Placements from other financial institutions Other liabilities Total Group 2021 (59,581) - (4,413,261) - (4,413,261) (54,194) - (161,300) 576,414 - 576,414 (935,001) - (935,001) (814,077) (1,826,128) (142,350) (6,286,011) 3 – 12 months B$’000 (612,146) (1,610,634) 1–3 months B$’000 (241,118) (6,044,893) Up to 1 month B$’000 2,171,371 - 2,171,371 (136,069) - - (35,780) (100,289) 1–5 years B$’000 1,839,772 - 1,839,772 (1,427) - - - (1,427) Over 5 years B$’000 990,288 (751,370) 1,741,658 (143,716) (143,716) - - - - Non profit bearing B$’000 199,616 - 199,616 (13,173) - (13,173) - - Trading book B$’000 429,199 (751,370) 1,180,569 (143,716) (9,220,601) (113,775) (13,173) (580,548) (8,369,389) Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS95
108. 74 ,877 2,291,882 262,774 792,545 - - 79,242 10,000 - 191,769 - 258,760 228,313 - 1,978,692 1–3 months B$’000 227,260 924,483 - - 71,423 625,800 - - 3 – 12 months B$’000 1,257,418 1,861,432 329,281 - 274,733 - - - 1–5 years B$’000 2,186,909 12,588 2,340,863 92,555 - 48,811 - - - Over 5 years B$’000 45,957 1,125,447 205,934 - - - 488,898 384,658 Non profit bearing B$’000 48,393 208,663 - 160,270 - - - - Trading book B$’000 48,393 4,009,238 12,588 45,957 9,545,315 627,770 160,270 10,000 474,209 1,045,882 488,898 2,622,110 Total B$’000 * Financial assets at fair value through profit or loss and at other comprehensive income exclude unquoted fund and investments in unquoted equity securities, respectively. * Financing and advances is arrived at after deducting allowances for losses from the outstanding gross impaired financing. * Other assets exclude prepayments. Investments at fair value through other comprehensive income * Derivative financial assets Financing and advances * Finance lease receivables Other assets * Total Investments at fair value through profit or loss * Placements with and financing and advances to banks Government sukuks Investments at amortised cost Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Group 2020 Up to 1 month B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS96
109. Recognised assets profit sensitivity gap Unrecognised financial instruments profit sensitivity gap Total profit sensitivity gap Liabilities Deposits from customers Deposits from banks and other financial institutions Derivative financial liabilities Placements from other financial institutions Other liabilities Total Group 2020 (139,110) (488,638) (2,774,441) - (2,774,441) (106,076) - (301,813) - (187,226) (1,035,512) - (187,226) (1,035,512) (979,771) (1,959,995) (147,147) (5,066,323) 3 – 12 months B$’000 (693,514) (1,552,106) 1–3 months B$’000 (228,146) (4,349,539) Up to 1 month B$’000 1,648,294 - 1,648,294 (213,138) - - (72,100) (141,038) 1–5 years B$’000 2,340,150 - 2,340,150 (713) - - - (713) Over 5 years B$’000 365,505 (627,234) 992,739 (132,708) (132,708) - - - - Non profit bearing B$’000 197,152 - 197,152 (11,511) - (11,511) - - Trading book B$’000 553,922 (627,234) 1,181,156 (132,708) (8,364,159) (733,824) (11,511) (749,206) (6,736,910) Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS97
110. - 51 ,488 295,010 1,389,511 449,560 22,898 145,666 49,999 - 40,474 214,292 1,872,354 - 570,555 - 1,421,923 1–3 months B$’000 4,004 240,827 1,321,560 - 1,028,577 9,987 38,165 - - 3 – 12 months B$’000 419,257 1,426,956 2,061,228 - 215,015 - - 1–5 years B$’000 36,291 1,280,572 12,559 1,376,103 - 46,681 - - Over 5 years B$’000 81,722 38,123 1,843,216 - - 452,343 1,271,028 Non profit bearing B$’000 27,869 212,789 184,920 - - - Trading book B$’000 633,236 27,869 3,457,657 12,559 38,123 10,076,761 184,920 1,623,803 59,986 322,759 452,343 3,263,506 Total B$’000 * Financial assets at fair value through profit or loss and at other comprehensive income exclude unquoted fund and investments in unquoted equity securities, respectively. * Financing and advances is arrived at after deducting allowances for losses from the outstanding gross impaired financing. * Other assets exclude prepayments. Derivative financial assets Financing and advances * Finance lease receivables Other assets * Total Investments at fair value through other comprehensive income * Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments at amortised cost Investments at fair value through profit or loss * Bank 2021 Up to 1 month B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS98
111. Recognised assets profit sensitivity gap Unrecognised financial instruments profit sensitivity gap Total profit sensitivity gap Derivative financial liabilities Placements from other financial institutions Other liabilities Total Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bank 2021 (4,340,539) - (4,340,539) (6,212,893) - (226,488) (5,986,405) Up to 1 month B$’000 3 – 12 months B$’000 - (39,100) 510,124 - 510,124 (350,094) - (350,094) (59,581) (54,194) (879,387) (1,671,654) - (211,397) (608,409) (1,578,360) 1–3 months B$’000 1,957,094 - 1,957,094 (104,134) - (15,680) (88,454) 1–5 years B$’000 1,376,103 - 1,376,103 - - - - Over 5 years B$’000 958,820 (751,370) 1,710,190 (133,026) (133,026) - - - Non profit bearing B$’000 199,616 - 199,616 (13,173) (13,173) - - Trading book B$’000 311,124 (751,370) 1,062,494 (113,775) (133,026) (9,014,267) (13,173) (492,665) (8,261,628) Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS99
112. - 261 ,859 791,630 191,769 79,242 228,313 10,000 - 74,949 2,290,988 - 258,760 - 1,977,726 1–3 months B$’000 215,173 1,330,069 - 1,043,473 71,423 - - 3 – 12 months B$’000 329,281 871,556 1,475,570 - 274,733 - - 1–5 years B$’000 92,555 1,858,742 12,588 2,012,696 - 48,811 - - Over 5 years B$’000 205,934 44,474 1,084,966 - - 449,900 384,658 Non profit bearing B$’000 48,393 208,663 160,270 - - - Trading book B$’000 627,770 48,393 3,282,279 12,588 44,474 9,194,582 160,270 1,463,555 10,000 474,209 449,900 2,621,144 Total B$’000 * Financial assets at fair value through profit or loss and at other comprehensive income exclude unquoted fund and investments in unquoted equity securities, respectively. * Financing and advances is arrived at after deducting allowances for losses from the outstanding gross impaired financing. * Other assets exclude prepayments. Derivative financial assets Financing and advances * Finance lease receivables Other assets * Total Investments at fair value through other comprehensive income * Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments at amortised cost Investments at fair value through profit or loss * Bank 2020 Up to 1 month B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS100
113. Recognised assets profit sensitivity gap Unrecognised financial instruments profit sensitivity gap Total profit sensitivity gap Derivative financial liabilities Placements from other financial institutions Other liabilities Total Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Bank 2020 (2,783,796) - (2,783,796) (488,638) (5,074,784) - (291,620) (4,294,526) Up to 1 month B$’000 3 – 12 months B$’000 - (147,613) (179,519) - (179,519) (448,722) - (448,722) (139,110) (106,076) (971,149) (1,778,791) - (147,147) (684,892) (1,525,102) 1–3 months B$’000 1,312,573 - 1,312,573 (162,997) - (36,100) (126,897) 1–5 years B$’000 2,012,696 - 2,012,696 - - - - Over 5 years B$’000 330,919 (627,234) 958,153 (126,813) (126,813) - - - Non profit bearing B$’000 197,152 - 197,152 (11,511) (11,511) - - Trading book B$’000 441,303 (627,234) 1,068,537 (733,824) (126,813) (8,126,045) (11,511) (622,480) (6,631,417) Total B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS101
114. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Profit sensitivity analysis for variable rate instruments : A change of 100, 300 and 800 basis points (“bp”) in yield rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular foreign currency rates, remain constant. Group and Bank 100 bp 100 bp increase decrease B$’000 B$’000 Profit or loss / Equity 300 bp 300 bp increase decrease B$’000 B$’000 800 bp increase B$’000 800 bp decrease B$’000 2021 Variable rate instruments (8,473) 8,473 (25,419) 25,419 (67,784) 67,784 2020 Variable rate instruments (8,677) 8,677 (26,031) 26,031 (69,416) 69,416 (ii) Foreign exchange risk of the Bank Trading positions The Bank controls the foreign exchange risk within the trading portfolio by limiting the open exposure to individual currencies, and on an aggregate basis. Overall (trading and non-trading positions) To mitigate the risk of loss due to foreign currency rate changes, the Bank will match its positions as closely as possible. Trading is always conducted to ensure that internal set limits are adhered to. Positions are analysed on a daily basis, whereby a currency risk report is produced for the Managing Director and the Chief Risk Officer on a daily basis and for the Board of Directors at the end of each quarter. Foreign exchange risk of the subsidiaries The subsidiaries’ nature of business does not maintain any trading positions and does not have significant exposure to foreign exchange risk. FS102
115. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Exposure to foreign exchange risk As at the reporting date , net currency exposures arising from the Group’s major trading currencies were as follows: ---------------------Group and Bank-------------------USD EUR GBP Others B$’000 B$’000 B$’000 B$’000 2021 Assets Cash and short term funds Placements with and financing and advances to banks Investments Financing and advances Others Total Liabilities Deposits from customers Deposits from banks and other financial institutions Placements from other financial institutions Others Total Net foreign exchange exposure Effect of use of derivatives Net exposure 1,913,618 13,803 60,985 9,924 973,641 1,146,072 372,085 26,154 4,431,570 321 14,124 60,148 309,450 221 430,804 9,924 (90,724) (351,442) (9,039) (920,179) (1,823) - (1) - (113,775) (1,462) (1,037,239) (2) (90,726) (574) (352,017) 3,394,331 (76,602) 78,787 (3,513,907) 76,710 (78,720) (119,576) 108 67 869 1,805,985 40,371 115,927 16,700 853,545 1,264,787 250,827 19,786 4,194,930 341 40,712 7,172 304,437 269 427,805 16,700 (16) (9,055) 869 - 2020 Assets Cash and short term funds Placements with and financing and advances to banks Investments Financing and advances Others Total FS103
116. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements ---------------------Group and Bank---------------------2020 Liabilities Deposits from customers Deposits from banks and other financial institutions Placements from other financial institutions Others Total Net foreign exchange exposure Effect of use of derivatives Net exposure USD B $’000 EUR B$’000 GBP B$’000 Others B$’000 (606,384) (40,843) (14,246) - (1) (733,824) (1,869) (1,356,323) - (620) (343,876) (2) (40,845) (343,255) (16,016) (21) (16,037) 2,838,607 (133) 83,929 663 (2,885,986) 286 (83,825) 93 (47,379) 153 104 756 Sensitivity analysis Considering that other risk variables remain constant, the foreign currency revaluation sensitivity for the Group and Bank as at the reporting date is summarised as follows: 2021 Group and Bank USD EUR GBP Others Total Profit or loss / Equity 2020 -1% +1% -1% +1% depreciation appreciation depreciation appreciation B$’000 B$’000 B$’000 B$’000 1,196 (1) (1) (9) 1,185 (1,196) 1 1 9 (1,185) 474 (2) (1) (8) 463 (474) 2 1 8 (463) (iii) Equity price risk The Group is exposed to equity price risk on its equity investments which are carried at fair value through profit or loss and through other comprehensive income. FS104
117. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements For a 10 % increase in the value of equity securities, the impact on profit or loss of the Group and the Bank would have been an increase of B$67,000 and B$67,000 respectively (2020: B$69,000 and B$69,000 respectively). A 10% decrease in the value of the equity securities would have an equal and opposite effect on the profit or loss of the Group and the Bank. For a 10% increase in the value of equity securities, the impact on fair value reserve of the Group and the Bank would have been an increase of B$32,000 and B$32,000 respectively (2020: B$34,000 and B$34,000 respectively). A 10% decrease in the value of the equity securities would have an equal and opposite effect on the fair value reserve of the Group and the Bank. (c) Liquidity risk Overview of the Group’s liquidity risk The Group’s exposure to liquidity risk arises when there is a possibility of the Group not having sufficient funds to meet its obligations from its financial liabilities. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. In addition, the Bank and one of its subsidiaries have to comply with Section 45(1) of the Islamic Banking Order, 2008 and section 13A of the Finance Companies Act, Cap 89 respectively to maintain minimum cash balances with the BDCB. The Bank and the subsidiary were in compliance with these requirements during the year ended 31 December 2021. Management of liquidity and funding risk The Bank manages its liquidity under the purview of its ALCO which is responsible for establishing the liquidity policy as well as monitoring liquidity on an ongoing basis. A Minimum Liquid Asset requirement has been established to ensure that the ratio of liquid assets to qualifying liabilities is subject to a minimum threshold at all times. Overview of the subsidiary’s liquidity risk Liquidity risk is the risk that the subsidiary will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The subsidiary’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions, without incurring unacceptable losses or risking damage to the subsidiary’s reputation. Management of liquidity risk Liquidity risk is managed in accordance with the subsidiary’s liquidity needs through, in large part, receipt of placements from the Bank, in addition to the receipt of deposits from other financial institutions and retail depositors. This will ensure that liquidity risk is monitored and managed in a manner that ensures sufficient funds are available over a range of market conditions. FS105
118. 3 ,264,875 492,042 1,186,936 60,000 1,224,925 28,580 4,757,314 27,780 40,013 11,082,465 3,264,565 492,042 1,180,555 59,986 1,140,915 27,869 4,182,666 12,559 40,013 10,401,170 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Assets Cash, balances and placements with banks Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments * Derivative financial assets Financing and advances Finance lease receivables Other assets * Total Group 2021 Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 50,000 126,102 26,012 863,055 180 19,333 5,326,774 595,662 381,555 3,264,875 Less than 3 months B$’000 34,995 2,278 250,241 180 4,494 532,082 205,372 34,522 - 3–6 months B$’000 10,000 34,182 290 402,110 360 393 901,509 385,902 68,272 - 6 – 12 months B$’000 384,595 1,368,557 1,480 241 1,762,483 - 7,610 - 1–3 years B$’000 438,764 614,882 1,560 13,553 1,068,759 - - - 3–5 years B$’000 126,765 1,258,469 24,020 1,999 1,411,336 - 83 - Over 5 years B$’000 79,522 79,522 - - - No specific maturity B$’000 The table below summarises the Group’s and Bank’s assets and liabilities based on remaining contractual maturities. The expected cash flows of these assets and liabilities could vary significantly from what is shown in the table. For example, deposits from customers are not all expected to be withdrawn immediately. Maturity analysis Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS106
119. Recognised assets net liquidity gap Commitments and contingencies Net liquidity gap Derivative financial liabilities Placements from other financial institutions Other liabilities Lease liabilities Total Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Group 2021 (59,591) (9,523) (296,729) 1,861,268 (751,370) 1,109,898 1,180,569 (751,370) 429,199 (2,492,386) (751,370) (1,741,016) (102,657) (40,357) (41,059) (2,840) (9,221,197) (7,067,790) (113,785) (113,775) (584,445) 5,885 (102,657) (41,059) (9,220,601) Less than 3 months B$’000 (8,385,136) (6,658,750) (13,173) (580,548) (8,369,389) Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 6 – 12 months B$’000 (54,194) 223 (233,216) (120,622) - (120,622) (417,721) - (417,721) (21,784) (20,574) (129) (652,704) (1,319,230) - (1,615) (18,421) (610,884) (1,011,340) 3–6 months B$’000 1,616,526 - 1,616,526 (8,507) (591) (145,957) - 1,868 (36,079) (102,648) 1–3 years B$’000 1,081,389 - 1,081,389 (1,661) (641) 12,630 - 14,932 - - 3–5 years B$’000 1,363,190 - 1,363,190 (9,774) (36,858) (48,146) - - - (1,514) Over 5 years B$’000 79,522 - 79,522 - - - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS107
120. 1 ,053,455 1,045,882 10,000 1,355,045 48,273 4,635,380 28,500 45,957 10,287,797 488,898 488,898 10,000 1,262,249 48,393 4,009,238 12,588 45,957 9,545,315 2,622,289 2,622,110 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Government sukuks Investments * Derivative financial assets Financing and advances Finance lease receivables Other assets * Total Assets Cash, balances and placements with banks Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Group 2020 Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 10,000 82,587 44,573 665,967 180 32,473 4,236,381 420,550 357,762 2,622,289 Less than 3 months B$’000 51,844 2,971 219,371 180 2,732 544,281 222,227 44,956 - 3–6 months B$’000 42,334 729 345,049 360 238 873,571 410,678 74,183 - 6 – 12 months B$’000 357,339 1,453,253 1,440 3,617 1,827,597 - 11,948 - 1–3 years B$’000 417,114 758,840 1,540 3,307 1,180,801 - - - 3–5 years B$’000 198,200 1,192,900 24,800 3,590 1,419,539 - 49 - Over 5 years B$’000 205,627 205,627 - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS108
121. Recognised assets net liquidity gap Commitments and contingencies Net liquidity gap Derivative financial liabilities Placements from other financial institutions Other liabilities Lease liabilities Total Liabilities Deposits from customers Deposits and placements of banks and other financial institutions Group 2020 (627,863) (7,235) (449,999) 1,908,772 (627,234) 1,281,538 1,181,156 (627,234) 553,922 (2,582,989) (627,234) (1,955,755) (92,941) (37,513) (39,767) (974) (8,379,025) (6,169,643) (733,997) (733,824) (753,095) (1,713) (92,941) (39,767) (8,364,159) Less than 3 months B$’000 (6,757,512) (5,046,059) (11,511) (749,206) (6,736,910) Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 - (202) (237,962) (901,659) 6 – 12 months B$’000 (278,742) - (278,742) (300,865) - (300,865) (25,026) (17,811) (84) (209) (824,671) (1,157,843) (106,134) (2,804) (28,591) (662,032) 3–6 months B$’000 1,637,022 - 1,637,022 (6,186) (277) (189,064) - 947 (36,543) (147,005) 1–3 years B$’000 1,184,863 - 1,184,863 (3,028) (491) 4,062 - 7,581 - - 3–5 years B$’000 1,416,622 - 1,416,622 (3,377) (37,732) (41,866) - - - (757) Over 5 years B$’000 205,627 - 205,627 - - - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS109
122. 3 ,263,815 452,343 1,630,183 60,000 1,224,925 28,580 4,027,145 27,780 38,123 10,752,894 3,263,506 452,343 1,623,803 59,986 1,140,915 27,869 3,457,657 12,559 38,123 10,076,761 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments * Derivative financial assets Financing and advances Finance lease receivables Other assets * Total Bank 2021 Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 50,000 126,102 26,012 861,535 180 17,443 5,303,580 595,662 362,831 3,263,815 Less than 3 months B$’000 34,995 2,278 250,241 180 4,494 583,236 259,213 31,835 - 3–6 months B$’000 10,000 34,182 290 388,745 360 393 1,261,479 775,308 52,201 - 6 – 12 months B$’000 384,595 1,120,204 1,480 241 1,511,996 - 5,476 - 1–3 years B$’000 438,764 614,882 1,560 13,553 1,068,759 - - - 3–5 years B$’000 126,765 791,538 24,020 1,999 944,322 - - - Over 5 years B$’000 79,522 79,522 - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS110
123. Recognised assets net liquidity gap Commitments and contingencies Net liquidity gap Liabilities Deposits from customers Deposits from banks and other financial institutions Derivative financial liabilities Placements from other financial institutions Other liabilities Lease liabilities Total Bank 2021 5 ,885 (113,785) (13,173) (113,775) (59,591) (9,523) (437,987) 1,742,848 (751,370) 991,478 1,062,494 (751,370) 311,124 (2,583,246) (751,370) (1,831,876) (93,491) (31,191) (39,535) (1,316) (9,010,046) (7,135,456) (492,890) (93,490) (39,536) (9,014,267) Less than 3 months B$’000 (8,276,230) (6,595,848) (492,665) (8,261,628) Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 (54,194) 223 (20,738) (991,231) 6 – 12 months B$’000 (57,322) - (57,322) 174,836 - 174,836 (21,784) (20,574) (129) (640,558) (1,086,643) - (1,615) (18,421) (598,738) 3–6 months B$’000 1,398,609 - 1,398,609 (8,507) (591) (113,387) - 1,868 (15,744) (90,413) 1–3 years B$’000 1,081,389 - 1,081,389 (1,661) (641) 12,630 - 14,932 - - 3–5 years B$’000 897,690 - 897,690 (9,774) (36,858) (46,632) - - - - Over 5 years B$’000 79,522 - 79,522 - - - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS111
124. 2 ,621,324 449,900 1,471,128 10,000 1,355,045 48,273 3,902,193 28,500 44,474 9,930,837 2,621,144 449,900 1,463,555 10,000 1,262,249 48,393 3,282,279 12,588 44,474 9,194,582 * Investments exclude unquoted equity security and unquoted fund. * Other assets exclude prepayments. Assets Cash and cash equivalents Balances with Brunei Darussalam Central Bank Placements with and financing and advances to banks Government sukuks Investments * Derivative financial assets Financing and advances Finance lease receivables Other assets * Total Bank 2020 Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 10,000 82,587 44,573 664,485 180 30,990 4,209,958 420,550 335,269 2,621,324 Less than 3 months B$’000 51,844 2,971 219,371 180 2,732 545,702 222,000 46,604 - 3–6 months B$’000 42,334 729 332,509 360 238 1,262,338 828,578 57,590 - 6 – 12 months B$’000 357,339 1,063,813 1,440 3,617 1,436,646 - 10,437 - 1–3 years B$’000 417,114 758,840 1,540 3,307 1,180,801 - - - 3–5 years B$’000 198,200 863,175 24,800 3,590 1,089,765 - - - Over 5 years B$’000 205,627 205,627 - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS112
125. Recognised assets net liquidity gap Commitments and contingencies Net liquidity gap Liabilities Deposits from customers Deposits from banks and other financial institutions Derivative financial liabilities Placements from other financial institutions Other liabilities Lease liabilities Total Bank 2020 (1,713) (733,997) (11,511) (733,824) (627,863) (7,235) (438,819) 1,793,882 (627,234) 1,166,648 1,068,537 (627,234) 441,303 (2,505,921) (627,234) (1,878,687) (87,958) (32,530) (38,855) (62) (8,136,955) (6,088,645) (623,379) (87,958) (38,855) (8,126,045) Less than 3 months B$’000 (6,651,053) (4,982,136) (622,480) (6,631,417) Carrying amount B$’000 Gross nominal inflow/ (outflow) B$’000 (341,890) - (341,890) (25,026) (84) (887,592) (106,134) (2,804) (102,938) (650,606) 3–6 months B$’000 312,939 - 312,939 (17,811) (209) (949,399) - (202) (45,079) (886,098) 6 – 12 months B$’000 1,262,374 - 1,262,374 (6,186) (277) (174,272) - 947 (36,543) (132,213) 1–3 years B$’000 1,184,863 - 1,184,863 (3,028) (491) 4,062 - 7,581 - - 3–5 years B$’000 1,048,656 - 1,048,656 (3,377) (37,732) (41,109) - - Over 5 years B$’000 205,627 - 205,627 - - - No specific maturity B$’000 Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS113
126. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements (d) Operational Risk of the Group Overview of the Bank and a material subsidiary’s operational risk Operational risk is the potential for loss resulting from events involving people, internal processes, systems or external events. A set of minimum control standards for operational risk management has been developed with the objective of ensuring that operational risks within the Group are identified and managed in a structured and consistent manner. Operational Risk Management Framework Operational risks can arise from all business lines and from all activities carried out by the Bank. Operational risks are systematically identified at the divisional level. Risk Coordinators are appointed from each division and are responsible for risk identification and risk management in all the identified risk areas. This includes maintaining an effective control environment arising from those activities as their first line of defence responsibilities. Operational risk exposures can take various forms, and the Bank seeks to manage them in accordance with standards that drive systematic risk identification, assessment, control and monitoring. These standards are reviewed regularly to ensure their ongoing effectiveness. To support the systematic identification of material operational risk exposures associated with a given process, the Bank classifies them into the following risk types: ● ● ● ● People Process System External Operational risk exposures are rated ‘high’, ‘medium’ or ‘low’ in accordance with defined risk assessment criteria. Risks that are outside set materiality thresholds receive a different level of management attention and are reported to Senior Management (Ad-Hoc Basis) and Enterprise Risk Management (“ERM”) committee (Monthly Basis) and AFRC (Quarterly Basis). Significant risk events or financial losses that have occurred are analysed to identify the root cause of any failure for remediation and future mitigation. Actual operational losses are recorded. As the second line of defence, Operational Risk Management (“ORM”) unit of the Risk Management Division is responsible for setting and maintaining the standards for operational risk management and control. ORM also creates awareness of possible risk issues in business units and provides risk awareness training and workshops. The ERM Committee oversees the management of operational risks across the Bank, supported by all business unit heads. The ERM Committee operates on the basis of terms of reference derived from the Operational Risk Management mandate/framework which is approved by the Leadership Forum. FS114
127. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Overview of a material subsidiary ’s operational risk Operational risk is the potential for loss resulting from events involving people, internal processes, systems or external events. A set of minimum control standards for operational risk management has been developed with the objective of ensuring that operational risks within the subsidiary are identified and managed in a structured and consistent manner. (a) ORIC committee The subsidiary’s board, through the Operational Risk and Internal Controls Committee (“ORIC”), is responsible for the ongoing monitoring of operational risks and the development, implementation and monitoring of established internal controls to address the operational risks, by monitoring identified key risk indicators, measuring board approved risk appetite limit against near-miss, potential loss and actual-loss events, monitoring of identified early warning signals indicators and operational risk incident reports. The committee is also responsible to ensure timely closures of audit points raised by internal and external auditors. (b) Risk controls self-assessment All divisions in the subsidiary have established internal controls framework (“ICF”), requiring appropriate segregation of duties, reconciliation and monitoring of transactions. The ICF is updated at least annually, as part of the risk controls self-assessment exercise, where each department will assess its level of compliance to the ICF, identify control gaps and report its findings to ORIC. FS115
128. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 37 Fair value of financial assets and liabilities Fair value is 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 principal or , in its absence, the most advantageous market to which the Group has access at that date. The information presented herein represents the estimates of fair values as at the reporting date. Quoted and observable market prices, where available, are used as the measure of fair values of the financial instruments. Where such quoted and observable market prices are not available, fair values are estimated based on a range of methodologies and assumptions regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows and other factors. Fair value information for non-financial assets and liabilities are excluded from this note as they do not fall within the scope of IFRS 13: Fair Value Measurements which requires the fair value information to be disclosed. These include investments in subsidiaries and property and equipment. The fair value of the Group’s and the Bank’s financial instruments such as cash and short-term funds, balances with BDCB, deposits and placements with banks and other financial institutions, deposits from customers and banks, government sukuks, other assets, other liabilities and short term borrowings are not materially sensitive to shifts in market yield rate because of the limited term to maturity of these instruments. As such, the carrying value of these financial assets and liabilities at the reporting date approximate their fair values. The fair values are based on the following methodologies and assumptions: Investments The estimated fair values are generally based on quoted and observable market prices. Where there is no ready market in certain securities, fair values have been estimated by reference to market indicative yields or net tangible asset of the investee. Financing and advances The fair value is estimated by discounting the estimated future cash flows using the prevailing market rates of financing with similar credit risks and maturities. Derivatives The fair values of derivatives are obtained based on quoted rates of similar instruments at the reporting date. FS116
129. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Fair value hierarchy IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable . Observable inputs reflect market data obtained from independent sources and unobservable inputs reflect the Group’s market assumptions. The fair value hierarchy is as follows: ● Level 1 – Quoted price (unadjusted) in active markets for the identical assets or liabilities. This level includes listed equity securities and debt instruments. ● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). ● Level 3 – Inputs for assets or liabilities that are not based on observable market data (unobservable inputs). This level includes equity instruments and debt instruments with significant unobservable components. FS117
130. Financial liabilities measured at fair value Forward exchange contracts Derivative liabilities Financial assets measured at fair value Investments Government sukuks Forward exchange contracts Group and Bank 2021 - 633 ,557 59,986 693,543 B$’000 (12,005) (1,168) 185,585 27,869 213,454 B$’000 - 322,759 322,759 B$’000 FVOCI equity and debt Mandatorily Amortised instrument at FVTPL cost Carrying amounts (12,005) (1,168) 1,141,901 59,986 27,869 1,229,756 B$’000 Total (1,168) 1,101,498 1,101,498 B$’000 Level 1 (12,005) - 54,537 27,869 82,406 B$’000 Level 2 - 986 59,986 60,972 B$’000 Level 3 Fair values (12,005) (1,168) 1,157,021 59,986 27,869 1,244,876 B$’000 Total The carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy are as follows. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS118
131. Financial liabilities measured at fair value Forward exchange contracts Derivative liabilities Financial assets measured at fair value Investments Government sukuks Forward exchange contracts Group and Bank 2020 - 628 ,111 10,000 638,111 B$’000 (10,819) (692) 160,959 48,393 209,352 B$’000 - 474,209 474,209 B$’000 Carrying amounts FVOCI equity and debt Mandatorily Amortised instrument at FVTPL cost (10,819) (692) 1,263,279 10,000 48,393 1,321,672 B$’000 Total (692) 1,254,862 1,254,862 B$’000 Level 1 (10,819) - 28,048 48,393 76,441 B$’000 Level 2 - 1,030 10,000 11,030 B$’000 Level 3 Fair values (10,819) (692) 1,283,940 10,000 48,393 1,342,333 B$’000 Total Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements FS119
132. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Valuation techniques and significant unobservable inputs The table below sets out information about valuation techniques and significant unobservable inputs used in estimating parameters of financial instruments categorised as Level 2 and 3 in the fair value hierarchy : Significant unobservable inputs Interrelationship between key unobservable inputs and fair value measurement Classification Level of the fair value hierarchy Structured notes FVTPL 2 Issuer quoted prices (bidask) of the structured notes are sourced from Bloomberg on a daily basis. - Not applicable. Forward exchange contracts FVTPL 2 Quoted prices: Market prices are sourced from Bloomberg on a daily basis. - Not applicable. Unquoted security FVOCI 3 Net asset value: The unquoted security is reallocated at least every three years. The present reallocation is based on the financial contribution to network-based services in 2017. Type of financial instrument Valuation techniques Net asset value Not applicable. FS120
133. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Type of financial instrument Classification Level of the fair value hierarchy Unquoted funds FVTPL 3 Net asset value : This is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding. As the funds are not listed, the fair value of the investment in the fund is determined using valuation techniques. Methods used include estimating fair value with reference to recent arm's length transactions or the underlying net asset value of the company. This fund determined NAV of its investment in the fund based on the NTA method, which is the closest proxy to fair value. Government sukuks FVOCI 3 Discounted cash flows: The fair value is estimated considering a net present value calculated using the price provided by Brunei Government upon the initiation of the Government sukuks. Valuation techniques Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Net asset value The estimated fair value would increase (decrease) if: • the net asset value were higher (lower). Yield curve and credit spreads The estimated fair value would increase (decrease) if: • the expected cash flows were higher (lower); or • the risk-adjusted discount rate was lower (higher). There are limited inter-relationships between unobservable inputs as the financial instruments are usually categorised into Level 3 because of a single unobservable input. In estimating significance, the Group performed sensitivity analysis based on methodologies applied for fair value adjustments. These adjustments reflect the values which the Group estimates to be appropriate to reflect uncertainties in the inputs used (e.g. based on stress testing methodologies on the unobservable input). The methodologies used can be statistical or based on other relevant approved techniques. Management considers that any reasonably possible changes to the unobservable inputs will not result in a significant financial impact. FS121
134. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements Changes in Level 3 for financial instruments that are measured at fair value The following table presents the changes in Level 3 instruments for the Group and the Bank : FVOCI B$’000 At 1 January 2021 Matured during the year Purchased during the year Fair value movements during the year Foreign exchange gain loss At 31 December 2021 10,341 (157,970) 207,950 7 (20) 60,308 FVOCI B$’000 At 1 January 2020 Matured during the year Purchased during the year Distribution of capital Fair value movements during the year Foreign exchange gain/(loss) At 31 December 2020 10,214 (9,897) 10,000 24 10,341 FVTPL B$’000 689 (23) (2) 664 FVTPL B$’000 1,148 (125) (312) (22) 689 Total B$’000 11,030 (157,970) 207,950 (16) (22) 60,972 Total B$’000 11,362 (9,897) 10,000 (125) (312) 2 11,030 There were no transfers from Level 1 instruments to Level 2, and no transfers into or out of Level 3 instruments during the year ended 31 December 2021 (2020: NIL). FS122
135. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 38 Leases A . Leases as lessee The Group and Bank leases buildings and warehouse facilities. The buildings and warehouse leases were entered into many years ago as combined leases of land and buildings. Information about leases which the Group and Bank is a lessee is presented below. i. Right-of-use assets Group Balance at 1 January Amortisation charged for the year Additions to right-of-use assets Termination/Disposal of right-of-use assets Balance at 31 December Bank Balance at 1 January Amortisation charged for the year Additions to right-of-use assets Termination/Disposal of leases Balance at 31 December ii. 2021 2020 Land and Building B$’000 B$’000 40,965 (3,498) 4,042 (97) 41,412 41,172 (3,087) 2,880 40,965 2021 2020 Land and Building B$’000 B$’000 40,066 (3,117) 3,023 (8) 39,964 40,137 (2,763) 2,692 40,066 Amounts recognised in profit or loss 2021 Profit on lease liabilities Expenses relating to short-term leases Expenses relating to lease of low-value assets, excluding short-term leases of low value assets Group B$’000 Bank B$’000 1,312 - 1,269 - 45 45 FS123
136. Bank Islam Brunei Darussalam Berhad and its Subsidiaries 2020 Profit on lease liabilities Expenses relating to short-term leases Expenses relating to lease of low-value assets , excluding short-term leases of low value assets Financial Statements Group B$’000 Bank B$’000 1,328 - 1,284 - 145 145 iii. Amounts recognised in the statement of cash flows Group 2021 B$’000 Total cash outflow for leases 2020 B$’000 (3,992) (3,622) Bank 2021 B$’000 Total cash outflow for leases B. (3,602) 2020 B$’000 (3,261) Leases as lessor The Group and Bank leases out some of its property. All leases are classified as operating leases from a lessor perspective with the exception of a sub-lease, which the Group has classified as a finance sublease (see Note 22). Operating lease The Group leases out its investment property. The Group has classified these leases as operating leases, because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Rental income recognised by the Group and Bank during 2021 was B$2,665,000 (2020: B$3,004,000). FS124
137. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements The following table sets out a maturity analysis of lease payments , showing the undiscounted leased payments to be received after the reporting date. Group and Bank B$’000 2021 Within one year Between one and five years 2,484 5,524 8,008 Total Group and Bank B$’000 2020 Within one year Between one and five years 1,444 3,244 4,688 Total 39 Non-current assets and liabilities Assets and liabilities other than those disclosed below are current. Assets Balances with Brunei Darussalam Central Bank Investments Financing and advances Finance lease receivables Investments in subsidiaries Investments in associate and joint ventures Other assets Property and equipment Investment property Deferred tax assets Liabilities Deposits from customers Deposits from banks and other financial institutions Other liabilities 2021 B$’000 Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 7,693 11,997 5,476 10,437 717,244 3,418,836 11,860 - 951,314 3,444,327 11,889 - 717,244 2,707,528 11,860 32,844 951,314 2,730,298 11,889 32,844 46,691 41,843 22,358 22,358 22,315 89,804 22,431 7,718 10,514 89,654 23,927 6,268 22,315 72,942 22,431 6,105 10,514 76,271 23,927 5,026 101,717 141,751 88,454 126,897 35,780 72,100 15,680 36,100 58,032 51,091 58,032 51,091 FS125
138. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 40 Commitments Commitments : Undrawn credit lines Forward deposits Total Capital expenditure: - Approved and contracted for but not provided for in the financial statements - Approved but not contracted for and provided for in the financial statements Total Total commitments 2021 B$’000 Group 2020 B$’000 2021 B$’000 Bank 2020 B$’000 383,409 3,066 386,475 294,957 3,357 298,314 383,409 3,066 386,475 294,957 3,357 298,314 6,858 4,670 6,858 4,670 - 1,604 - 1,604 6,858 6,274 6,858 6,274 393,333 304,588 393,333 304,588 41 Capital adequacy Capital Management The Group’s objective when managing capital is to maintain a strong capital position to support business growth, and to maintain investor, depositor, customer, rating agency and market confidence. In line with this, the Group manages its capital actively and ensure the capital adequacy ratios which takes into account the risk profile of the Group are comfortably above the regulatory minimum. The Group and Bank has a dividend policy to distribute dividend which takes into consideration capital requirements, available distributable retained profits, liquidity and other factors while ensuring compliance with the prevailing laws and regulations.The Group and the Bank have applied all effective pronouncements and interpretations of IFRS in arriving at the capital position of the Group and the Bank. Capital Adequacy Ratios The Group and Bank are required to comply with the core capital ratio and risk-weighted capital adequacy ratio prescribed by BCDB. The Group and Bank were in compliance with all prescribed capital ratios throughout the year. FS126
139. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Regulatory capital Tier 1 capital Total capital base Total risk-weighted amount Risk-weighted amount for credit risk Risk-weighted amount for operational risk Risk-weighted amount for market risk Total risk-weighted amount Capital ratios Core capital (Tier 1) ratio % Total capital ratio % Financial Statements 2021 B$’000 Group Bank 2020 B$’000 2021 B$’000 1,284,695 1,302,960 1,269,881 1,281,387 1,154,606 1,155,579 1,169,212 1,146,527 5,657,635 5,696,379 5,287,887 5,320,622 619,629 621,815 577,148 603,460 72,909 82,728 72,909 82,728 6,350,173 6,400,922 5,937,944 6,006,810 2021 B$’000 Group 20.2% 20.5% 2020 B$’000 19.8% 20.0% 2021 B$’000 Bank 19.4% 19.5% 2020 B$’000 2020 B$’000 19.5% 19.1% The capital adequacy ratio is derived after IFRS adjustments, except for those adjustments in relation to capitalisation of fees, collateral, profit in suspense and allowance for impairment. In accordance to Section 11(2) of the Islamic Banking Order, 2008, the Group and Bank shall not, at any time, have a Tier 1 capital ratio of less than 5 per cent and total capital ratio of less than 10 per cent or such percentage as may be determined by the Authority. FS127
140. Bank Islam Brunei Darussalam Berhad and its Subsidiaries Financial Statements 42 Contingent liabilities Group Letters of credit Guarantees , bonds Shipping guarantees Acceptances Trade risk participation Import bills Total Bank 2021 2020 2021 2020 B$’000 B$’000 B$’000 B$’000 82,582 172,926 29,446 1,933 77,782 226 364,895 41,883 196,598 7,613 17,946 63,681 1,199 328,920 82,582 172,926 29,446 1,933 77,782 226 364,895 41,883 196,598 7,613 17,946 63,681 1,199 328,920 In the normal course of business, the Group and Bank incur certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. FS128
141. Lot 159 , Jalan Pemancha, Bandar Seri Begawan, BS 8711, Negara Brunei Darussalam Tel: (673) 223 8181 www.bibd.com.bn BIBDBRUNEI Company Registration: RC00006420