Bank Islam Integrated Annual Report 2020

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.16 Recognition of income Financing income Financing income is recognised in the profit or loss using the effective profit rate method. The effective profit rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instruments or, when appropriate, a shorter period to the net carrying amount of the financial instruments. When calculating the effective profit rate, the Group and the Bank have considered all contractual terms of the financial instruments but do not consider future credit losses. The calculation includes all fees and transaction costs integral to the effective profit rate, as well as premium or discounts. Income from a sale-based contract is recognised on effective profit rate basis over the period of the contract based on the principal amounts outstanding whereas income from Ijarah (lease-based contract) is recognised on effective profit rate basis over the lease term. Once a financial assets or a group of financial assets has been written down as a result of an impairment loss, income is recognised using the effective profit rate used to discount the future cash flows for the purpose of measuring the impairment loss. Fee and other income recognition Financing arrangement, management and participation fees, underwriting commissions, brokerage fees and wakalah performance incentive fees are recognised as income based on contractual arrangements. Fees from advisory and corporate finance activities are recognised net of service tax, discounts on satisfaction of performance obligations and completion of each stage of the assignment. Dividend income from subsidiaries and other investments are recognised when the Bank’s rights to receive payment is established. 2.17 Material profit or loss items The Group and the Bank have identified item which is material due to the significance of their nature and/or their amount. This is listed separately here to provide a better understanding of the financial performance of the Group and of the Bank. Group and Bank 2020 RM’000 2019 RM’000 Loss on modification of financial assets (136,380) – During the financial period, the Group and the Bank granted an automatic moratorium on certain financing repayments (except for credit card balances), to individuals and small and medium enterprises (SMEs) for a period of six months from 1 April 2020. The automatic moratorium was applicable to financing that are not in arrears exceeding 90 days and denominated in Malaysian Ringgit. This measure was to assist customers experiencing temporary financial constraints due to the COVID-19 pandemic. Following the end of the six-month blanket moratorium, the Group and the Bank continue to support financing customers that face difficulties in fulfilling their financial obligation, through the Targeted Repayment Assistance (“TRA”) programme. Notes to the financial statements for the financial year ended 31 December 2020 218 Financ ial Statement s Accountabi l i t y Addi t ional Informat ion