United Capital Bank: Consolidated Financial Statements - 31 December 2016

Transcription

1. UNITED CAPITAL BANK (Public Limited Company) CONSOLIDATED FINANCIAL STATEMENTS December 31, 2016
2. UNITED CAPITAL BANK CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS Note No . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 Page No. AUDITOR'S REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INCORPORATION AND ACTIVITIES BASIS OF PREPARATION SIGNIFICANT ACCOUNTING POLICIES CASH AND BALANCES WITH BANKS AND FINANCIAL INSTITUTIONS INVESTMENTS WITH BANKS AND FINANCIAL INSTITUTIONS INVESTMENTS IN SECURITIES FINANCE TO CUSTOMERS OTHER INVESTMENTS OTHER ASSETS PROPERTY AND EQUIPMENT DUE TO BANKS AND FINANCIAL INSTITUTIONS CUSTOMERS' DEPOSITS OTHER LIABILITIES INVESTMENT DEPOSITS OF BANKS AND FINANCIAL INSTITUTIONS OTHER INVESTMENT DEPOSITS SHARE CAPITAL SHARE PREMIUM STATUTORY RESERVE FOREIGN CURRENCIES REVALUATION RESERVES PROPOSED DIVIDENDS INCOME FROM INVESTMENTS WITH BANKS AND FINANCIAL INSTITUTIONS INCOME FROM INVESTMENTS IN SECURITIES INCOME FROM FINANCE TO CUSTOMERS RETURN TO UNRESTRICTED INVESTMENT ACCOUNT HOLDERS FEE INCOME FOREIGN EXCHANGE GAIN, NET GENERAL AND ADMINSTRATIVE EXPENSES EARNING PER SHARE CASH AND CASH EQUIVALENT RELATED PARTY TRANSACTIONS COMMITMENTS AND CONTINGENCIES RESTRICTED INVESTMENT ACCOUNTS CAPITAL ADEQUACY FINANCIAL INSTRUMENTS AND RISK MANAGEMENT SEGMENTAL INFORMATION SHARIAH SUPERVISORY COMMITTEE COMPARATIVE FINANCIAL STATEMENTS
3. Aboulela New Building Gamhoria Street P .O. Box 1608 Khartoum - Sudan Sheikh & Co Chartered Accountants Telephone: +249- 183- 771205 Fax : +249- 183- 777581 e-mail : mail@sheikhco.com INDEPENDENT AUDITORS' REPORT To the Shareholders of United Capital Bank (public limited company) We have audited the accompanying consolidated financial statements of United Capital Bank , which comprise the consolidated statement of financial position as at December 31st, 2016 and the consolidated statement of comprehensive income, and statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Financial Reporting Standards for items not covered by AAOIFI standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances Auditors' responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Bank as of 31st December 2016 and of its consolidated financial performance and its cash flows for the year then ended in accordance with the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), International Financial Reporting Standards for items not covered by AAOIFI standards and the general principles as determined by the Bank's Shari'a Supervisory Committee. s~~h <:\- Co. Sheikh & Co Chartered Accountants Sheikh & Co 27March, 2017
4. UNITED CAPITAL BANK CONSOLIDATED STATEMENT OF FINANCIAL POSITION Al December 31 , 2016 2016 SDG 484. 712.477 314.320.000 Notes ASSETS Cash and balances with banks and financial institutions Investments with banks and financial institutions Investments in securities Finance to customers, net Other investments Other assets Property and equipment, net TOTAL ASSETS 4 5 96.548 ,105 6 7 8 9 10 1.136.951.269 58.995.805 61.695 .502 2.159.223 .758 20 15 SDG 301.997.938 199.000.000 419.960,096 938.268,509 80.075,228 68.585.320 2.007.887.091 LIABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNT HOLDERS AND SHAREHOLDERS' EQUITY Liabilities Due to banks and financial institutions Customers' deposits Other Liabilities TOTAL LIABILITIES EQUITY OF UNRESTRICTED INVESTMENT ACCOUNT HOLDERS Investment deposits -banks and financial institutions Investment deposits-other TOTAL EQUITY OF UNRESTRICTED INVESTMENT ACCOUNT HOLDERS Shareholders' equity Share capital Share premium Statutory reserve Fair value reserve Foreign currencies revaluation reserve Retained earnings Proposed dividends Total Shareholders' equity of the parent company Non-controlling interest TOTAL SHAREHOLDERS' EQUITY 230.845.019 154.097,931 340.609.137 278.826.121 384.942.950 619.435.258 240.000.000 4.500.000 37,935.448 16.177 240.000.000 4.500.000 37.561.315 (856.403) 57.047.992 94.331.259 36.000.000 468.584. 163 19.418 468.603.581 661.571 ,655 506.104.005 14 15 16 17 18 19 158.648.713 20 441.100.338 22.910 441.123 .248 TOTAL LlABILITIES, EQUITY OF UNRESTRICTED INVESTMENT ACCOUNT HOLDERS AND SHAREHOLDERS' EQUITY COMMITMENTS AND CONTINGENCIES 1.333.157.560 172.503.954 436.308.788 311.035,510 919.848.252 164.875.900 11 12 13 31 2 .159.223. 758 2.007.887.091 972. 748.942 1.052.297 .861 The consolidated financial statements were authorized for issue in accordance with a resolution of the Board of ; M 23, 017. \ <.'' -~ •----, -= Mansour Qaiser Bteisb Vice-Chairman The attached notes I to 37 fonn an integral part of these consolidated financial statements. 2 ~ ~ Mohammed Kbalifa Aladsani Chairman 23
5. UNITED CAPITAL BANK CONSOLIDATED INCOME STATEMENT For the year ended December 31 , 2016 Notes 2015 SDG 2016 SDG INCOME FROM : Investments with banks and financial institutions Investments in securities Finance to customers Other investments 21 22 23 Total income from financing and investments Less: Return to unrestricted investment account holders Less : Finance Cost 24 Net income from investments and financing Fee income Foreign exchange gain, net 25 26 Total operating income 13.469,879 13.196.463 99.317.729 3.968.550 42.627.774 95.390.907 129.952.621 158.188.698 (46.928.623) (4,470.868) (46.303.992) (5.250.738) 78.553.130 32.836,642 17.516.083 106.633.968 30.179.857 9.424.461 128,905,855 146.238.286 (31.719.151) (24.069.359) (4.890.279) (37,857,914) (6.405.472) (33.693.697) (23.936.985) (5,607.347) (10,266.980) (104.942.175) (73.505.009) 23.963.680 72.733.277 (6, 121.287) (10,195.306) (6.168.775) (13 ,557.935) 7,647.087 53.006.567 16.374,897 3.795.120 EXPENSES Staff cost General and administrative expenses Depreciation 27 10 7.1.3 Provision for finance losses Provision for impairment Total operating expenses Net operating profit before zakat and income tax Zakat expense Income tax expense Net profit Less: net profit attributable to non-controlling interest {3.492} Net profit attributable to equity holders of the parent company 28 <ieneralManager Mansour Qaiser Bteish Vice-Chairman The attached notes l to 37 form an integral part of these consolidated financial statements. 3 {1.963} 7.643,595 53.004.604 0.32 2.21 Chairman
6. UNITED CAPITAL BANK CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31 , 2016 Notes 2016 SDG 2015 SDG CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the year Adjustments for non-cash items: Depreciation and amortization Zakat Income tax Provision for staff end of service benefits Provision for finance losses Provision for staff bonus (Gain) loss on disposal of property and equipment Operating profit before working capital changes 1.643.595 53.004.604 4.890.279 6.121.287 10.195.306 2.044.440 44.263,386 4.237.889 5.607.347 6.168.775 13.557.935 654.877 10.266.980 3.862.911 (13.186) 629.575 79.382.996 93.753.004 (41.405.034) 4.379.757 (242.946. 146) 21.079,423 15.336.628 19.803.711 188.655.516 (17.449.256) Other liabilities (7.628.054) 225.268,867 173.069.572 (207.924.411) 78.150.465 113.784.238 Net cash from operating activities 211 .201.381 284.109.895 Acquisition of investments Proceeds from sale of investment Acquisition of property and equipment Proceeds from sale of property and equipment (1.939,029) 326.223.000 (4.303.443) 316.168 (164.175.181) 8.694.500 (7.929.162) 335.351 Net cash from investing activities 320.296.696 0 63.074,492) 3.493 (36.000.000) 1.963 Net (increase)/decrease in operating assets: Statutory cash reserve Cash margin on LCs & LGs Finance to customers Other assets Net increase/(decrease) in operating liabilities: Due to banks and financial institutions Customers deposits CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Net movement in non-controlling interest Dividends paid Net increase in equity of unrestricted investment accounts Net cash from financing activities £2H.~22,JlH!} (220.~88.815} 261.009.262 ~~2.~2J,!i22 29 General Manager Mansour Qaiser Bteish Vice-Chairman The attached notes I to 37 form an integral part of these consolidated financial statements. 4 110,502.254 Chairman (38.400.000) 2.Q56.562 £36.311.115} 84.693.928 3!:11.122.161 112.123.622
7. UNITED CAPITAL BANK CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended December 31 , 2016 Attributable to shareholders' of the ~arent com~ani Share capital Note Balance at January 1, 2016 SDG 240,000,000 Share premium Statutory reserve Fair value reserve SDG SDG SDG 4,500,000 37,561,315 (856,403) F. currencies revaluation reserve 57,047,992 Net Profit for the year Retained earnings Proposed dividends Total SDG SDG SDG 94,331,259 7,643,595 Transfer to statutory reserve 18 Foreign Currencies revaluation reserve 468,584,163 19,418 468,603,581 7,643,595 3,492 7,647,087 872,580 (57,047,992) 19 872,580 872,580 57,047,992 Dividends paid (36,000,000) Proposed dividends Total Shareholders' equity SDG (374,133) 374,133 Net change in fair value reserve (36,000,000) (36,000,000) 20 Balance at December 31, 2016 240,000,000 4,500,000 37,935,448 Balance at January 1, 2015 240,000,000 4,500,000 32,775,949 16,177 158,648,713 56,478,927 Net Profit for the year 82,681,086 38,400,000 53,004,604 Transfer to statutory reserve 18 - Foreign Currencies revaluation reserve (856,403) 569,065 19 (38,400,000) 20 Balance at December 31, 2015 Yousif Ahmed El-Tinay - 240,000,000 4,500,000 37,561,315 22,910 441,123,248 454,835,962 17,455 454,853,417 53,004,604 1,963 53,006,567 (856,403) 57,047,992 Mansour Qaiser Bteish Vice-Chairman The attached notes l to 37 form an integral part of these consolidated financial statements. 5 (856,403) (856,403) (38,400,000) (38,400,000) (569,065) Dividends paid Proposed dividends 441,100,338 (4,785,366) 4,785,366 Net change in fair value reserve General Manager 36,000,000 Noncontrolling interest SDG (36,000,000) 36,000,000 94,331,259 36,000,000 468,584,163 19,418 Mohammed Khalifa Aladsani Chairman 468,603,581
8. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 1. INCORPORATION AND ACTIVITIES United Capital Bank ( the Bank ) is a public limited company registered in the Republic of Sudan on November 25, 2007 under the Companies’ Ordinance of 1925 . The Bank was initially registered on August 8, 2005 as a private limited company and commenced banking operations on August 1, 2006. The Bank's shares were listed for trading at the Khartoum Stock Exchange with effect from November 25, 2007. The Bank is engaged in providing a full range of Islamic banking services to corporate and institutional customers. The Bank operates through four branches in the Republic of Sudan. The registered office is located at Building No. 411, Square 65, Mamoun Behairy Street, Khartoum East, Post Office Box 8210, Al-Amaarat, Khartoum, Sudan. Fax no. 00249 183 235 000, web site : www.bankalmal.net. The Bank owns 99% of the shares of Al-Mal United for Securities Company Limited (Al-Mal), which was registered with the Company Registrar and started operations in April 2008. Al-Mal provides financial investment and brokerage services and is a licensed dealer at the Khartoum Stock Exchange. The Bank also owns 99% of the shares of Al-Mawarid Investment Company Limited (Al-Mawarid), which was registered with the Company Registrar in January 2009 and started operations in April 1, 2009. Al-Mawarid is licensed to invest in real estate development and various other economic sectors. 2. BASIS OF PREPARATION 2.1 Statement of compliance The financial statements have been prepared in accordance with the Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Shariah rules and principles as determined by the Shariah Supervisory Committee of the Bank and the applicable regulations of the Central Bank of Sudan. In accordance with the requirement of AAOIFI, for matters where no AAOIFI standards exist, the Bank applies the relevant International Financial Reporting Standards (IFRS). 2.2 Basis of measurement The consolidated financial statements are prepared on the historical cost concept except for the re-measurement at fair value of investment securities carried at fair value through income statement and equity. 2.3 Functional and presentation currency The consolidated financial statements are presented in Sudanese Pounds (SDG) which is the Bank's functional and presentation currency. 2.4 Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries , Almal United Company Limited and Almawarid Investment Co. Ltd. The financial statements of the subsidiaries are prepared for the same reporting year as that of the Bank , using consistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Bank obtains control, and continues to be consolidated until the date that such control ceases. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
9. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 2. BASIS OF PREPARATION (continued) 2.4 Basis of consolidation (continued) All inter-company balances, transactions, income and expenses arising from inter-company transactions are eliminated in preparing the consolidated financial statements. Non-controlling interest represent the portion of profit or loss and net assets not owned by the Bank and are presented separately in the income statement and within the equity in the consolidated statement of the financial position, separate from parent shareholders' equity. 2.5 Critical accounting judgments and estimates In the application of the Bank’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. 2.5.1 Impairment losses on financing portfolio The Bank reviews its financing portfolio on a monthly basis in terms of the collection from customers to determine if there is any delay in payments or any decrease in the value of the portfolio or the future cash flows which requires the establishment of a specific provision. The amount of provision is calculated in accordance with the directives of the Central Bank of Sudan. In addition , in accordance with the Central Bank of Sudan instructions , minimum general provision of 1% is made on all finance balances not subject to specific provisions. 2.5.2 Impairment of equity-type instruments through equity The Bank exercises judgment to consider impairment on equity-type instruments through equity. This includes determination of a significant or prolonged decline in the fair value below its cost. In making this judgment, the Bank evaluates other factors including the normal volatility in securities price, the financial health of the investee, industry sector performance and cash flows. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
10. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 2. BASIS OF PREPARATION (continued) 2.5.3 Fair value of financial instruments that are not quoted in an active market The fair values of financial instruments that are not quoted in an active market are determined by using valuation techniques such as: * recent arm’s length market transactions; * current fair value of an instrument that is substantially the same; * the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics. The determination of the cash flows and discount factors for unquoted equity investments requires significant estimation. There are a number of investments where this estimation cannot be reliably determined. As a result, these investments are carried at cost less provision for impairment. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the previous financial year. The significant policies adopted in the preparation of these consolidated financial statements are set out below: 3.1 Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization and any impairment loss. Depreciation is calculated on a straight line basis over the estimated useful lives as follow: Useful life (years) • Land & Builing : 50 − Leasehold land 40 − Bank's Building 10 − Leased Buildings (Lease tenure) 4 IT equipment • 5 • Office equipment, furniture and fixtures 4 • Motor vehicles 5 • Computer software The assets’ residual values and useful life are reviewed, and adjusted if appropriate, at the date of each statement of financial position. All assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. 3.2 Impairment and uncollectibility of assets The carrying amounts of the Bank's financial assets and tangible assets are reviewed at each balance sheet date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in the income statement. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
11. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.3 Investment in securities According to FAS 25, investments in securities are broadly classified into debt-type instruments where the investment is managed on a contractual yield basis; and equity-type investments which include instruments that evidence a residual interest in the net assets of the investee entity. The investment securities held by the Bank fall into the equity-type category which are subject to the following policies: 3.3.1 Equity-type instruments at fair value through equity: Those are instruments which are intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity. These are initially recognized at cost, being the fair value of the consideration given, plus transaction costs. Subsequent to acquisition, these are re-measured at fair value on individual basis. Unrealized gains or losses arising from a change in the fair value are recognized directly in owner's equity under "fair value reserve" until the investment is derecognized or determined to be impaired at which time the cumulative gain or loss previously recorded in owners' equity is recognized in the consolidated income statement. 3.3.2 Equity-type instruments carried at cost: Those are have a quoted market price as they are not listed in the market or do not have an active market or their fair value cannot be determined in any other appropriate method, are recognized at cost less any impairment in value –if any. Any gain on such investment is calculated on the lowest profit’s rate distributed in the last three years. Gain or Loss on these investments is recognized when these investments are disinvested. 3.4 Investments with banks and financial institutions Placements in investment accounts based on the Mudaraba contract with banks and financial institutions are stated at cost less provision for impairment, if any. 3.5 Finance to customers Deferred receivables from Murabaha, Salam,Istisna and Ijarah are stated net of deferred profit, provision for impairment and profit in suspense- if any. Participation in syndicated financing with other banks based on the Mudaraba contract is stated at cost less impairment - if any. Financing through Musharakah is stated at gross principal amount less any liquidation and provision for impairment- if any. 3.6 Other financial assets and liabilities With regard to other financial assets and financial liabilities, fair value is determined based on expected future cash flows or management’s estimate of the amount at which an asset could be exchanged for cash on an arm’s length basis or a liability settled to the satisfaction of creditors. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
12. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.7 Cash and cash equivalents For the purpose of the consolidated statement of cash flows, cash and cash equivalents are defined as cash, balances with the Central Bank of Sudan (excluding statutory cash reserve balances) and investment deposits with banks and other financial institutions that are readily convertible to known amounts of cash within ninety days. 3.8 Provisions Provisions, other than impairment or finance loss provisions, are recognized when the Bank has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate of the expenditure required to settle the obligation at the balance sheet date. 3.9 Zakat Zakat is calculated and provided for, in accordance with the regulations of the Chamber of Zakat which is a Government Agency responsible for the collection and distribution of Zakat. Zakat is paid in full to the Chamber of Zakat. 3.10 Taxation The Bank is subject to business profit tax at the rate of 30% of taxable profit. Zakat is allowed as deduction for income tax purposes. 3.11 Staff end of service benefits A provision is made for amounts payable to employees for end-of-service benefits, which is calculated in accordance with the provisions of the Labour Law and the Bank's internal Human Resourse policy. 3.12 Revenue recognition Income from Murabaha finance is recognized on a time-apportioned basis over the period of the contract based on the outstanding balance.Assets available for sale after acquisition on the basis of Murabaha to the purchase orderer shall be measured at their historical cost. In the cases where the assets value declines below cost due to damage, destruction or any other unfavorable circumstances, such a decline shall be reflected in the evaluation of the assets at the end of the financial period. Income from Istisnaa arises from financing the contract and post-contract phases of the project. Profit from financing the contract phase of the Istisnaa Project is recognized on the percentage of completion method. No profit is recognized on this phase until the project has progressed to the point where the estimate of realizable profit can be reasonably determined. Profit from financing the completed project is recognized on a time-apportioned basis over the period. Ijarah income is recognized on a time-apportioned basis over the lease period. Profit or loss from Salam finance is recognized when Salam commodity has been received and the significant risks and rewards of ownership of the Salam inventory have passed to a buyer and the amount of profit or loss is realized or can be measured reliably. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
13. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.12 Revenue recognition (continued) Income from participation in syndicated facilities managed by other banks under Mudaraba contracts is recognized on an accrual basis. Profit from Mudaraba investments with banks and other financial institutions is recognized on an accrual basis. Income from Musharakah financing is recognized on cash basis if such income cannot be reliably measured. In cases where income can be reliably measured (e.g. where the Musharakah activities are in the form of deferred sales such as Murabaha and Ijarah) then the Bank’s income from such Musharakah is recognized on the accrual basis. Income from equity-type investment carried at cost is recognized on accrual basis. Dividend income is recognized when the right to receive the dividend is established. Fee and foreign exchange income from banking services and foreign exchange transactions are recognized when contractually earned at the time the related services are provided. 3.13 Settlement date accounting All regular purchases and sales of financial assets are recognized on the settlement date i.e. the date on which the asset is delivered to the counterparty. Regular purchases and sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. 3.14 Return to Unrestricted Investment Account Holders Return to Unrestricted Investment Account Holders is calculated based on the income generated from all financing and investment assets after deducting the expense related to the investment pool “Mudarib expense”. Mudarib expenses include all expenses directly attributed to the investment and financing activities and the general provision for finance losses. All general and administrative expenses of the Bank including the specific provisions for finance losses are charged to revenue allocated to the shareholders’ equity. The Bank’s “Mudarib Profit” is deducted from depositors’ share of income before distribution. The financing and investment income is allocated between the unrestricted investment account holders and the shareholders' equity according to the contribution of each of the two parties in the invested funds according to the Bank's standard policies approved by the Bank's Sharia Supervisory Committee. 3.15 Restricted investment accounts Restricted investment accounts represent funds belonging to the Bank’s customers for which it has assumed investment management responsibility. Such funds are invested on behalf of the customers by the Bank acting as mudarib or agent, or the funds may be invested by the Bank in its own name under the terms of a specific Mudaraba contract with the customers. Restricted investment accounts and the attributable investment income or loss are not included in the Bank’s consolidated financial statements and are directly paid to the customers after deducting of the Bank’s stated commission as agent or profit share as Mudarib. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
14. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3.16 Commitments and Contingencies Contingent liabilities are not recognized in the consolidated financial statements, but are disclosed in the notes when the possibility of an outflow of economic resources is reasonable. Contingent assets are not recognized in the consolidated financial statements, but are disclosed when an inflow of economic benefits is probable. 3.17 Foreign currency transactions The consolidated financial statements are denominated in Sudanese Pounds (SDG). Transactions in foreign currencies are translated into SDG at the exchange rate prevailing on the transaction date . Monetary assets and liabilities denominated in foreign currencies, at balance sheet date, are translated into SDG at the exchange rates prevailing at the balance sheet date. Realized and unrealized gains or losses on foreign exchange are credited or charged to the consolidated income statement. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
15. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 Notes 4- CASH AND BALANCES WITH BANKS AND FINANCIAL 2016 SDG 2015 SDG 2016 2015 SDG SDG INSTITUTIONS Cash in hand Central Bank of Sudan - Current account Foreign correspondent banks – Current accounts Sub-total Central Bank of Sudan - Statutory Cash Reserve Cash margin on letters of credit with correspondent banks Total 4.1 4.1 4.1 4.1 4.1 4.1 Foreign currency balances included in the above balances are as follows: Cash in hand Central Bank of Sudan - Current account Foreign correspondent banks – Current accounts Sub-total Central Bank of Sudan - Statutory cash reserve Cash margin on letters of credit with correspondent banks Total 5- INVESTMENTS WITH BANKS AND FINANCIAL INSTITUTIONS These represent investment accounts placed with banks and financial institutions according to Mudaraba contracts for renewable periods not exceeding one month. Partial and total withdrawals are allowed without significant cost. Balances at December 31, are as follows: Local banks Foreign banks and financial institutions Total The attached notes 1 to 37 form an integral part of these consolidated financial statements. 2016 SDG 2015 SDG
16. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 6- INVESTMENTS IN SECURITIES Comprise the following equity-type instruments: Note Securities at fair value through equity Liqudity Management Fund- Not listed 2016 2015 SDG SDG 6.1 Securities carried at cost Shahama Certificates - Listed 6.2 Less : provision for shahama impairment 6.2 Shasha Certificates - Listed 6.3 Sudan Academy Fund - Not listed 6.4 Total Investment securities at fair value through equity: 6.1 Liqudity Management Fund: This is a Fund concerned with the liquidity management among banks , where all banks operating in Sudan are obligated to contribute in. The Fund is managed by Financial Investment Bank with a capital of SDG 750 Million divided into 750,000 Share (Sukuk) with nominal value of one thousand SDG .These Sukuk are not traded in Khartoum Stock Exchange (KSE).The objective of this fund is to recover the over draft current account with Central Bank of Sudan in local currency for all the participating banks with specific regulations ,not only but also the Fund invests excess money in Shahama certificates. The Shares (Sukuk) invested in this Fund are valued on a daily basis and profits are distributed on a semi-annual basis. Investment securities carried at cost: 6.2 Shahama Certificates: Represents securities issued by the Ministry of Finance and are based on the Musharaka contract. The certificates are traded at Khartoum Stock Exchange (KSE). They consistently recorded a yield not less than 14% per annum since their inception in 1999. Current year yield for redeemed securities ranged between 17% to 19%. 6.3 Shasha Certificates: The Bank acquired these securities on December 2012 and March 2013 in settlement of pastdue financing collateralized by promissory notes issued by the Ministry of Finance. The securities represent investment based on the Mudarabah contract in closed-ended renewable fund managed by the Sudan Financial Services Co. Ltd. The fund’s contributions were allocated to acquire certain assets of Sudan Electricity Distribution Company. which were then leased back to the Ministry of Finance under operating lease contract for a tenor of four years. At the end of the lease term the fund’s assets are liquidated at the market prices prevailing on liquidation date. These securities are trading in the secondary and inter-bank market. Lease rentals at 5% p.a. are expected to be distributed annually. 6.4 Sudan Academy for Financial and Banking Studies Fund: Represents the Bank’s contribution together with all commercial banks operating in Sudan in addition to the Central Bank of Sudan in a 5 year closed ended fund managed by Financial Investment Bank. The Fund resources will be invested in securities quoted at the Khartoum Stock Exchange with expected return ranging from 12% to 14% per annum. It has been agreed to allocate 55% of the Fund's return as donation to the Sudan Academy for Financial and Banking Studies and 45% to be distributed to the Fund owners. The attached notes 1 to 37 form an integral part of these consolidated financial statements.
17. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 7- FINANCE TO CUSTOMERS, NET 7.1 By type Deferred sales receivables : Murabaha receivables Istisna receivables Ijara Salam Staff Financing Total deferred sales receivables Mudaraba & Musharaka : Syndicated Mudaraba financing with banks Musharaka financing Total finance to customers Notes 2016 SDG 2015 SDG 1,033,337,796 1,044,748,361 1,311,317,623 1,067,123,648 Less : deferred profit Total finance, net of deferred profit Less : Income suspense-past-due accounts Less : provision for finance losses Total finance to customers, net 7.1.1 Ijara comprise: Cost of leased property Cost of leased motor vehicles Deferred rental Total 7.1.2 Movements in the provision for finance loses: The accumulated provision for finance losses is as follows: General Provision: Balance at beginning of the year Provided (recoveries) during the period Balance at the end of the year Specific Provision: Balance at beginning of the year Provided during the year Recoveries of amounts previously provided Balance at the end of the year Total accumulated provision at end of the year The attached notes 1 to 37 form an integral part of these consolidated financial statements. 2016 2015 SDG SDG
18. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 7- FINANCE TO CUSTOMERS (continued) 7.1.3 Net charge (recovery) of provision for credit losses for the year in the consolidated income statement Notes 2016 SDG 2015 SDG General Provision: Total charge(recovery) of general provision Specific Provision: Addition during the year Recoveries of amounts previously provided Total provided of the specific provision b Net charge of the provision expense for the year (a+b) The above provisions for finance losses are calculated in accordance with the guidelines of the Central Bank of Sudan which require a general provision of 1% to be accounted for finance to customers not subject to specific provision. At December 31, 2016 total past due installments, including profit margins is SDG 244,551,650 (2015: 135,965,840). 7.2 By Industry Manufacturing Trading Contracting Services Agriculture Transportation Other Total finance Less: deferred profit Total finance, net of deferred profit Less Income suspense-past-due accounts less: Provision for finance losses Finance to customers, net The attached notes 1 to 37 form an integral part of these consolidated financial statements. 2016 2015 SDG SDG
19. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 7- FINANCE TO CUSTOMERS (continued) Notes 7.3 By Portfolio 2016 SDG 2015 SDG Performing finance to customers Non-performing finance to customers Total finance to customers Less : deferred profit Total finance to customers, net of deferred profit Income suspense -past-due accounts General provision Specific provision Total provision & income suspense Finance to customers, net 7.3.1 For the purpose of determining the percentage of past-due financing to total financing portfolio, the CBOS defines past due financing as the total of past-due installments excluding profit margin. At December 31, 2016 the total of past-due installments excluding profit margins amounted to SDG 203,767,089 (2015: 108,409,149). 2016 SDG 8. OTHER INVESTMENTS 2015 SDG Investments in companies Al-Hadah Grain Silos for Investments 8.1 Less: Provision for Impairment - Total 8.1 Al-Hadah Grain Silos for Investments : Represents equity shares in a private company acquired in exchange of debt. 9- OTHER ASSETS 2016 SDG Cotton Inventory 14,346,678 30,949,601 4,677,982 5,600,114 25,184,832 25,031,338 Commission receivable (Gezira Scheme Syndication) Accrued income 2015 SDG Prepaid expenses 2,549,505 3,571,167 Deferred expenses 3,477,607 4,190,849 Sundry receivables - Seen for Flour Mills 8,372,436 7,924,936 Sundry receivables - other 296,677 2,681,714 Other 90,088 125,509 Total 58,995,805 The attached notes 1 to 37 form an integral part of these consolidated financial statements.
20. UNITED CAPITAL BANK NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended December 31 , 2016 10- PROPERTY AND EQUIPMENT, NET Land and Buildings SDG IT equipment Office equipment, Furniture & fixtures SDG SDG Cost Balance at January 1, 2016 Acquisitions Disposals Balance at December 31, 2016 Accumulated depreciation and amortization Balance at January 1, 2016 Depreciation expense for the year Disposals Balance at December 31, 2016 Net book value at December 31, 2016 Net book value at December The attached notes 1 to 37 form an integral part of these consolidated financial statements. Motor vehicles Intangible assets: Computer Software Total SDG SDG SDG