Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. Assess the adequacy and appropriateness of the related disclosures in the accompanying consolidated financial statements. Significant accounting policies applied in the preparation of these consolidated financial statements are set out below.
Basis of preparation (i) Statement of Compliance
It also includes the purchase of residential and commercial buildings and the acquisition of land for the construction of buildings for sale or lease in the interest of the company. Some ownership interests in subsidiaries are registered in the name of trustees who have officially transferred their shares to the company. The attached consolidated financial statements were approved by the company's board of directors on March 15, 2023.
Basis of preparation (continued) (ii) Historic cost convention
Basis of preparation (continued)
Amendments to IAS 8: Definition of 'accounting estimates, the distinction between changes in accounting estimates and changes in accounting policy and the correction of errors, and the use of measurement techniques and inputs to develop accounting estimates. Amendments to IAS 1 and IFRS Practice Statement 2: Guidance and examples to help entities apply materiality assessments to accounting policy disclosures and replace the requirement to disclose significant accounting policies with a requirement to disclose material accounting policies.
Subsidiaries
Foreign currency
Financial Instruments
Financial Instruments (continued)
The effective interest rate is the rate that discounts the expected future cash payments over the expected life of the financial liability, or where appropriate, a shorter period, to the net book value at initial recognition. The Group derecognizes a financial liability (or part of a financial liability) from its statement of financial position when and only when it is extinguished, i.e. the financial assets and liabilities are offset and the net amount is presented in the statement of financial position. when, and only when, the Group has a legally enforceable right to offset the recognized amounts and intends to settle them on a net basis or to realize the asset and settle the liability simultaneously.
Inventories
Cash and cash equivalents include cash at banks and on hand and short-term deposits with maturities of three months or less that are readily convertible to known amounts of cash and are subject to insignificant risk of change in value.
Investment properties
Lease accounting
Lease accounting (continued) (i) The Group as a lessee (continued)
Property and equipment
Property and equipment (continued)
Impairment of non-financial assets
Assets held for sale
Assets held for sale (continued)
Provisions
Zakat and income taxes
Employee benefits
Employee benefits (continued)
Statutory reserve
Sales revenue
Sales revenue (continued)
Cost of sales and operating expenses
Rental revenue
Finance charges
Earnings per share
Segment reporting
Fair value measurement
Fair value measurement (continued)
Current versus non-current classification
Cash at bank balance as at 31 December 2022 included short-term deposits of Saudi Riyal 100 million (31 December 2021: Saudi Riyal nil) for a term of one week in the form of Murabaha Investment account with a local bank earning financing income at the agreed Murabaha profit. As a result, 624,126 shares of those owned by the Group were canceled and the Group received the respective compensation amounting to Saudi Riyals 6.24 million, reducing the balance of "financial assets at fair value through profit or loss" by the same amount has.
Fair value of investment property
Fair value of investment property (continued) (i) Freehold office, retail and residential properties in KSA
Fair value of investment property (continued) (iii) Right-of-use assets
Amounts included in the statement of income related to investment properties The consolidated statement of income includes, among others, the following amounts related to
As of December 31, 2022, tangible fixed assets and investment properties include land worth 8.1 million Saudi riyals (2021: 24.7 million Saudi riyals) registered under the names of related parties and others and the beneficial ownership of which has been transferred to the group. . Assumptions used to calculate the warranty provision are based on product sales, date of sale, warranty period, and estimated level of repairs and warranty costs. The estimate is made based on the historical warranty trend and suppliers' recommendations have been taken into consideration and may vary due to cost changes, manufacturing processes and changes in product quality.
Gain on sale and lease back
Rental income
Component of zakat base
Adjusted net income
Provision for zakat
Status of zakat assessments
Status of zakat assessments (continued) Years 2019 and 2020
Income tax
Changes in the end of service benefit liability
Assumptions used and risks
Assumptions used and risks (continued)
Related parties’ transactions
Related parties balance
Key management personnel
On March 29, 2022, the board agreed to sell a building owned by the group, located in Khobar, and therefore the book value of the Saudi Riyal property became 166.4 million. reclassified (Saudi Riyals 60.4 million and Saudi Riyals 106.0 million reclassified investment property) as held for sale in the condensed consolidated interim financial statements for the period ending March 31, 2022. During the three-month period ended June 30, 2022 , the Group completed the sale of the building to a Real Estate Investment Trust "REIT" at a price of Saudi Riyal 178.0 million, when the title of the building was duly transferred and the property was transferred to the REIT. The total realized gain amounted to 11.6 million. Saudi Riyals, of which an amount of 1.4 million The Saudi Riyal relates to the rights that the Group retains as a seller-lessee.
The remaining portion of the profit amounting to 10.2 million Saudi Riyals is included in other income during the year ended December 31, 2022. Other income for the previous year ended December 31, 2021 includes: (i) a capital gain of Saudi riyals 38.5 million for the sale of a plot of land to a related party for an amount of 97.9 million Saudi riyals after the transaction was reviewed and approved by the unrelated members of the audit committee and the board of directors , (ii) received insurance compensation in the amount of 11.1 million Saudi Riyals for a business interruption claim related to a fire incident in 2016 after winning a dispute with the insurance company based on the decision of the Insurance Dispute Resolution Appeal Board and -violations. Exchange differences on the translation of foreign operations, included in the consolidated statement of comprehensive income, amounted to Saudi Riyals 29.0 million for the current year ended December 31, 2022, and are primarily attributed to the exchange rate loss resulting from the company's net investment in its subsidiary in Egypt, whose functional currency is the Egyptian pound, affected by the devaluation of the Egyptian pound, which began in March 2022 by the Egyptian authorities.
Based on the prior approval of the General Meeting, the Board of Directors in their meetings held on March 8, May 9, August 4 and November 8, 2022, decided to distribute an interim cash dividend worth 234 million Saudi Riyals , 246 million Saudi riyals. million, Saudi riyals 174 million and Saudi riyals 270 million, respectively, which were paid to shareholders in the year ended December 31, 2022 (Saudi riyals 7.7 per share). Based on the prior approval of the General Meeting, the Board of Directors, at their meetings of March 16, May 26, August 10 and November 3, 2021, decided to distribute an interim cash dividend worth 282 million Saudi Riyals, 252 million Saudi riyals. million, Saudi Riyals 168 million and Saudi Riyals 246 million, respectively, which were paid to shareholders in the year ended December 31, 2021 (Saudi Riyals 7.90 per share). The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 2.20 above.
See Note 20 for an analysis of the Group's sales from its major product and service categories to external customers.
Contingencies
Geographical information on sales is based on the geographic location of the customers and the geographic information on non-current assets is based on the geographic location of those assets. The Group's sales are positively affected by the back to school seasons, especially sales of school and office supplies. The sales in the current year ended 31 December 2022 were positively affected, compared to the previous year, by a back to school season (both the big back to school season from year-end vacation which typically falls in the third quarter and the small back to school seasons then from school breaks) after in-person education in the Kingdom resumed in January 2022 for the students of kindergarten and lower stages (which has a greater impact on the Group sales) for the first time since the implementation of COVID 19 precautions that the shift after including distance learning.
Capital commitments
Leases where the Group is as lessee
Leases where the Group is as lessee (continued)
Leases as lessor
Leases as lessor (continued) a) Operating lease
The main financial risks faced by the Group relate to credit risk, currency risk, interest rate risk and liquidity risk. This note describes the Group's objectives, policies and processes for managing these risks and the methods used to measure them. There have been no significant changes in the Group's exposure to risks from financial instruments, its objectives, policies and processes for managing these risks or the methods used to measure these risks compared to previous periods.
The Board has overall responsibility for setting the Group's risk management objectives and policies, and the Group's finance function assists the Board in fulfilling its responsibility by designing and operating processes that ensure the effective implementation of objectives and policies. The overall objective of the Board is to set policies that aim to reduce risk to a minimum.
Credit risk
Credit risk (continued)
Credit risk (continued) Trade receivables: (continued)
Credit risk (continued) Credit quality and exposure
Foreign currency risk
Foreign currency risk (continued)
Interest rate risk
Liquidity risk
The main objective of the Group's capital management is to maximize returns for shareholders. The Group's policy is to maintain a strong capital base to retain investors and creditors and support future business development. For the purposes of managing the Group's capital, capital includes issued and paid-up capital and all other capital reserves attributable to the Company's shareholders.
The Group manages its capital structure and makes adjustments in light of changes in economic conditions and its financial needs. In order to maintain or adjust the capital structure, the Group may issue new shares or adjust the dividend payment to shareholders, maintaining the dividend payment at no less than 80%. Currently, the number of daily worldwide and local cases, including the critical case, has dropped significantly after several waves of the pandemic.
In response to the COVID-19 pandemic, the authorities in the Kingdom and the countries in which the Group operates have taken various measures to control the spread of the pandemic. The resulting negative impact of the pandemic on the supply side is improving but has not yet fully recovered. Apart from these impacts, no major impacts on the Group's operations were observed in the current reporting period.
The Group has assessed the impact of COVID-19 on its consolidated financial statements based on information available up to the date the consolidated financial statements were authorized for issue.
