Accounting for Islamic Financial Transactions

Project paper:

Bahrain Islamic Bank vs. Emirates Islamic Bank

Accounting for Islamic financial transactions

FN 6103

By:

Omer Bin Thabet

0880944

1. Executive Summary

This paper tries to analysis the balance statements for both Bahrain Islamic Bank (BIB) and Emirates Islamic Bank (EIB) for the duration from 2004-2007.therfore, its better to start with short summary for each.

Bahrain Islamic Bank B.S.C. (“the Bank”) was incorporated in the Kingdom of Bahrain in the year 1979 byAmiri Decree No.2 of 1979, under Commercial Registration (CR) number 9900, to carry out banking and other financial trading activities in accordance with the teachings of Islam (Sharia’a). The Bank operates under a retail banking licence issued by the Central Bank of Bahrain (CBB). The Bank’s Sharia’a Supervisory Board is entrusted to ensure the Bank’s adherence to Sharia’a rules and principles in its transactions and activities.

The Bank holds 100% of the share capital of Abaa’d Real-Estate Company B.S.C. (“Subsidiary”). The Subsidiary was incorporated in the Kingdom of Bahrain on 8 April 2003 with an authorized and fully paid-up share capital of BD 10 million. The Subsidiary has started operations during the year 2007. The main activities of the Subsidiary are the management and development of real estate in accordance with the Islamic rules and principles.

The Bank’s registered office is at Building 722, Road 1708, Block 317, Manama, and Kingdom of Bahrain. The Bank has twelve branches (2006: twelve), all operating in the Kingdom of Bahrain

Emirates Islamic Bank formerly Middle East Bank (the “Bank”) was incorporated by a decree of His Highness the Ruler of Dubai as a conventional Bank with limited liability in the Emirate of Dubai on 3rd of October 1975. The Bank was reregistered as a Public Joint Stock Company in July 1995.

At an extraordinary general meeting held on 10th of March 2004, a resolution was passed to transform the Bank’s activities to be in full compliance with the Islamic Sharia. The entire process was completed on 9th of October 2004 (the “Transformation Date”) when the Bank obtained UAE Central Bank and other UAE authorities’ approvals.

The Bank is a subsidiary of Emirates Bank International PJSC, Dubai (the “Group Holding Company”).

In addition to its head office in Dubai, the Bank operates through 21 branches in the UAE. The accompanying consolidated financial statements combine the activities of the Bank’s head office and its branches and its subsidiaries. During the year ended December 31, 2006, the Bank setup a brokerage company 'Emirates Islamic Financial Brokerage' (the “Subsidiary”) a wholly owned subsidiary.

The Bank provides full banking services, and a variety of products through Islamic financing and investing instruments.

2. Set of financial statement

This part summarize the financial statements( balance sheet, income statement, and cash flow) for banks of time from 2004-2007.

BIB-Balance Sheet

Year / 2004 / 2005 / 2006 / 2007
ASSETS
Cash and balances with the BMA and other banks / 9407 / 10,448 / 15,469 / 18,349
Murabaha receivables / 155476 / 156,421 / 241710 / 337055
Mudaraba investments / 11819 / 29,459 / 22,180 / 43,609
Musharaka investments / 2721 / 9,889 / 13,954 / 39,426
Non-trading investments / 55770 / 80,749 / 97,418 / 156,161
Total Current Assets / 235,193 / 286,966 / 390,731 / 594,600
Investments in associates / 2953 / 3,382 / 6,652 / 7,045
Investments in Ijarah assets / 5124 / 5,174 / 4,998 / 5,893
Ijarah Muntahia Bittamleek / 5116 / 11,876 / 15,486 / 13,574
Investments in properties / 4044 / 10,341 / 9,985 / 27,905
Ijarah rental receivables / 938 / 2,315 / 2,963
Other assets / 2345 / 2,020 / 6,309 / 6,989
Other assets
Total None Current Assets / 19,582 / 33,731 / 45,745 / 64,369
TOTAL ASSETS / 254,775 / 320,697 / 436,476 / 658,969
LIABILITIES AND SHARE HOLDER'S FUNDS
Current Liabilities
customers' current account / 30,368 / 47,345 / 51,393 / 60,963
other liabilities / 2,828 / 3,562 / 6,041 / 7,615
Total Current Liabilities / 33,196 / 50,907 / 57,434 / 68,578
None Current Liabilities
unrestricted invesment account / 168,829 / 197,881 / 304,215 / 403,118
Tatal None Current Liabilities / 168,829 / 197,881 / 304,215 / 403,118
TOTAL LIABILITIES / 202,025 / 248,788 / 361,649 / 471,696
SHAREHOLDERS’ EQUITY
Share Capital / 23,000 / 25,300 / 28,336 / 60,214
Reserves / 18,100 / 35,358 / 36,999 / 62,460
share premium / 5,762 / 2,726 / 50,869
retained earnings / 828 / 1,360
proposed appropriate / 5,060 / 7,164 / 9,589 / 13,633
Shareholders’ Funds
Total Share Holders Equity / 52,750 / 71,908 / 74,924 / 187,176
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS / 254,775 / 320,696 / 436,573 / 658,872

EIB-Balance sheet

Year / 2004 / 2005 / 2006 / 2007
ASSETS
Cash, and balances with U.A.E Central Bank / 148764 / 238,858 / 453,337 / 867,912
Due from banks and other financial institutions / 19845 / 95,088 / 38,465 / 23,340
Due from Group Holding Company, net / 1417616 / 1,354,613 / 1,182,074 / 985,482
Financing receivables / 463593 / 2,447,155 / 6,558,309 / 10,836,828
Loans and receivables / 39758 / 44,774 / 42,472 / 39,909
Investment securities designated at fair value / 994,914 / 1,187,157
Other investments / 339 / 293,340 / 622,385 / 1,592,993
Total Current Assets / 2,089,915 / 4,473,828 / 9,891,956 / 15,533,621
Investment properties / 172455 / 128,729 / 270,048 / 606,905
Prepayments and other assets / 73007 / 143,965 / 247,280 / 536,353
Fixed assets / 10267 / 21,955 / 64,466 / 277,030
Other assets
Total None Current Assets / 255,729 / 294,649 / 581,794 / 1,420,288
TOTAL ASSETS / 2,345,644 / 4,768,477 / 10,473,750 / 16,953,909
LIABILITIES AND SHARE HOLDER'S FUNDS
Current Liabilities
customers' current account / 1,234,517 / 3,596,981 / 9,046,095 / 13,909,058
other liabilities / 79,892 / 295,495 / 395,187 / 800,319
Total Current Liabilities / 1,314,409 / 3,892,476 / 9,441,282 / 14,709,377
None Current Liabilities
Due to banks and other financial institutions / 14,768 / 17,932 / 55,983 / 158,200
Zakat payable / 2,080 / 5,704 / 10,613 / 13,426
Investment Wakala / 0 / 0 / 0 / 740,000
due to group and holding company / 198,066 / 0 / 0 / 0
Tatal None Current Liabilities / 214,914 / 23,636 / 66,596 / 911,626
TOTAL LIABILITIES / 1,529,323 / 3,916,112 / 9,507,878 / 15,621,003
SHAREHOLDERS’ EQUITY
Share capital / 500,000 / 650,000 / 650,000 / 747,500
Statutory reserve / 106,935 / 111,233 / 123,746 / 147,599
General reserve / 64,857 / 54,308 / 65,000 / 74,750
Revaluation reserve / - / 144,000
Mudaraba pool reserve / - / 6,175
Retained earnings / 144,539 / 36,824 / 127,126 / 212,882
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS / 2,345,654 / 4,768,477 / 10,473,750 / 16,953,909

BIB- Income Statement

BIB
Year / 2004 / 2005 / 2006 / 2007
Return on unrestricted investment accounts before
Bank’s share as a Mudarib / 2,417 / 5,627 / 20,049 / 25,433
Bank’s share as a Mudarib / -343 / -571 / -7,389 / -9,824
Return on unrestricted investment accounts / 2,074 / 5,056 / 12,660 / 15,609
Bank’s share of income from unrestricted investment / 5,612 / 7,292 / 12,045 / 15,854
Income from investments / 2,340 / 2,238 / 5,518 / 11,698
Gain on fair value adjustment for investments in properties / 232 / 1,991 / 2,098 / 5,328
Share of results of associates / 115 / 454 / 609 / 558
Other income / 450 / 626 / 1,288 / 3,586
Total income / 8,749 / 12,601 / 21,558 / 37,024
EXPENSES
Staff costs / 2,771 / 3,248 / 3,855 / 7,082
Depreciation / 545 / 564 / 2,854 / 1,079
Other expenses / 1,421 / 1,399 / 1,646 / 3,838
Total expenses / 4,737 / 5,211 / 8,355 / 11,999
Net income before provisions / 4,012 / 7,390 / 13,203 / 25025
Provisions / -184 / 0 / -150 / 0
Zakah / -123 / 0
Net profit for the year / 3,705 / 7,390 / 13,053 / 25,025
BASIC AND DILUTED EARNINGS PER SHARE (fils) / 15 / 30 / 41 / 64

EIB-income statment

Emirates / 2004 / 2005 / 2006 / 2007
Income from financing activities, net / 2,089 / 89,655 / 277,407 / 498,399
Income from investment securities designated at fair value / 0 / 0 / 100,684 / 40,620
Income from other investments / 0 / 0 / 25,391 / 69,784
Income from Group Holding Company, net / 6,415 / 34,990 / 42,521 / 129,855
Property related income / 0 / 8,986 / 19,921 / 27,037
Commissions and fees income, net / 25,552 / 55,391 / 38,683 / 110,311
Other operating income / 0 / 49,270 / 85,474
Total income before net interest / 34,056 / 189,022 / 553,877 / 961,480
interest income / 39,932 / 0 / 0 / 0
interest expenses / -9,045 / 0 / 0 / 0
net interst income / 30,887 / 0 / 0 / 0
Total Income / 64,943 / 189,022 / 553,877 / 961,480
EXPENSES
General and administrative expenses / 58,900 / 105,088 / 161,695 / 271,050
Depreciation of investment properties / 0 / 3,200 / 2,508 / 5,817
Allowances for impairment net of recoveries / -16,523 / -6,575 / 33,903 / 41,872
TOTAL EXPENSES / 42,377 / 101,713 / 198,106 / 318,739
NET OPERATING INCOME / 22,566 / 87,309 / 355,771 / 642,741
Depositors’ share of profit / -2,996 / -44,229 / -238,311 / -404,208
SHAREHOLDERS’ PROFIT (NET INCOME) / 19570 / 43080 / 117,460 / 238,533
Earnings per share (Dirham) / 0.03 / 0.07 / 0.16 / 0.32

BIB-Cash Flow

Bahrain Islamic bank
YEAR / 2006 / 2007
OPERATING ACTIVITIES
Net profit for the year / 13,053 / 25,025
Adjustments:
Depreciation / 2,845 / 1,079
Provisions / 150 / 0
Gain on sale of investments in properties / -948 / -190
Gain on fair value adjustment for investments in properties / -2,098 / -5,328
Share of results of associates / -609 / -558
Operating profit before working capital changes / 12,402 / 20,028
WORKING CAPITAL ADJUSTMENTS:
Mandatory reserve with Central Bank of Bahrain / -1,550 / -4,770
Murabaha receivables / -85,439 / -95,345
Mudaraba investments / 7,279 / -21,429
Musharaka investments / -4,065 / -25,472
Ijarah Muntahia Bittamleek / -5,049 / 2,324
Ijarah rental receivables / -1,377 / -648
other assets / -3,430 / -377
Customers’ current accounts / 4,048 / 9,570
Other liabilities / 2,479 / 1,574
Net cash generated/(used in) from operating activities / -74,702 / -114,545
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase) Proceeds of investments in properties / 1,305 / -14,042
Purchase of investments in Ijarah assets / 0 / -719
Purchase of investments / -22,527 / -50,551
Proceeds from (Purchase of ) associates / -2,714 / 0
Net cash used in investing activities / -23,936 / -65,312
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in capital / 28,336 / 0
Share premium / 56,581 / 0
Increase in unrestricted investment accounts / 99,097 / 106,237
Dividends paid / -5,667 / -3,795
Directors’ remuneration paid / -210 / -120
Zakah paid / -170 / -138
Charitable contributions paid / 0 / -75
Net cash generated from financing activities / 102,109 / 177,967
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS / 3,471 / -1,890
CASH AND CASH EQUIVALENTS BROUGHT FORWARD / 4,483 / 7,954
Foreign exchange differences on opening balance
CASH AND CASH EQUIVALENTS CARRIED FORWARD / 7,954 / 6,064
ANALYSIS OF CASH AND CASH EQUIVALENTS

EIB-Cash Flow

Emirates Islamic bank
YEAR / 2006 / 2007
CASH FLOWS FROM OPERATING ACTIVITIES
OPERATING ACTIVITIES
Net profit for the year / 117,460 / 238,533
Adjustments:
Allowances for impairment on financing receivables / 47,122 / 73,728
Gain on sale of investments / -4,697 / -8,937
Gain on sale of investment properties / -12,822 / -10,678
Loss/Gain on revaluation of investment securities / -66,033 / 5,065
Gain on redemption of investment securities / -661 / -
Depreciation on investment properties / 2,508 / 5,817
Depreciation on fixed assets / 7,670 / 14,162
Zakat paid / -5,704 / -10,613
Operating profit before working capital changes / 84,843 / 307,077
Increase in reserves with UAE Central Bank / -197,852 / -368,282
Decrease/increase in due from Group Holding Company / -750,473 / 2,804,344
Increase in financing receivables / -4,494,878 / -4,352,247
Decrease in loans and receivables / 2,302 / 2,563
Increase in prepayments and other assets / -103,315 / -289,073
Increase in customers’ accounts / 5,446,539 / 4,862,963
Increase in other liabilities / 78,528 / 403,063
Net cash generated/(used in) from operating activities / 65,694 / 3,370,408
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment properties / -241,353 / -367,045
Proceeds from sale of investments properties / 110,314 / 35,045
Purchase of investment securities / -916,653 / -1,370,711
Proceeds from sale of investment securities / 31,086 / 211,733
Additions to fixed assets / -50,178 / -82,726
Proceed from sale of fixed assets / 31 / -
Net cash used in investing activities / -1,066,753 / -1,573,704
CASH FLOWS FROM FINANCING ACTIVITIES
FINANCING ACTIVITIES
Investment Wakala / 0 / 740,000
Net cash generated from financing activities / 0 / 740,000
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS / -1,001,059 / 2,536,704
CASH AND CASH EQUIVALENTS BROUGHT FORWARD / 1,319,668 / 318,609
Foreign exchange differences on opening balance
CASH AND CASH EQUIVALENTS CARRIED FORWARD / 318,609 / 2,855,313
ANALYSIS OF CASH AND CASH EQUIVALENTS
Cash and short term funds / 6,847,135 / 7,484,090

3. Accounting policies ISRS and AAOIFI

Accountants inevitably make many accounting estimates and policy decisions when preparing financial statements. They must select depreciable lives for long-lived assets, choose an inventory costing method, make assumptions about pensions, and make many more judgments. These accounting estimates are driven by an entity’s accounting policy as it applies to the issues at hand. These decisions could significantly affect a company’s financial statements and how users understand a company’s results and financial position.

There is no single list of accounting policies which are applicable to all circumstances. The differing circumstances in which enterprises operate in a situation of diverse and complex economic activity make alternative accounting principles and methods of applying those principles acceptable.The choice of the appropriate accounting principles and the methods of applying those principles in the specific circumstances of each enterprise calls for considerable judgments by the management of the enterprise. The following table summarizes the analysis of accounting policies within banks

Item / Bahrain bank / Emirates bank / Notes
Balance sheet / Have been prepared on a historical cost basis, except for investment in properties and certain investments “available for sale” that have been measured at fair value. / Historical cost convention asmodified for the measurement at fair value of financial assets carried at fair value throughincome statementavailable for sale investments. / Both banks use same methods within 4 years which comply with IFRS.
Assets:
Loans and receivables / None / Loans and receivables were originated by the Bank before the transformation date of the Bank’s activities to be in full compliance with the Islamic Sharia. These are reported net of impairment allowance to reflect the estimated recoverable amounts / EIB was comply with IFRS regards the treatment of thisProduct.
Investments in associates / Investments in associates are accounted for using the equity method of accounting from 2004-2007 / Investments in associates are accounted for using the equity method of accountingfor the all yers. / IFRS requirements.
Ijarah/Lease / These are initially recorded at cost and Depreciation is calculated using the straight-line method on all Ijarah muntahiah bitamlik / Recorded as financing receivable and transfer all risks to lessee. / It must be treated receivables according to IFRS like what EIB do, butBIB treated as operational assets.
Investment/ Investments in properties / Initially recorded at cost and measured at fair value and changes in fair value are recognized income.
. / Recognized at cost less accumulated depreciation and impairment allowance, if any. / Here banks deny with IFRS because this profit neither is nor realized.
Financial assets / Assets carried at fair value. Difference between cost and fair value, less any impairment loss previously recognized in the consolidated income statement.
Assets carried at cost. Difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset.
Assets carried at amortized cost. Difference between carrying amount and the present value of future cash flows discounted at the original effective profit rate. / Assets carried at fair value. Difference between cost and fair value, less any impairment loss previously recognized in the consolidated income statement.
Assets carried at cost. Difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset.
Assets carried at amortized cost. Difference between carrying amount and the present value of future cash flows discounted at the original effective profit rate. / Both are along with IFRS and AAOIFI
Fixed assets / historical cost / Fixed Assets are recorded at cost, less impairment allowance, if any. Depreciation is provided on a straight-line basis over estimated useful lives of all fixed assets, other than freehold land which is not depreciated / Both comply with IFRS. in same time they did separte between them in balance Sheet.
Liabilities:
Unrestricted investment account holders / carried at cost plus profit and related reserves less amounts repaid / Does not classify it under its name. / EIB follow FIRS to record this liability because it not fully adopts AAOIFI, while BIB follows AAOIFI.
Zakah / Zakah is paid by the Group based on statutory reserve, general reserve andretained earningbalances at thebeginning. of the year. The remaining Zakah is payable by individual shareholders only. / Recorded in liabilities side and calculates Zakat based on the guidance of its Fatwa and Sharia Supervisory Board / Separate statement in BIB, in liabilities side in EIB.
Tax / There is no tax on corporate income in the Kingdom of Bahrain / Liable tax recorded in liability side / IFRS requirements.
Provisions / Provisions are recognized when the Group has a present obligation arising from a pastevent and the costs to settle the obligation are both probable and able to be reliably measured / Provisions are accounted for when the Bank has an obligation arising from a past event, and the costs to settle the obligation are both probable and can be reliably measured / IFRS
Contingent liabilities / Not practice / Not recognized in the financial statements / Here EIB comply with IFRS, but AAOIFI adopt fully disclosure for all liabilities.
Offsetting / Financial assets and financial liabilities are only offsetted and the net amount is reported in the consolidatedbalance sheet when there is a legal enforceable right to set off the recognized amounts / Financial assets and financial liabilities are only offsetted and the net amount is reported in the consolidatedbalance sheet when there is a legal enforceable right to set off the recognized amounts
Income Statement
Murabaha receivables / Income is recognized on a time-apportioned basis over the period of the contract based on the principalamounts outstanding. / profit is recognized as it accrues over the period of the contract on effective profit rate method on the balance outstanding / According to IFRS and AAOIFI
Musharaka investments / Income is recognised on the due dates of the installments or when received in case of sale Musharaka / Not practice / According to IFRS and AAOIFI
Mudaraba investments / Income is recognised when it is quantifiable or on distribution by the Mudarib, whereas the losses are chargedto income on their declaration by the Mudarib. / Income is recognised when it is quantifiable or on distribution by the Mudarib, whereas the losses are chargedto income on their declaration by the Mudarib. / According to IFRS and AAOIFI
Dividends / Dividends revenue is recognized when the right to receive the dividend is established. / Dividend income is recognized when the right to receive it, is declared. / Both are Comply with IFRS.
Ijarah and Ijarah Muntahia Bittamleek / Ijarah income and income from Ijarah Muntahia Bittamleek are recognised on a time-apportioned basis overthe lease term against depreciation and maintenance costs. / Income from Ijarah is recognized on an accrual basis over the period of the contract. They not adopt ijarah muntahia bitamlik. / IFRS did not recognize any losses (financial lease) like what EIB did. But banks BIB follow AAOIFI and treat it as operation lease.
Wakala / Not practice / Is recognized on an accrual basis over the period, adjusted by actual income when received. Losses are accounted for on the date of declaration by the agent / IFRS treatment.
Fee and commission income / Fee and commission income is recognized when earned / According to IFRS and AAOIFI
Income allocation / Income is allocated proportionately between unrestricted investment accounts and shareholders on the basisof the average balances outstanding during the year / allocated between unrestricted investment accounts and shareholders on the basisof the average balances outstanding during the year / According to IFRS and AAOIFI
Cash flow: / Prepared according to IFRS requirement for all years as well as AAOIFI. / Prepared according to IFRS requirement for all years / Comply with IFRS.
Restrictedinvestment account: / Recognized off-balance sheet includes: balance of restricted accounts at the beginning of the period, number of investment units, deposits received or investment units, withdrawals or repurchase of units during the period. / No separate statement for this account instead it recorded in liabilities side with other liabilities. / BIB follows AAOIFI standards in this matter while EIB adopts IFRS because this deposit handle for special investments which out of bank obligation according to AAOIFI.
Change in Accounting policies / No change in its accounting policies within these four years. / The Bank has changed its accounting policy related to amortization of deferred income on financing receivables. Previously the Bank used to amortize its deferred income on straight line basis (equally over the period of the contract). During 2004, 2005, and 2006 the Bank adopted the effective rate of return method in accordance with IFRS 39. / Due to its change to fully Islamic bank (no more loans).

4. Vertical analysis

BIB-balance sheet / Vertical Analysis
Year / 2004 / 2005 / 2006 / 2007
Cash and balances with the BMA and other banks / 4% / 3.6% / 4.0% / 3.1%
Murabaha receivables / 66% / 54.5% / 61.9% / 56.7%
Mudaraba investments / 5% / 10.3% / 5.7% / 7.3%
Musharaka investments / 1% / 3.4% / 3.6% / 6.6%
Non-trading investments / 24% / 28.1% / 24.9% / 26.3%
Total Current Assets / 100% / 100.0% / 100.0% / 100.0%
Investments in associates / 15.1% / 10.0% / 14.5% / 10.9%
Investments in Ijarah assets / 26.2% / 15.3% / 10.9% / 9.2%
Ijarah Muntahia Bittamleek / 26.1% / 35.2% / 33.9% / 21.1%
Investments in properties / 20.7% / 30.7% / 21.8% / 43.4%
Ijarah rental receivables / 0.0% / 2.8% / 5.1% / 4.6%
Other assets / 12.0% / 6.0% / 13.8% / 10.9%
Other assets / 0.0% / 0.0% / 0.0% / 0.0%
Total None Current Assets / 100.0% / 100.0% / 100.0% / 100.0%
TOTAL ASSETS
LIABILITIES AND SHARE HOLDER'S FUNDS
Current Liabilities
customers' current account / 91.5% / 93.0% / 89.5% / 88.9%
other liabilities / 8.52% / 7.00% / 10.52% / 11.10%
Total Current Liabilities / 100.00% / 100.00% / 100.00% / 100.00%
None Current Liabilities
unrestricted invesment account
Tatal None Current Liabilities
TOTAL LIABILITIES / 100%
SHAREHOLDERS’ EQUITY
Share Capital
Reserves
share premium
retained earnings
proposed appropriate
Shareholders’ Funds
Total Share Holders Equity / 100%
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS
EIB Balance Sheet / Vertical Analysis
Year / 2004 / 2005 / 2006 / 2007
Cash, and balances with U.A.E Central Bank / 7% / 5.3% / 4.6% / 5.6%
Due from banks and other financial institutions / 1% / 2.1% / 0.4% / 0.2%
Due from Group Holding Company, net / 68% / 30.3% / 11.9% / 6.3%
Financing receivables / 22% / 54.7% / 66.3% / 69.8%
Loans and receivables / 2% / 1.0% / 0.4% / 0.3%
Investment securities designated at fair value / 10.1% / 7.6%
Other investments / 0% / 6.6% / 6.3% / 10.3%
Total Current Assets / 100% / 100.0% / 100.0% / 100.0%
Investment properties / 67.4% / 43.7% / 46.4% / 42.7%
Prepayments and other assets / 28.5% / 48.9% / 42.5% / 37.8%
Fixed assets / 4.0% / 7.5% / 11.1% / 19.5%
Other assets
Total None Current Assets / 100.0% / 100.0% / 100.0% / 100.0%
TOTAL ASSETS
LIABILITIES AND SHARE HOLDER'S FUNDS
Current Liabilities
customers' current account / 93.9% / 92.4% / 95.8% / 94.6%
other liabilities / 6.08% / 7.59% / 4.19% / 2.69%
Total Current Liabilities / 100.00% / 100.00% / 100.00% / 100.00%
None Current Liabilities
Due to banks and other financial institutions
Zakat payable
Investment Wakala
due to group and holding company
Tatal None Current Liabilities
TOTAL LIABILITIES / 100%
SHAREHOLDERS’ EQUITY
Share capital
Statutory reserve
General reserve
Revaluation reserve
Mudaraba pool reserve
Retained earnings
TOTAL LIABILITIES AND SHAREHOLDERS’ FUNDS / 100%
BIB-income statement / Vertical analysis
Year / 2004 / 2005 / 2006 / 2007
Return on unrestricted investment accounts before
Bank’s share as a Mudarib / 27.6% / 22.9% / 81.2% / 68.7%
Bank’s share as a Mudarib / -3.9% / -2.3% / -29.9% / -26.5%
Return on unrestricted investment accounts / 23.7% / 20.6% / 51.2% / 42.2%
Bank’s share of income from unrestricted investment / 64.1% / 29.6% / 48.8% / 42.8%
Income from investments / 26.7% / 9.1% / 22.3% / 31.6%
Gain on fair value adjustment for investments in properties / 2.7% / 8.1% / 8.5% / 14.4%
Share of results of associates / 1.3% / 1.8% / 2.5% / 1.5%
Other income / 5.1% / 2.5% / 5.2% / 9.7%
Total income / 100.0% / 51.2% / 87.3% / 100.0%
EXPENSES
Staff costs / 31.7% / 13.2% / 15.6% / 19.1%
Depreciation / 6.2% / 2.3% / 11.6% / 2.9%
Other expenses / 16.2% / 5.7% / 6.7% / 10.4%
Total expenses / 54.1% / 21.2% / 33.8% / 32.4%
Net income before provisions / 45.9% / 30.0% / 53.4% / 67.6%
Provisions / -2.1% / 0.0% / -0.6% / 0.0%
zakah / -1.4% / 0.0% / 0.0% / 0.0%
Net profit for the year / 42.3% / 30.0% / 52.8% / 67.6%
BASIC AND DILUTED EARNINGS PER SHARE (fils)
EIB-income statement / vertical analysis
Year / 2004 / 2005 / 2006 / 2007
Income from financing activities, net / 6.1% / 50.1% / 50.1% / 51.8%
Income from investment securities designated at fair value / 0.0% / 0.0% / 18.2% / 4.2%
Income from other investments / 0.0% / 0.0% / 4.6% / 7.3%
Income from Group Holding Company, net / 18.8% / 22.5% / 7.7% / 13.5%
Property related income / 0.0% / 4.8% / 3.6% / 2.8%
Commissions and fees income, net / 75.0% / 29.3% / 7.0% / 11.5%
Other operating income / 0.0% / 0.0% / 8.9% / 8.9%
Total income before net interest / 100.0% / 100.0% / 100.0% / 100.0%
interest income / 117.3% / 0.0% / 0.0% / 0.0%
interest expenses / -26.6% / 0.0% / 0.0% / 0.0%
net interst income / 90.7% / 0.0% / 0.0% / 0.0%
Total Income / 190.7% / 100.0% / 100.0% / 100.0%
EXPENSES / 0.0% / 0.0% / 0.0% / 0.0%
General and administrative expenses / 173.0% / 55.6% / 29.2% / 28.2%
Depreciation of investment properties / 0.0% / 1.7% / 0.5% / 0.6%
Allowances for impairment net of recoveries / -48.5% / -3.5% / 6.1% / 4.4%
TOTAL EXPENSES / 124.4% / 53.8% / 35.8% / 33.2%
NET OPERATING INCOME / 66.3% / 46.2% / 64.2% / 66.8%
Depositors’ share of profit / -8.8% / -23.4% / -43.0% / -42.0%
SHAREHOLDERS’ PROFIT (NET INCOME) / 0.574642 / -145,942 / 0.212069 / 0.248089
Historical 2007 / Historical 2006 / Vertical 2007 / Vertical 2006 / BIB-Cash Flow
53% / -35% / -1666.34% / -1440.09% / Net cash generated/(used in) from operating activities
173% / -63% / -533.93% / -821.12% / Net cash used in investing activities
74% / -43% / 2277.69% / 2237.45% / Net cash generated from financing activities
-154% / -284% / 77.43% / -23.76% / NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
77% / -44% / 100.00% / 100.00% / CASH AND CASH EQUIVALENTS BROUGHT FORWARD
Historical 2007 / Historical 2006 / Vertical 2007 / Vertical 2006 / EIB-Cash Flow
100% / 5030% / 1057.85% / 4.98% / Net cash generated/(used in) from operating activities
-%100 / 48% / -493.93% / -80.83% / Net cash used in investing activities
-100% / 0 / 232.26% / 0.00% / Net cash generated from financing activities
-100% / -353% / 796.18% / -75.86% / NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
-100% / -76% / 100.00% / 100.00% / CASH AND CASH EQUIVALENTS BROUGHT FORWARD

5. Horizontal analysis