naseej for technology

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NASEEJ FOR TECHNOLOGY

(PREVIOUSLY KNOWN AS NASEEJ FOR

COMMUNICATION AND INFORMATION TECHNOLOGY) SAUDI JOINT STOCK COMPANY

CONSOLIDATED FINANCIAL STATEMENTS TOGETHER WITH THE INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDED DECEMBER 31, 2022

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FOR THE YEAR ENDED 31 DECEMBER 2022

INDEX Page

Independent auditor’s report 1 – 5

Consolidated statement of financial position 6

Consolidated statement of profit or loss and other comprehensive income 7

Consolidated statement of changes in equity 8

Consolidated statement of cash flows 9

Notes to the consolidated financial statements 10 – 43

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2 CONSOLIDATED FINANCIAL STATEMENTS To the Shareholders of

Naseej for technology Company (A Saudi Joint Stock Company) Riyadh – Kingdom of Saudi Arabia Opinion

We have audited the accompanying consolidated financial statements of Naseej for technology Company (Previously known as Naseej for communication and information technology) (A Saudi joint stock company) (the “Company") and its subsidiary company (collectively referred to as the "Group"), which comprise the consolidated statement of financial position as at 31 December 2022, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2022, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by Saudi Organization for Certified Public Accountants (SOCPA).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) endorsed in the Kingdom of Saudi Arabia. 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. We are independent of the Group in accordance with the Code of Conduct and Ethics adopted in the Kingdom of Saudi Arabia. Also fulfilled the requirements of the conduct of other ethics in accordance with those rules.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other matter

The consolidated financial statements for the year ended on 31 December 2021 were audited by another auditor, who expressed an unmodified opinion dated on 29 March 2021 corresponding 26 Shaaban 1443H.

.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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3 Key Audit Matters (continued)

For each key audit matter, a description of how our audit addressed the matter is set out below:

Key audit matters How the matter was addressed in our audit Revenue recognition:

During the year ended 31 December 2022, Group’s revenue amounted to SAR 215.1 million (2021: SAR 194.4 million).

The Group continues to be under pressure to meet goals and expectations which may lead to misstatements in revenue recognition.

Revenue recognition is a key audit matter because there is a material area in consolidation financial statements, and is and indicator for the performance there is a risk that management may override controls to misrepresent revenue transactions

Refer to Note 6-20 of the consolidated financial statements for the accounting policy related to revenue recognition and Note 29 for the related disclosures.

We have performed the following procedures regarding revenue recognition:

- Evaluating the appropriateness of the accounting policies related to the revenue recognition of the Group by taking into consideration the requirements of IFRS 15 "Revenue from Contracts with Clients".

- Performance of audit analytical procedures for revenues, by comparing sales for the current year with the previous year, and identifying the causes of fundamental fluctuations, which require additional examination in light of our understanding of the Group’s operating conditions, considering market conditions as well.

- Testing sales transactions, on a sample basis, and perform cut-off tests of revenue to ensure that the revenue has been recognized in the correct period.

- Assessing the adequacy of the disclosures that the management has included in the accompanying consolidated financial statements.

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4

The other information consists of the information included in the annual report of the board of directors but does not include the consolidated financial statements and our report thereon, Management is responsible for the other information in its annual report.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation for the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error .

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so .

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements .

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We are also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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5

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (continued)

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit .

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards . From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

For Al-Kharashi Co.

Abdallah El Misnad License No. (456) Riyadh:

March ---, --- Ramadan ---

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6

- The accompanying notes are an integral part of these consolidated financial statements.

Chairman CEO Finance Manager

Note 2022 2021

ASSETS

Non-current assets

Property and equipment 14 2,121,252 2,761,384

Right-of-use assets 15 1,874,304 2,271,009

Goodwill 16 48,224 48,224

Investment in associates 17 9,691,152 9,464,727

Deferred tax asset 28,960 47,678

Total non-current assets 13,763,892 14,593,022

Current assets

Financial assets at fair value through profit or loss (“FVTPL”) 18 - 271,278

Projects in progress 12 21,110,883 17,451,507

Inventories 13 101,788 2,056,817

Due from related parties 11 545,875 683,088

Trade receivables 8 92,095,453 79,490,554

Contract assets 9 55,029,188 22,355,635

Prepayments and other assets 10 12,456,402 12,489,759

Cash and bank balances 7 29,003,737 43,354,778

Total current assets 210,343,326 178,153,416

Total assets 224,107,218 192,746,438

Equity and liabilities Equity

Share capital 24 50,000,000 50,000,000

Statutory reserve 9,296,640 7,087,756

Translation reserve (133,757) 438,915

Employees defined benefit obligations remeasurement reserve 155,911 (866,447)

Retained earnings 56,827,353 37,179,192

Equity attributable to the owners of the parent 116,146,147 93,839,416

Non-controlling interest 695,390 463,581

Total equity 116,841,537 94,302,997

Non-current liabilities

Lease liabilities- non current portion 15 373,750 693,504

Employees’ end of service benefits 23 25,130,547 22,793,814

Total non-current liabilities 25,504,297 23,487,318 Current liabilities

Short Term Islamic Murbah 19 10,089,610 -

Trade payables 23,118,297 15,107,487

Accruals and other liabilities 20 13,172,595 9,808,156

Contract liabilities 21 30,734,870 45,825,190

Lease liabilities- current portion 15 671,709 840,087

Zakat payable 22 3,974,303 3,375,203

Total current liabilities 81,761,384 74,956,123

Total liabilities 107,265,681 98,443,441

Total liabilities and equity 224,107,218 192,746,438

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(ALL AMOUNTS ARE IN SAUDI RIYALS UNLESS OTHERWISE STATED)

7

For the year ended December 31

Note 2022 2021

Revenue 29 215,067,718 194,421,673

Cost of revenue 30 (150,162,141) (133,593,814)

Gross profit 64,905,577 60,827,859

Selling and marketing expenses 25 (23,114,051) (19,326,224)

General and administrative expenses 26 (16,520,518) (16,386,603)

Operating profit 25,271,008 25,115,032

Share of profit from equity accounted associates 17 738,817 790,810

Finance cost 28 (1,156,586) (688,288)

Other expenses 27 (1,051,184) (34,604)

Other income 2,036,050 945,836

Profit before zakat and tax 25,838,105 26,128,786

Zakat and tax for the year 22 (3,749,251) (5,251,230)

Net profit for the year 22,088,854 20,877,556

Profit attributable to:

Owners of the parent 21,857,045 20,707,512

Non-controlling interests 231,809 170,044

22,088,854 20,877,556 Other comprehensive income:

Item that will not be reclassified subsequently to profit or loss:

Re-measurement loss on employees' end of service benefits 23 1,022,358 (433,367) Item that may be reclassified subsequently to profit or loss:

Foreign currency translation differences (572,672) (289,659)

Total other comprehensive income / (loss) 449,686 (723,026) Total comprehensive income for the year 22,538,540 20,154,530 Total comprehensive income attributable to:

Owners of the parent 22,306,731 19,984,486

Non-controlling interests 231,809 170,044

22,538,540 20,154,530

Basic and diluted earnings per share 31 4,37 4.14

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8 Share capital

Statutory reserve

Translation reserve

Employees defined benefit

obligations remeasurement

reserve

Retained earnings

Total attributable to the owners

of the parent

Non- controlling

interest Total As at 1 Jan 2021 10,000,000 5,000,000 728,574 (433,080) 58,559,436 73,854,930 293,537 74,148,467

Transferred to additional capital from retained earnings

40,000,000 - - - (40,000,000) - - -

Net profit for the year - - - - 20,707,512 20,707,512 170,044 20,877,556

Transfer to statutory reserve - 2,087,756 - - (2,087,756) - - -

Other comprehensive income - - (289,659) (433,367) - (723,026) - (723,026)

Balance as at 31 Dec 2021 50,000,000 7,087,756 438,915 (866,447) 37,179,192 93,839,416 463,581 94,302,997 As at 1 Jan 2021 50,000,000 7,087,756 438,915 (866,447) 37,179,192 93,839,416 463,581 94,302,997

Net profit for the year - - - - 21,857,045 21,857,045 231,809 22,088,854

Other comprehensive income - - (572,672) 1,022,358 - 449,686 - 449,686

Transfer to statutory reserve - 2,208,884 - - (2,208,884) - - -

Balance as at 31 Dec 2022 50,000,000 9,296,640 (133,757) 155,911 56,827,353 116,146,147 695,390 116,841,537

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FOR THE YEAR ENDED DECEMBER 31, 2022

9

For the year ended December 31

Note 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before zakat and tax 25,838,105 26,128,786

Adjustments to reconcile net profit before zakat and tax:

Depreciation - Property and equipment 14 664,460 815,857

Depreciation - Right-of-use assets 18 702,258 692,221

Loss / (gain) on disposal of property and equipment 11,192 3,595

Provision for expected credit loss 8 (1,242,146) 3,139,077

Financial assets at fair value through profit or loss (“FVTPL”) 271,278

Reversals of expected credit loss 8 (260,171) (4,981,955)

Gain on termination of lease - (8,132)

Share of profit from equity accounted associates (738,817) 790,810

Provision for employees’ end of service benefits 23 4,801,300 2,299,629

Finance cost 28 536,188 640,610

30,583,647 29,520,498 Working capital changes

Projects in progress (3,659,376) (111,612)

Inventories 1,955,029 1,779,251

Trade receivable 8 (11,102,581) 7,558,800

Contract assets (32,673,553) (16,869,545)

Prepayments and other assets 33,357 (115,763)

Trade payables 8,010,810 (1,026,135)

Accruals and other liabilities 20 3,364,439 (3,311,359)

Contract liabilities (15,090,320) (8,996,287)

Due from related parties 137,213 64,795

Cash generated from operating activities (18,441,335) 8,492,643

Employees’ end of service benefits paid 23 (1,442,209) (1,927,849)

Zakat and tax paid (3,128,269) (4,630,814)

Net cash generated from operating activities (23,011,813) 1,933,980

Cash flows from investing activities

Additions to property and equipment 14 (730,507) (278,999)

Net cash used in investing activities (730,507) (278,999)

Cash flows from financing activities

Proceeds from loans and borrowings 16,000,000 -

Payment against lease obligations 15 (675,368) (763,895)

Repayment of short-term loan 19 (6,446,578) (5,038,089)

Repayment of loan to shareholders - (10,000,000)

Net cash used in financing activities 8,878,054 (15,801,984)

Net change in cash and cash equivalents (14,864,266) (14,147,003)

Foreign currency translation differences 513,225 (194,422)

Cash and cash equivalents at the beginning of the year 43,354,778 57,696,203

Cash and cash equivalents at the end of the year 29,003,737 43,354,778

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10 1. ORGANISATION AND ACTIVITIES

NASEEJ FOR TECHNOLOGY (the “Company") is a Listed Company registered in Riyadh on 11 Rabi' I, 1416 (H), corresponding to 8 August, 1995 (G), under commercial registration number 1010137106. On 20 September 2021, the Company changed its legal status from Limited Liability Company to a Listed Company.

On 18 August 2021, the Company’s board resolved to increase the share capital from SR 10 million to SR 50 million, consisting 5,000,000 shares of SR 10 each (refer to Note 20).

The principal activity of the Company is to provide computers' services (databases and information systems), internet, electronic communications, maintenance of computer devices and networks, and wholesale and retail of office furniture and library supplies in accordance with Ministry of Information License No. (16581) dated Dhul Qa'dah 24, 1422 (H), corresponding to 7 June, 1991 (G).

The Company's registered office address is PO. Box 20129, Riyadh 11455 Kingdom of Saudi Arabia.

1.1. Interest in subsidiaries

Name of subsidiary Principal activities

Country of

incorporation Ownership % 31 December

2022

31 December 2021 Naseej for Retail of Computer and

Accessories

Information

technology services Kuwait 100 100

Arabian Advanced Systems Lebanon Company

Information

technology services Lebanon 100 100

Arabian Advanced Systems Egypt Company

Information

technology services Egypt 100 100

Arabian Advanced Systems Morocco Company

Information

technology services Morocco 100 100

Arabian Advanced Systems Syria Company*

Information

technology services Syria 100 100

Arabian Advanced Systems Establishment

Information

technology services Qatar 100 100

Sprintive Software LLC.

Information

technology services Jordan 60 60

* Dormant company since 2011.

1.2. Interest in associates

Name of associate Principal activities

Country of

Incorporation Ownership % 31

December 2022

31 December

2021 Al-Bayanat Al-Rakamyeh for Information

Technology

Information

technology services Jordan 45 45

Infosystech Information System Company

Information

technology services Egypt 50 50

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FOR THE YEAR ENDED DECEMBER 31,2022

11 1.3. Branch

Branch

Branch Commercial Registration No.

Location Establishment Year

Nassej for Technology – Riyadh (AUC) branch 1010467905 Riyadh 2017 2. STATEMENT OF COMPLIANCE WITH IFRS

These consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs), and other standards and pronouncements issued by the International Accounting Standards Board (IASB) as endorsed by the Saudi Organization for Chartered and Professional Accountants (“SOCPA”).

3. STANDARDS, INTERPRETATIONS AND AMENDMENTS TO EXISTING STANDARDS Standards issued but not yet effective.

A number of new declarations are effective for annual periods beginning on or after January 1, 2023, with early application permitted. However, the Group did not implement early application of the new or amended standards in preparing these financial statements.

Standards issued but not yet effective.

Effective from periods beginning on or after the following date Description

Standards / Interpretations

January 1, 2023 Disclosure of accounting policies and the

exercise of judgments regarding materiality Amendments to IAS 1 and

IFRS 2 Practice Statement

January 1, 2023 Definition of accounting estimates

Amendments to IAS 8

January 1, 2023 Deferred tax relating to assets and liabilities

arising from a single transaction Amendments to IAS 12

The Group is evaluating the effects of the above standards, amendments and interpretations on the Group's consolidated financial statements.

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12 4. BASIS OF PREPARATION

4.1. Overall considerations

These consolidated financial statements have been prepared using the measurement bases specified by IFRSs for each type of asset, liability, income and expense. The measurement bases are more fully described in the accounting policies.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out in Note 6.

The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies.

The areas where significant judgments and estimates have been made in preparing these consolidated financial statements and their effect are disclosed in Note 5.

These financial statements have been prepared on the historical cost basis, except for the following:

• Financial assets at fair value through other profit or loss;

• Trade receivables and contract assets at amortised cost;

• Loans and borrowings at amortised cost; and

• Defined benefits plan is measured at present value of future obligations using projected unit credit method.

4.2. Basis of consolidation

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December 2022.

Business combination

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities, if any.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships.

Such amounts are generally recognized in profit or loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, other contingent consideration is re- measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, 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. The financial statements of subsidiaries are included in these financial statements from the date on which control commences until the date on which control ceases.

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13 Non-controlling interests (NCI)

NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Transactions eliminated on consolidation

Intra‑group balances and transactions, and any unrealized income and expenses arising from intra‑group transactions, are eliminated. Unrealized gains arising from transactions with equity‑accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

4.3 Financial year end

The Group’s financial year starts from 1 January to 31 December in each Gregorian calendar year.

4.4 Functional and presentation currency

These consolidated financial statements are presented in Saudi Riyal (“SR”), which is the Group’s functional currency.

5. USE OF JUDGEMENT AND ESTIMATES

The Group makes certain estimates and assumptions regarding the future. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below:

Assessment of significant influence

Where the Group holds less than 20% of voting rights in an investment but the Group has the power to exercise significant influence, such an investment is treated as an associate. In the opposite situation where the Group holds over 20% of voting rights (but not over 50%) and the Group does not exercise significant influence, the investment is treated as a fair value through other comprehensive income.

Impairment of trade receivable

The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The allowance for expected credit losses on trade receivables is estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

Trade accounts receivable are normally assessed collectively unless there is a need to assess a particular debtor on an individual basis.

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14

Useful lives and residual values of property and equipment and intangible assets

An estimate of the useful lives and residual values of property and equipment and intangible assets is made for the purposes of calculating depreciation and amortization, respectively. These estimates are made based on the expected useful lives of relevant assets. Residual value is determined based on experience and observable data where available.

Impairment of non-financial assets

An impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flow management makes assumptions about future operating results. These assumptions are related to future events and circumstances.

The actual results may vary and may cause significant adjustments to the Group’s assets within the next financial year. Estimated cost of completing projects

The Group uses best estimates, using its in-house experts and based on its past experience for the similar projects, to estimate the total project cost. The Group revises and updates its cost estimation to complete the projects, when the project scope becomes more precise and projects’ risks are more appropriately analyzed.

Employees’ benefits

The cost of employee benefit obligations and other after-service benefits are determined by actuarial valuation exercises. The actuarial estimates involve making many assumptions that may differ from actual developments in the future. These assumptions include the determination of the discount rate and future salary increases. Given the complexity of the estimates and the underlying assumptions and their long-term nature, the commitment of the employees’ benefits is greatly influenced by changes in these assumptions. All inputs are reviewed at the end of each financial year.

Estimate of zakat, current and deferred income taxes

The Group’s Zakat and tax charge on ordinary activities is the sum of the total zakat, current and deferred tax charges. The calculation of the Group’s zakat and total taxes charge involves a degree of estimation and judgment in respect of certain items whose treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process.

Recognition and measurement of provisions

By their nature, the measurement of provisions depends upon estimates and assessments whether the criteria for recognition have been met, including estimates of the probability of cash outflows. The Group’s estimates related to provisions for environmental matters are based on the nature and seriousness of the contamination, as well as on the technology required for remediation. Provisions for litigation are based on cost estimation, considering legal advice and other available information.

Leases

The determination of lease term for some lease contracts in which the Group is a lessee, including whether the Group is reasonably certain to exercise lessee options and the determination of incremental borrowing rate used to measure the lease liabilities.

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15 Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or liability, the Group uses observable market data as far as possible.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities.

• Level 2: inputs other than quoted priced included in 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 the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group recognises transfers between the levels of the fair value hierarchy at the end of the reporting year during which the change has occurred.

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Group has consistently applied the accounting policies to all periods presented in these consolidated financial statements. Following are the significant accounting policies applied by the Group in preparing its consolidated financial statements:

6-1 Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognized in profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Saudi Riyals at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Saudi Riyal at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in other comprehensive income and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interest (NCI).

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

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16 6-2 Property and equipment

• Recognition and measurement

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, if any, less accumulated depreciation and any accumulated impairment losses. If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment. All other repair and maintenance costs are recognized in profit or loss as incurred.

• Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.

• Derecognition

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal of an item of property and equipment is recognized in statement of profit or loss and other comprehensive income.

• Depreciation

Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight‑line method over their estimated useful lives, and is generally recognized in statement of profit or loss and other comprehensive income. Land is not depreciated.

The estimated useful lives of property and equipment for current and comparative periods are as follows:

Assets Useful lives

Buildings 20

Motor vehicles 4

Office furniture 10-20

Office equipment 5-10

Computers 4

The residual values, useful lives and methods of depreciation of property and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

6-3 Goodwill

Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, if any, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in the cost at its acquisition-date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss.

Goodwill is capitalized as an intangible asset with any impairment in carrying value being charged to the consolidated statement of profit or loss and other comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of the consideration paid, the excess is credited in full to the consolidated statement of profit or loss and other comprehensive income on the acquisition date.

• Impairment test for goodwill

The Group conducts a test of goodwill annually to ensure that there is no impairment in its value and to determine whether the book value of the goodwill is less than the recoverable amount or not.

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17 6-4 Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9: Financial Instruments, is measured at fair value with the changes in fair value recognized in the other comprehensive income.

6-5 Lease contracts

At the inception of the contract, the Company and its subsidiaries determines whether the contract is a lease or includes a lease. That is, if under the contract the right to control the use of a specific asset for a specified year is transferred in exchange for that.

• Group as lessee

The Group apply a single method to recognizing and measuring all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease obligations to make lease payments and right-of-use assets that represent the right to use related assets.

• Right-of-use assets

The Company and its subsidiaries recognize a right-of-use asset on the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less accumulated depreciation and impairment losses, and adjusted for remeasurement of lease liabilities. The cost of right-of-use assets includes the value of the lease commitments recognized and lease payments made on or before the lease commencement date, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term or the estimated useful lives of the assets.

• Lease liabilities

On the commencement date of the lease, the Company recognizes the lease liability measured at the present value of the lease payments to be paid over the lease term. Lease payments include fixed payments (including in substance fixed payments) that are based on a rate.

After the lease start date, the lease liability is increased to reflect the commission increase, and reduced to reflect the lease payments made. In addition, the carrying amount of the lease liability is re-measured if there is a modification, a change in the lease term, a change in lease payments (i.e., a change in future lease payments as a result of a change in the index or rate used to determine those payments) or a change in the evaluation of a purchase option The origin in question.

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18 6-6 Inventories

Inventory is measured at cost or net realizable value, whichever is lower. Cost is determined using the weighted average method. Cost includes expenses incurred in obtaining the goods and includes other costs incurred in bringing the goods to their present condition and location.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

6-7 Project in progress

Projects in progress are cost incurred in a supply-chain management. It is the cost of the items and services, staff hours, and overhead incurred for projects that are at various stages of the production process. It is a component of the inventory asset account on the balance sheet. These costs are subsequently transferred to the active projects' accounts and eventually to the cost of sales.

6-8 Contract assets

A contract asset is recognized when the Group right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time.

6-9 Impairment testing of non-financial assets

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

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. In determining fair value less costs of disposal, recent market transactions are considered. If no such transactions can be identified, an appropriate valuation model is used.

These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognized in the statement of comprehensive income in expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement or loss and other comprehensive income.

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19 6-10 Financial Instruments

i. Financial assets

The Group classifies its financial assets into one of the categories described below, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows:

Fair value through profit or loss (FVTPL)

Financial assets fair valued through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognized in the statement of profit or loss in the other income or expense line.

Fair value through other comprehensive income (FVOCI)

Financial assets fair valued through other comprehensive income are carried at fair value with changes in fair value recognized in other comprehensive income and accumulated in the fair value through other comprehensive income reserves. Upon disposal, any balance within fair value through other comprehensive income reserve is reclassified directly to retained earnings and is not reclassified to statement of profit or loss and other comprehensive income.

Purchases and sales of financial assets measured at fair value through other comprehensive income are recognized on the settlement date. Any change in fair value between trade date and settlement date is recognized in the fair value through other comprehensive income reserves.

Amortized cost

These assets arise principally from the provision of goods and services to customers and incorporate other types of financial assets where the objective is to hold these assets to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They have initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method, less provision for impairment.

Impairment provisions for trade receivables are recognized based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Impairment provisions for other receivables including related parties are recognized based on a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognized. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognized. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognized.

The Group’s financial assets measured at amortized cost comprise trade and other receivable, investments, due from related party and cash and cash equivalents in the consolidated statement of financial position.

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20 Subsequent measurement of financial assets

Debt instruments that meet the following conditions are measured subsequently at amortized cost:

• the financial asset is held within a business model whose objective is to hold financial assets in order 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 interest on the principal amount outstanding.

Debt instruments that meet the following conditions are measured subsequently at FVOCI:

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the 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 interest on the principal amount outstanding.

By default, all other financial assets are measured subsequently at FVTPL.

Presentation of impairment

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. Impairment losses related to assets are presented separately in the statement of profit or loss account.

De-recognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains all the risks and rewards of ownership substantially and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay.

ii Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. The Group’s accounting policy for each category is as follows:

Fair value through profit or loss

Financial liabilities fair valued through profit or loss are carried in the statement of consolidated financial position at fair value with changes in fair value recognized in the statement of profit or loss. The Group does not have any liabilities held for trading, nor has it designated any financial liabilities as being at fair value through profit or loss.

Other financial liabilities

Finance cost bearing liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument. Such finance cost bearing liabilities are subsequently measured at amortized cost using the effective interest rate method, which ensures that any finance cost over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. For the purposes of each financial liability, finance cost includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Other short-term monetary liabilities, which are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method.

The Group’s financial liabilities measured at amortized cost comprises of loans and borrowings, trade and other payables and due to related parties.

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21 De-recognition

When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

6-11 Investment in associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognized in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognized in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalized and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

6-12 Cash and cash equivalents

Cash and cash equivalents in the consolidated statement of financial position comprise cash at banks and in hand, which are subject to an insignificant risk of changes in value.

6-13 Equity and reserves

Share capital represents the nominal value of shares that have been issued.

Retained earnings include all current and prior period profits.

All transactions with owners of the parent are recorded separately within equity, if any.

• Other reserves

Other reserves consist of the foreign currency translation reserve.

• Statutory reserve

In accordance with the Regulations of Companies' law in the Kingdom of Saudi Arabia and the Company’s Bylaws, the Company should transfer 10% of the net profits for the year to statutory reserve until such reserve equals 30% of its share capital. This reserve is not available for distribution to shareholders.

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22 6-14 Employees’ end of service benefits

• Short-term employee benefits

A liability is recognized for benefits accruing to employees’ in respect of wages and salaries, annual leave, air tickets and sick leave that are expected to be settled wholly within twelve months after the end of the period in which the employees render the related service. The liability is recorded at the undiscounted amount of the benefits expected to be paid in exchange for that service.

• Defined benefit plans

The end-of-service indemnity provision is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period. Re-measurements, comprising actuarial gains and losses, are reflected immediately in the statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Re-measurements recognized in other comprehensive income will not be reclassified to profit or loss in subsequent periods. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service costs. Interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:

• service cost (including current service cost and past service cost);

• interest expense; and

• Re-measurements

The Group presents the first two components of defined benefit costs in profit or loss and the third component in other comprehensive income, in relevant line items.

6-15 Provisions

Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, legal disputes or onerous contracts.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases, where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized, unless it was assumed in the course of a business combination.

6-16 Contract liabilities

A contract liability is recognized if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related services. Contract liabilities are recognized as revenue when the Group performs under the contract (i.e., transfers control of the related services to the customer).

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23 6-17 Zakat and income tax

The Company and its Saudi Arabian subsidiaries are subject to zakat in accordance with the regulations of the Zakat, Tax and Customs Authority (“ZATCA” formerly” GAZT") in the Kingdom of Saudi Arabia. Any differences between the provision and the final assessment are recorded at the approval of the final assessment, when the provision is closed. The Group withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as required under Saudi Arabian Income Tax Law. The foreign subsidiaries are subject to tax regulations in their countries of incorporation.

Zakat and foreign subsidiaries income tax are charged in statement of profit or loss and other comprehensive income.

• Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the period and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

• Deferred tax

Deferred tax is recognized 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 recognized 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 arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences 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 recognized 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 business plans for individual subsidiaries in the Group and the reversal of temporary differences. 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 realized; such reductions are reversed when the probability of future taxable profits improves.

Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.

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.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

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24 6-18 Impairment of non-financial assets

The Group, on the date of preparing each financial statement, performs an assessment to ensure that there is any evidence of impairment in the value of an asset. If such evidence exists, or when annual testing for impairment is required, the Group estimates the asset's recoverable amount. The recoverable amount is the higher of the fair value of the asset or cash-generating unit, less costs of disposal and the present value. The recoverable amount of an asset is determined unless the asset generates cash flows that are largely independent of other assets or groups of assets. If the carrying amount of the asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and reduced to its recoverable amount. In assessing the present value, the estimated future cash flows are discounted to their present value using a pre-zakat discount rate that reflects market assessments of the time value of money and the risks inherent in the asset. In determining fair value less costs to sell, recent market transactions are taken into account. In the event that such transactions cannot be determined, appropriate valuation methods are used. These calculations are supported by valuation multiples, quoted share prices for listed companies, and other available indicators of fair value.

The Group calculates impairment on the basis of other budgets and forecasts, which are prepared separately for each cash-generating unit in the Group to which the asset is allocated. These budgets and forecasts usually cover a period of five years.

Impairment losses on continuing operations are recognized in the statement of profit or loss and other comprehensive income within the categories of expenses and in line with the function of the asset whose value is impaired.

For assets other than goodwill, an assessment is made at each reporting date to ensure that there is no evidence that previously recognized impairment losses are present or have decreased. If such evidence exists, the Group estimates the recoverable amount of the asset or cash-generating unit. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the recoverable amount since the last impairment loss was recognized. The reversal of the entry is limited so that the carrying amount of the asset does not exceed its recoverable amount nor the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized in previous years. This reversal is recognized in the statement of profit or loss and other comprehensive income unless the asset is recorded at the revaluation amount, in which case the reversal is considered as a revaluation increase.

6-19 Provisions

Provisions are recognized when the Company and its subsidiaries has an obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. In cases where the company expects to reimburse some or all of the provisions, for example under an insurance contract, the reimbursement is recognized as a separate asset only when it is certain that the entity will receive the compensation. The expense relating to the provision is presented in the statement of profit or loss and other comprehensive income, net of any recoveries.

If the effect of the time value of money is material, provisions are discounted using the current pre-zakat rate that, when appropriate, reflects the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost. Provisions are reviewed at each reporting date and adjusted to reflect current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed in the statement of profit or loss and other comprehensive income.