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AL JABR FINANCING COMPANY

(A SAUDI CLOSED JOINT STOCK COMPANY) FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2017

AL JABR FINANCING COMPANY (A SAUDI CLOSED JOINT STOCK COMPANY)

FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 31 DECEMBER 2017

INDEX PAGE

Independent auditor’s audit report 1 -2 Statement of financial position 3 Statement of comprehensive income 4 Statement of changes in shareholders’ equity 5 Statement of cash flows 6 Notes to the financial statements 7-32


STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017

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Note

31 December

2017

SR

31 December

2016

SR

ASSETS

Current assets

Cash and cash equivalents 4 37,646,137 19,592,694

Investment in financing contracts, net - current portion 5 181,240,909 133,199,534

Assets repossessed held for sale 6 1,780,777 419,346

Prepayment and other receivables 7 2,448,045 1,818,616

Due from a related party 8 354,000 -

Total current assets 223,469,868 155,030,190

Non-current assets

Property and equipment, net 9 5,416,895 4,923,303

Investment- available for sale 10 892,850 -

Investment in financing contracts, net – non-current portion 5 493,686,794 331,990,989

Total non-current assets 499,996,539 336,914,292

TOTAL ASSET 723,466,407 491,944,482

LIABILITIES AND EQUITY

Current Liabilities

Borrowings - current portion 11 50,000,000 -

Accounts payable and other liabilities 12 129,011,111 106,016,517

Zakat provision 13 1,451,686 1,682,602

Total current liabilities 180,462,797 107,699,119

Non-current liabilities

Borrowing - non-current portion 11 150,000,000 -

End-of-service indemnities 14 2,402,976 1,144,088 TOTAL LIABILITIES 332,865,773 108,843,207

SHAREHOLDERS’ EQUITY

Share capital 15 345,000,000 345,000,000

Statutory reserve 16 6,318,392 3,816,924

Retained earnings 39,547,566 34,284,351

Actuarial loss reserve on end-of-service indemnities 14 (265,324) -

TOTAL SHAREHOLDERS’ EQUITY 390,600,634 383,101,275

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 723,466,407 491,944,482

The accompanying notes form an integral part of these financial statement


STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2017

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Note

Year ended 31

December 2017 SR

Period from 12 January 2015 to 31 December 2016

(Re-stated) SR

NET REVENUE AND FINANCE INCOME Net sales revenue 18 10,685,363 42,806,837 Finance income 18 83,153,322 51,730,831

93,838,685 94,537,668 Insurance cost (26,049,861) (14,687,948) Finance cost 19 (782,993) -

Gross profit 67,005,831 79,849,720

General and administration expenses 20 (22,614,323) (23,424,685) Selling and marketing expenses 21 (2,272,668) (1,886,340) Allowance for credit loss 5 (18,067,293) (12,323,024) Other income 22 2,258,935 3,649,587

NET PROFIT 26,310,482 45,865,258

Earnings per share (basic and diluted) 23 0.76 1.32 OTHER COMPREHENSIVE LOSS Items that will not be reclassified to profit and loss Actuarial loss reserve on end-of-service indemnities 14 (265,324) -

Total other comprehensive loss for the year (265,324) -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 26,045,158 45,865,258

The accompanying notes form an integral part of these financial statements.

AL JABR FINANCING COMPANY (A SAUDI CLOSED JOINT STOCK COMPANY) STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2017

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Share Capital

SR

Payments under Capital

Increase SR

Statutory Reserve

SR

Retained Earnings

SR

Actuarial loss reserve on

end-of-service

indemnities SR

Total SR

Balance as at 12 January 2015 99,994 344,900,006 - (67,969) - 344,932,031 Payments to increase capital 344,900,006 (344,900,006) - - - -

Net Profit for the period - - - 38,169,244 - 38,169,244

Re-statement (note 26) - - - 7,696,014 - 7,696,014

Total comprehensive income for the period (re-stated) - 45,865,258 - 45,865,258

Zakat for the period - - - (7,696,014) - (7,696,014)

Net profit after zakat - 38,169,244 - 38,169,244

Transfer to statutory reserve - - 3,816,924 (3,816,924) - -

Balance as at 31 December 2016 345,000,000 - 3,816,924 34,284,351 - 383,101,275

Balance as on 1 January 2017 345,000,000 - 3,816,924 34,284,351 - 383,101,275

Net Profit for the year - - - 26,310,482 - 26,310,482

Other comprehensive income for the year - - - - (265,324) (265,324)

Total comprehensive income for the year - - - 26,310,482 (265,324) 26,045,158

Zakat for the year - - - (1,295,799) - (1,295,799)

Net profit after zakat - - - 25,014,683 (265,324) 24,749,359

Transfer to statutory reserve - - 2,501,468 (2,501,468) -

Dividends distributed - - - (17,250,000) - (17,250,000)

Balance as at 31 December 2017 345,000,000 - 6,318,392 39,547,566 (265,324) 390,600,634



NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

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For the year ended

31 December, 2017

SR

Period from 12 January 2015 to 31 December 2016

(Re-stated) SR

OPERATING ACTIVITIES

Net profit 26,310,482 45,865,258

Adjustments for:

Depreciation 2,417,524 1,537,656 Provision for end-of-service indemnities 1,172,563 692,591 Allowance for credit loss 18,067,293 12,323,024

Changes in operating assets and liabilities:

Investment in financing contracts, net (227,804,473) (477,513,547) Prepayment and other receivables (629,429) (167,505)

Assets repossessed held for sale (1,207,888) (419,346) Due from a related party (354,000) - Accounts payable and other liabilities 22,994,594 104,737,774

Cash used in operations (159,033,334) (312,944,095)

Zakat paid during the year / period (1,526,715) (6,013,412) End-of-service indemnities paid (178,999) (88,834) Net cash used in operating activities (160,739,048) (319,046,341)

INVESTING ACTIVITIES Investment -available for sale (892,850) - Purchase of property and equipment (3,064,659) (6,460,959)

Net cash used in investing activities (3,957,509) (6,460,959) FINANCING ACTIVITIES

Borrowings 200,000,000 -

Dividends paid during the year (17,250,000) - Net cash from financing activities 182,750,000 -

NET CHANGE IN CASH AND CASH EQUIVALENTS 18,053,443 (325,507,300)

Cash and cash equivalents at the beginning of the year / period 19,592,694 -

Transfer from Al Jabr Installment Company - 345,099,994 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR / PERIOD 37,646,137

19,592,694

Non- cash transactions

Actuarial loss reserve on end-of-service indemnities

265,324 - Transfer from Property and equipment to assets repossessed held for sale 153,543 -




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1. LEGAL STATUS

Al Jabr Financing Company ("the Company") is a Saudi Closed Joint Stock Company registered in the Kingdom of Saudi

Arabia under Commercial Registration No. 2050097254 issued in Dammam on 21 Rabi Al Awwal 1436 H (12 January

2015).

The approval of the Saudi Arabian Monetary Agency (SAMA) in its letter No, 351000150191 dated 18 Dhul Hijjah 1435

H (12 October 2014) and the issuance of Ministerial Decision No, 394 / S dated 21/3/1436 H corresponding to 12/1/2015

approving the transfer of Al Jabr Company for Installment from a limited liability Company to a closed joint stock

Company and to amend its name to become Al-Jabr Financing Company while maintaining the same commercial

registration number of the Company prior to the conversion.

The principal activity of the Company is finance lease under the license number 42/Ash/201512 dated 3 Rabi Ul Awwal

1437 H (corresponding to 14/12/2015) granted by Saudi Arabia Monetary Authority (SAMA).

The Company’s Head Office is located at the following address;

Al Jabr Financing Company

Dammam, Kingdom of Saudi Arabia

2. BASIS OF PREPARATION

Statement of compliance

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as modified by Saudi Arabian Monetary Authority (“SAMA”) for the accounting of zakat and income tax. The Ministry of Commerce and Investment commenced the implementation of the new Companies Regulations effective 25 Rajab1437H corresponding to 2 May 2016 (“the effective date”) promulgated by Royal Decree No. M/3 dated 28 Muharram 1437H. The new regulations shall replace the Companies Regulations promulgated by Royal Decree No. M/6 dated 22 Rabi’ I 1385H and it shall supersede all provisions that are inconsistent therewith. Companies existing as at the effective date of the regulations shall make all necessary amendments to their bylaws to comply with the requirements of the provisions of the new companies’ regulations within a period of one year of the effective date of the companies’ regulations. The Company is in the process to make the necessary amendments to the Company’s by Laws as required by the new regulations. Basis of measurement

These financial statements have been prepared under the historical cost convention. Functional and presentational currency

These financial statements have been presented in Saudi Riyals (SAR) which is the Company's functional and presentation currency. All financial information presented in Saudi Arabian Riyals has been rounded to the nearest Riyal, unless otherwise mentioned.



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2. BASIS OF PREPARATION (Continued)

Significant accounting estimates and judgments

The preparation of financial statements in conformity with approved accounting standards require management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In the process of applying the Company’s accounting policies, management has made the following estimates and judgments which are significant to the financial statements: Going concern

The Company's management has made an assessment of the Company's ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern. Therefore, the financial statements have been prepared on a going concern basis. Actuarial valuation of employee benefits liabilities

The cost of the end-of-service ("employee benefits") under defined unfunded benefit plan is determined using actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and rate of employee turnover. Due to the complexity of the valuation and its long-term nature, a defined unfunded benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed on an annual basis or more frequently, if required. Impairment of net investment in financing contracts

An estimate of the collectible amount of financing contracts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and an allowance applied according to the length of time past due, based on historical recovery rates. Any difference between the amounts actually collected in future periods and the expected uncollectible amounts will be recognised in the statement of profit or loss of those periods.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies applied in the preparation of these financial statements are set forth below. These accounting policies have been applied consistently to all the years presented, unless otherwise specified. Change in accounting policy in relation to accounting for zakat

Based on the accounting framework mentioned in note 2 (statement of compliance section), the Company amended its accounting policy relating to zakat and have started to charge it directly to retained earnings with a corresponding liability recognised in the statement of financial position. Previously, zakat was charged to the statement of profit of loss with a corresponding liability recognised in the statement of financial position. The Company has accounted for this change in the accounting policy relating to zakat and income tax retrospectively and the effects of the above change are disclosed in note 26 to the financial statements.



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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Change in accounting policy in relation to accounting for zakat (Continued) Amendments in existing standards

The adoption of the following amendments to existing standard mentioned below which had no significant financial impact on the financial statements of the Company on the current period or prior period and is expected to have no significant effect in future periods:

IAS 7 Disclosure Initiative - Amendments to IAS 7

The amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods.

Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits

against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the

amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in

which taxable profit may include the recovery of some assets for more than their carrying amount. Entities are required

to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening

equity of the earliest comparative period may be recognised in the opening retained earnings (or in another component

of equity, as appropriate), without allocating the change between opening retained earnings and other components of

equity. Entities applying this relief must disclose that fact.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Cost incurred to replace a component of an item of property and equipment is capitalised and the asset so replaced is retired from use. All other repairs and maintenance expenditure are charged to the profit and loss account during the period in which they are incurred. Depreciation is charged using the straight-line method over its estimated useful life as mentioned below, after taking into account residual value. Depreciation rates applied are as follows: Vehicle tracking devices 33% Vehicles 25% Furniture, fixtures and office equipment 20% Computer and software 33% Leasehold buildings developments 50% Depreciation for leasehold improvements is calculated on the lower of the estimated useful life and the lease term. Depreciation on additions is charged from the month the assets are available for use. No depreciation is charged in the month of disposal. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains / losses on disposal of fixed assets, if any, are taken to the profit and loss account in the period in which they arise.

Assets having an indefinite useful life are stated at acquisition cost less accumulated impairment losses, if any. The assets residual values, useful lives and methods are reviewed and adjusted, if appropriate, at each balance sheet date.



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Impairment in assets' value

At each statement of financial position date, the carrying amounts of tangible assets are reviewed regularly to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the assets or cash-generating unit is reduced to its recoverable amount. Impairment loss is recognised as an expense in the statement of profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the assets or cash-generating unit in prior period. The reversal of an impairment loss is recognised in the statement of profit or loss immediately. Asset repossessed held for sale

The Company in the ordinary course of its business, acquires certain vehicles and other assets against settlement of financing contracts. Such assets are considered as assets held for sale and are initially recorded at the lower of the net realizable value of related financing contract or the current fair value of the related assets, less any cost to sell. Subsequent to the initial recognition, these assets owned are periodically revalued and are carried at lower of their carrying values or the related net realizable value. Rental income, realized gain or losses on disposal and unrealized losses on evaluation are credited or charged to the comprehensive income/loss, if any. Financial instruments

Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the Company loses control of the contractual rights that comprise the financial assets. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled, or expires. On derecognition of a financial asset or financial liability, the difference between the carrying amount and the consideration received (and receivable) or paid (and payable) is recognised in the statement of profit or loss. Financial assets

a) Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, financing contracts, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. Management determines the classification of the financial asset at the time of initial recognition. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Murabaha receivables

Murabaha is an agreement whereby the Company sells to a customer an asset, which the Company has purchased and acquired based on a promise received from the customer to buy. The selling price comprises the cost plus an agreed profit margin. Gross amounts due under the Murabaha sale contracts include the total of future sale payments on the Murabaha agreement. The Company is acting as dealer to its suppliers, accordingly the difference between the Murabaha sales value and the cost of the sold asset, is recognised as earned profit.



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Financial assets (Continued)

Finance Lease receivables

Finance lease is an agreement wherein gross amounts due under originated Lease finance includes the total of future payments on lease finance, plus estimated residual amounts receivable. The Company is acting as dealer to its suppliers, accordingly the difference between the lease contracts sales value and the cost of the lease assets is recognized as earned profit. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. Available-for-sale financial assets are carried at fair value. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognized in other comprehensive income.

b) Subsequent measurement

Lease financing assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, lease financing assets are measured at amortised cost using the effective interest rate method, less any impairment. Restructured/ rescheduled receivables are recorded at revised terms and conditions as approved by the management. Restructuring policies and practices are based on indicators or criteria which, indicate that payment will most likely continue. c) Derecognition of financial assets

Any financial asset or, where applicable a part of a financial asset or part of a group of similar financial assets is derecognised when: 1. the contractual right to receive cash flows from the asset has expired; or 2. the contractual right to receive cash flows from the asset has expired; but the Company has assumed an obligation

to pay them in full without material delay to a third party under a "pass through" arrangement; or 3. the Company has transferred its contractual right to receive cash flows from the asset and either:

(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred

control of the asset.

Any resulting gains or losses on derecognition of financial assets are recognised at the time of derecognition of financial assets. d) Impairment of financial assets

An assessment is made at each statement of financial position date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of profit or loss. Impairment is determined as follows: 1. for assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss

previously recognised in the statement of profit or loss; 2. for assets carried at cost, impairment is the 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; and, 3 for assets carried at amortised cost, impairment is the difference between carrying amount and the present value

of future cash flows discounted at the original effective profit rate.



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Financial liabilities

a) Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss or other financial liabilities, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value and, in the case of borrowings, net of directly attributable transaction costs. The Company's financial liabilities include trade and other payables, bank overdrafts, borrowings, financial guarantee contracts, and derivative financial instruments.

b) Subsequent measurement

The measurement of financial liabilities depends on their classification as financial liabilities at fair value through profit or loss or "amortised cost". The Company has not designated any financial liability as fair value through profit or loss. Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest rate method. Transaction costs relating to long-term borrowings are being amortised over the period of agreement using the effective interest rate method. c) Derecognition of financial liability

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. 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 recognised in the statement of profit or loss. Fair value management

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: a) In the principal market for the asset or liability; or

b) In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.



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Fair value management (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: a) Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. b) Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is

directly or indirectly observable. c) Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is

unobservable.

Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are set off and the net amount is reported in the financial statements only when the Company has a legally enforceable right to set off and the Company intends to either settle on a net basis, or to realise the assets and to settle the liabilities simultaneously. Income and expense items of such assets and liabilities are also offset and the net amount is reported in the financial statements. Regular way Contracts

All "regular way" purchases and sales of financial assets are recognised on trade date, i.e. the date on which the asset is delivered to or by the Company. Long term borrowings

Long term borrowings are initially recognised at cost being the fair value of consideration received together with the associated transaction costs. Subsequently, these are carried at amortised cost using the effective interest rate method. Transaction costs relating to long term borrowings are being amortised over the period of agreement using the effective interest rate method. Foreign currency transactions

Foreign currency transactions are translated into Saudi Riyals at exchange rates prevailing at the date of transaction and the resulting gain / loss recognised in the statement of profit or loss Monetary assets and liabilities in foreign currencies are translated at the rates of exchange which approximate those prevailing on the statement of financial position date. Gains and losses on translation are taken to statement of profit or loss currently except for difference arising on translation of equity accounted associates which are recognised directly in equity through other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rate at the date when the fair value was determined.

Provisions for non-financial assets

Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events and 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. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimates. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

Proposed dividend and transfer between reserves

Dividends and appropriations to reserves, except appropriations which are required by law, made subsequent to the balance sheet date are considered as non-adjusting events and are recorded in the financial statements in accordance with the requirements of International Accounting Standard (IAS) 10, 'Events after the Reporting Period' in the year in which they are approved / transfers are made.



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Revenue recognition

Sale of Vehicles

The Company is acting as a dealer for its suppliers, accordingly revenue from the sale of vehicles is recognized when

the significant risks and rewards of ownership have been transferred, which is considered to occur when title passes to

the customer. Revenue is measured at the fair value of the consideration received or receivable, which can be

measured as the net present value of the finance agreement plus the customer’s down payments. Revenue is generally

recognized when all the following conditions are met:

- Neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over

the goods sold, has been retained;

- The amount of revenue can be measured reliably;

- It is probable that the economic benefits associated with the sale will flow to the Company; and

- The costs incurred or to be incurred in respect of the sale can be measured reliably. Income from financing contracts

Income from financing contracts is recognised in the statement of profit or loss using the effective yield method, using the applicable effective profit rate "EPR", on the outstanding balance over the term of the contract. The calculation of EPR includes transaction costs and fees and commission income received that represent an integral part of the EPR. Transaction costs include incremental costs that are directly attributable to the acquisition of the financial assets Administration fees charged in respect of processing and other services are recognised as income over the period of the financing agreements. Cash and cash equivalents

Cash and cash equivalents include cash in hand, if any, and at banks including bank overdrafts and investments with original maturity of less than three months from the contract date. Post-employment benefits

This represents end of service benefits plan. End-of-service benefits as required by Saudi Arabian Labor Law are required to be provided based on the employees’ length of service. The Company’s net obligations in respect of defined unfunded benefit plans (End-of-service-benefits) (“the obligations”) is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and any un-recognised past service costs. The discount rate used is the market yield on government bonds at the reporting date that have maturity dates approximating the terms of the Company’s obligations. The cost of providing benefits under the defined benefit plans is determined using the projected unit credit method to determine the Company’s present value of the obligation. The defined benefit liability comprises the present value of defined benefit obligation as adjusted for any past service cost not yet recognised and any un-recognised actuarial gains/losses. Impairment of non-financial assets

The carrying amount of assets is reviewed at each reporting date for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to the profit and loss account.



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Selling and marketing expenses

Selling and marketing expenses principally comprise of costs incurred in the sale and marketing of the Company’s products / services. All other expenses are classified as general and administrative expenses.

Contingent liabilities

The Company receives legal claims through its normal cycle. Management has to make estimates and judgments about the possibility to set aside a provision to meet claims. The end of the legal claims date and the amount to be paid is uncertain. The timing and costs of legal claims depends on the statutory procedures. Lease arrangements where the Company is a lessee

Finance leases are those where the terms of the lease transfer substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. As lessee, the Company classifies its leases as operating leases and the rentals payable are charged to the statement of profit or loss on a straight line basis.

4. CASH AND CASH EQUIVALENTS

31 December

2017

SR

31 December

2016

SR

Cash at banks 37,646,137 19,592,694

AL JABR FINANCING COMPANY (A SAUDI CLOSED JOINT STOCK COMPANY) NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017

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5. NET INVESTMENT IN FINANCING CONTRACTS

Investment in financings contract comprised of investment in finance lease and murabaha contracts as mentioned below: 31 December 2017

Current Portion

SR

Non-Current Portion

SR Total

SR

Finance lease contracts receivables, net 167,545,033 491,163,157 658,708,190

Murabaha contracts receivables, net 13,695,876 2,523,637 16,219,513 181,240,909 493,686,794 674,927,703

31 December 2016

Current Portion

SR

Non-Current Portion

SR Total

SR


Murabaha contracts receivables, net 27,576,233 10,108,328 37,684,561

133,199,534 331,990,989 465,190,523

Finance lease contracts receivables, net

31 December 2017

Current Portion

SR

Non-Current Portion

SR Total

SR Finance lease contracts receivables, gross 281,738,506 674,914,699 956,653,205

Less: unearned revenues (106,632,289) (174,592,666) (281,224,955)

175,106,217 500,322,033 675,428,250

Less: Allowance for credit loss (7,561,184) (9,158,876) (16,720,060) Finance lease contracts receivables, net 167,545,033 491,163,157 658,708,190

31 December 2016

Current Portion

SR

Non-Current Portion

SR Total

SR Finance lease contracts receivables, gross 167,378,122 432,793,163 600,171,285 Less: unearned revenues (60,332,500) (109,056,909) (169,389,409)

107,045,622 323,736,254 430,781,876 Less: Allowance for credit loss (1,422,321) (1,853,593) (3,275,914)



- 17 -

5. NET INVESTMENT IN FINANCING CONTRACTS-Continued

Murabaha contracts receivables, net

31 December 2017

Current Portion

SR

Non-Current Portion

SR Total

SR Murabaha contracts receivables, gross 22,989,188 2,829,434 25,818,622

Less: unearned revenues (2,388,552) (215,300) (2,603,852)

20,600,636 2,614,134 23,214,770

Less: Allowance for credit loss (6,904,760) (90,497) (6,995,257)


31 December 2016

Current Portion

SR

Non-Current Portion

SR Total

SR

Murabaha contracts receivables, gross 33,965,119 11,042,103 45,007,222 Less: unearned revenues (4,103,082) (847,469) (4,950,551)

29,862,037 10,194,634 40,056,671 Less: Allowance for credit loss (2,285,804) (86,306) (2,372,110)


5.1 Movement in allowance for credit losses during the year /period is as follows:

31 December 2017

SR

Period from 12 January 2015

to 31 December

2016

Opening balance 5,648,024 - Charge for the year /period 18,067,293 12,323,024 Written off during year /period - (6,675,000)

23,715,317 5,648,024

5.2 The Company's effective profit rate on financing contracts (exclusive of insurance) ranges between 8% to 20% (2016: 8% to 20%) per annum.

5.3 The Company in ordinary course of its business, holds collateral in respect of the financing contracts (being the title of assets leased out) in order to mitigate the credit risk associated with them. These collaterals are not readily convertible into cash and are intended to be repossessed and disposed of in case the customer defaults.

5.4 Investment in financing contracts include net non-financing receivable balances amounting to SR. 1.5 million which

related to direct charges to customers’ accounts for other additive services or insurance reimbursements /

payables.


- 18 -

6. ASSETS REPOSSESSED HELD FOR SALE

During 2017, the Company has acquired certain vehicles in satisfaction of a claim in order to achieve an orderly realization of finance lease receivables to have a balance of SR 1,780,777 at the end of year 2017 (2016: SR 419,346).

7. PREPAYMENT AND OTHER RECEIVABLES

31 December 2017

SR

31 December 2016

SR

Employees receivable 102,615 132,076

Security deposits 120,000 120,000

Prepayments 955,932 98,491

Unsettled insurance claims, net 1,269,498 1,468,049

2,448,045 1,818,616

8. RELATED PARTY BALANCES AND TRANSACTIONS

In the normal course of its business, the Company buys and pays for the cars purchased from a related Company

on a commercial basis. Details of significant transactions with related parties during the period and related

balances are as follows:

Name Relation

Al Jabr Trading Company (KIA) Affiliate

Al Jabr Investment Company Affiliate

Related party

Nature of transactions

31 December 2017

SR

For the period from 12

January 2015 to 31 December

2016 SR

Al Jabr Trading Company (KIA) (Affiliate)

Purchase of cars from Al Jabr Trading, Net

280,078,962 583,361,845

Transfer of end of service indemnities - 649,961 Expenses Paid by Al Jabr Trading - 439,100

Al Jabr Investment Company

Expenses paid on behalf of Al Jabr investment Company

354,000 -

Board of Directors Remuneration and meetings attendance

allowance

607,000 36,500

Key management Salaries and benefits 2,106,250 2,401,479

End of service indemnities 497,660 311,513


- 19 -

8. RELATED PARTY BALANCES AND TRANSACTIONS- (Continued)

Balance due from a related party is as follows:

31 December 2017

SR

31 December 2016

SR

Al Jabr Investment Company 354,000 -

Balance due to a related party is as follows:

31 December 2017

SR

31 December 2016

SR

Al Jabr Trading Company (KIA) 117,831,375 93,331,735


(A SAUDI CLOSED JOINT STOCK COMPANY)

NOTES TO THE FINANCIAL STATEMENTS


- 20 -

9. PROPERTY AND EQUIPMENTS, NET

2017 Vehicle tracking

devices SR

Vehicles SR

Furniture, fixture and office

equipment SR

Computers and software

SR

Leased hold buildings

developments SR

Total SR

Cost

As at 1 January 2017 3,229,031 384,337 1,091,541 411,218 1,344,832 6,460,959 Additions during the year 1,630,245 - 324,657 963,593 146,164 3,064,659 Transfer to assets repossessed-held for sale

- (198,337) - - - (198,337)

As at 31 December 2017 4,859,276 186,000 1,416,198 1,374,811 1,490,996 9,327,281 Accumulated Depreciation As at 1 January 2017 486,707 54,106 211,314 94,048 691,481 1,537,656 Charge for the year 809,378 83,688 459,952 411,153 653,353 2,417,524 Transfer to assets repossessed-held for sale

- (44,794) - - - (44,794)

As at 31 December 2017 1,296,085 93,000 671,266 505,201 1,344,834 3,910,386 Net Book Value

As at 31 December 2017 3,563,191 93,000 744,932 869,610 146,162 5,416,895

2016 Vehicle tracking

devices SR

Vehicles SR

Furniture, fixture and office

equipment SR

Computers and software

SR

Leased hold buildings

developments SR

Total SR

Cost

As at 12 January 2015 - - - - - - Additions during the period 3,229,031 384,337 1,091,541 411,218 1,344,832 6,460,959

As at 31 December 2016 3,229,031 384,337 1,091,541 411,218 1,344,832 6,460,959 Accumulated Depreciation As at 12 January 2015 - - - - - - Charge for the year 486,707 54,106 211,314 94,048 691,481 1,537,656

As at 31 December 2016 486,707 54,106 211,314 94,048 691,481 1,537,656 Net Book Value

As at 31 December 2016 2,742,324 330,231 880,227 317,170 653,351 4,923,303





21

10. INVESTMENT- AVAILABLE FOR SALE

31 December 2017

SR

31 December 2016

SR

Beginning of the year / period - -

Purchased during the year / period 892,850 -

End of the year / period 892,850 -

In accordance with the requirement of SAMA, the Company during the year ended 31 December 2017 had an investment which represents Company’s ownership of 2% in a non-listed entity, which is still in the pre-operating stage.

11. BORROWINGS

11.1 During the year 2017, the Company obtained a bank facility in the form of term borrowings from local bank for financing leased assets. The outstanding balance as of 31 December 2017 amounted to SR 200 million (2016: nil). These bank facilities bear an interest rate of SIBOR plus 1.5%.

11.2 These facilities are collateralized against the personal guarantees of owners.

12. ACCOUNTS PAYABLE AND OTHER LIABILITIES

31 December 2017

SR

31 December 2016

SR

Current portion 50,000,000 -

Non-current portion 150,000,000 -

200,000,000 -

Note

31 December 2017

SR

31 December 2016

SR

Due to a related party 8 117,831,375 93,331,735

Vehicles suppliers 7,981,787 7,279,171

Insurance claims payable 1,692,747 -

Employees’ salaries and vacations 360,747 357,779

Accrued Interest on borrowings 253,215 -

Accrued expenses 209,440 825,806

Advances from financing contracts - 3,869,216

Other Payables 681,800 352,810

129,011,111 106,016,517





22

13. ZAKAT PROVISION

The movement in provision for zakat and income tax for the year / period is as follows 13.1 Charge for the year

Zakat is payable by the Saudi Shareholders and is calculated based on the higher of Zakat base or the adjusted profit for the year.

13.2 Computation for adjusted zakatable profit

13.3 Zakat has been computed based on the Company's understanding and interpretation of the zakat and income

tax regulations enforced in the Kingdom of Saudi Arabia. The GAZT continues to issue circulars to clarify certain zakat and tax regulations, which are usually enforced on all open years. The zakat liability as computed by the Company could be different from zakat as assessed by the GAZT for years for which assessments have not yet been raised by the GAZT.

Note 31 December 2017

SR

Period from 12 January 2015

to 31 December 2016

SR

Balance at the beginning of the year / period 1,682,602 -

Provided during for the year / period 1,295,799 7,696,014

Payment during the year / period (1,526,715) (6,013,412)

Balance at the end of the year / period 1,451,686 1,682,602

31 December 2017

SR

Computation of Zakat base:

Shareholders' equity opening balance 383,101,275

Opening provisions and adjustments 6,613,113

Borrowings, net 125,813,162

Book value of long-term assets (6,309,745)

Investment in financing contract-long term

(502,936,167)

6,281,638

Adjusted zakatable profit 45,550,338

Zakat base 51,831,976

Zakat due @ 2.5% 1,295,799

31 December 2017

SR

Profit for the year 26,310,482

Adjustments:

Provision for end of service benefits, net 1,172,563

Other adjustments 18,067,293

Adjusted profit for the year 45,550,338





23

14. END OF SERVICE INDEMNITIES

The major financial assumptions used to calculate the employees' post-employment benefits liabilities are as follows:

14.1 The movement in employees' post-employment benefits recognized in the statement of financial position is as

follows:

14.2 The amounts recognised in the statement of profit or loss in respect of employees' post-employment benefits are as follows:

14.3 The sensitivity of the employees' post-employment benefit to changes in the weighted principal assumptions

is:

Note

31 December 2017

SR

31 December 2016

SR

Present value of employees’ post-employment benefits 2,402,976 1,144,088

Principal Actuarial Assumptions

31 December

2017

Salary increase rate - short term (year 1 to 5) 5%

- long term (year 6 onwards) 4.25%

Discount rate 3.25%

Mortality Rate WHOSA15 75%

Rate of Employee Turnover Heavy

31 December 2017

SR

Net liability at the beginning of the year 1,144,088

Interest cost 79,323

Current service cost 1,093,240

Benefits paid during the year (178,999)

Actuarial losses recognized during the year 265,324

Net liability at the end of the year 2,402,976

31 December 2017

SR

Current service and interest costs 1,172,563

31 December 2017

Change in assumptions

Increase / (decrease) in present value of employees post-employment benefit

liability

Discount rate Percentage Amount

- Increase +0.5% 1,927,633

- Decrease -0.5% 2,177,369

Salary growth rate - Increase +0.5% 2,133,626

- Decrease -0.5% 1,965,706





24

15. SHARE CAPITAL

The Company’s subscribed and paid-in share capital of SR 345,000,000 (2016: 345,000,000) is divided into 34,500,000 (SR: 34,500,000) equity shares of SR. 10 each fully subscribed and paid, and distributed among shareholders.

16. STATUTORY RESERVE

In accordance with Company’s Article of Association, the Company establishes a statutory reserve by appropriation of 10% of net income until the reserve equaled 50 % of the share capital. This statutory reserve is not available for dividend distribution.

17. CONTINGENCIES AND COMMITMENTS

The Company had no contingencies and commitments other than the rent. Premises rent under operating

lease arrangements represent rentals payable by the Company for certain office properties. Leases are

negotiated for an average term of one year and rentals are fixed for the same period.

18. REVENUES

19. FINANCE COST

31 December 2017

SR

For the period from 12 January

2015 to 31 December 2016

SR

Sales revenue of cars 404,643,509 635,112,242

Cost of sold cars (393,958,146) (592,305,405)

Net sales revenue 10,685,363 42,806,837

Finance lease contracts income 78,954,374 42,397,763

Murabaha contracts income 3,079,482 7,379,846

Administration fee revenue 1,119,466 1,953,222

Finance income 83,153,322 51,730,831

Total revenue 93,838,685 94,537,668

31 December 2017

SR



SR

Finance cost on bank borrowings 782,993 -





25

20. GENERAL AND ADMINISTRATIVE EXPENSES

21. SELLING AND MARKETTING EXPENSES

22. OTHER INCOME

23. EARNINGS PER SHARE - basic and diluted

Basic earnings per share from net income for the year is calculated by dividing net income for the year

by the number of shares for the year amounting to 34,500,000 shares (2016: 34,500,000 shares). There were

no dilution effects during the year.

31 December 2017

SR



SR

Salaries, wages and other benefits 11,590,383 11,676,591

Technical service of vehicles 2,889,921 3,090,810

Rent & Utilities 1,593,000 2,477,132

Depreciation 2,417,524 1,537,656

Legal & professional fees 175,050 1,194,879

Commission bank guarantee - 1,064,861

Governmental fees 671,704 810,270

Fees and bonuses Shariah Committee and Board of Directors

607,000 384,500

Medical expenses 401,443 241,806

SIMAH 414,541 133,022

Travelling expenses 126,959 111,793

Bank charges 184,875 65,748

Miscellaneous 1,541,923 635,617

22,614,323 23,424,685

31 December 2017

SR



SR

Advertising Expense 795,486 1,603,874

Promotion Expense 1,477,182 282,466

2,272,668 1,886,340

31 December 2017

SR



SR

Gain on sale of repossessed vehicles 80,975 -

Post execution and income from other services charges

2,177,960 3,649,587

2,258,935 3,649,587





26

24. RISK MANAGEMENT

Risk is inherent in the Company's activities and is managed through a process of ongoing identification,

measurement and monitoring, subject to risk limits and other controls. This process of risk management is

critical to the Company's continuing profitability. The Company's activities are exposed to a variety of financial

risks, which mainly include market risk, credit risk and liquidity risk.

24.1 Risk management structure

Board of Directors

The Board of Directors is responsible for establishing the Company's policies, including risk management

framework, and to review the performance of the Company to ensure compliance with these policies.

Credit and risk management committee

The credit and risk management committee is appointed by the Board of Directors. The credit and risk

management committee assists the Board in reviewing overall risks, which the Company might face, evaluate

and review operational and non-operational risks and decide on mitigating factors related therewith.

Audit committee

The audit committee is appointed by the Board of Directors. The audit committee assists the Board in

carrying out its responsibilities with respect to assessing the quality and integrity of financial reporting,

the audit thereof and the soundness of the internal controls of the Company.

Internal audit

All key operational, financial and risk management processes are audited by the Internal Audit. Internal audit

examines the adequacy of the relevant policies and procedures, the Company's compliance with the

internal policies and regulatory guidelines. Internal audit discusses the results of all assessments with

management and reports its findings and recommendations to the Audit Committee.

The risks faced by the Company and the way these risks are mitigated by management are summarized below:

24.2 Market risk

Market risk is the risk that the fair value or the future cash flows of a financial instrument may fluctuate as

a result of changes in market profit rates or the market prices of securities due to change in credit rating

of the issuer or the instrument, change in market sentiments, speculative activities, supply and demand of

securities and liquidity in the market.

Market risk comprises of three types of risk: currency risk, profit rate risk and other price risk.

24.2.1 Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Company is subject to fluctuations in foreign exchange rates in the normal course of its business. The Company did not undertake significant transactions in currencies other than Saudi Riyals during the year. Accordingly, the Company is not exposed to any significant currency risk.

24.2.2 Profit rate risk

Profit rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate

because of changes in market profit rates. The Company's exposure to the risk of changes in market profit

rates relates primarily to the Company's long-term debt obligations with floating profit rates.

There were no financial liabilities subject to profit rate risk as at 31 December 2017.

24.2.3 Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market prices (other than those arising from profit rate risk or currency risk) whether

those changes are caused by factors specific to the individual financial instruments or it's issuer, or factors

affecting all similar financial instruments traded in the market. The Company does not have any financial

instruments, which are subject to other price risk.





27

24. RISK MANAGEMENT (Continued)

24.3 Credit Risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the

other party to incur a financial loss. Out of the total assets of SR 723.5 million (2016: SR 491.9 million), the

assets which were subject to credit risk amounted to SR 715.2 million (2016: SR 486.4 million). The

management analyze the credit risk in the following assets:

24.3.1 Net investment in financing contracts

The investment in financing contracts generally expose to significant credit risk. Therefore, the Company has

established a number of procedures to manage credit exposure including evaluation of lessees' credit

worthiness, formal credit approvals, assigning credit limits, obtaining collateral and personal guarantees.

The Company also follows a credit classification mechanism, primarily driven by day’s delinquency as a tool to

manage the quality of credit risk of the financing contracts portfolio.

The ageing of net investment in financing contracts, based on total due balances according to past due defaulting periods of the customers is as under:

The portfolio that is neither past due nor impaired has satisfactory history of repayment. As at statement

of financial position date, the Company has adequate collaterals to cover the overall credit risk exposure after

making an impairment provision.

Concentration Risk

Concentrations of credit risk arises when a number of counter-parties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be affected similarly by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company's performance to developments affecting a particular industry or geographical location.

31 December 2017

SR

31 December 2016

SR

Net investment in lease financing contracts 674,927,703 465,190,523

Bank Balances 37,646,137 19,592,694

Due from Related Parties 354,000 -

Investments 892,850

Other receivable 1,372,113 1,600,125

715,192,803 486,383,342

31 December 2017

SR

31 December 2016

SR

Neither past due nor impaired 200,312,278 251,549,596

Past due 1-30 days 199,574,691 116,203,602

Past due 31-90 days 187,018,920 81,764,555

Past due 91-180 days 52,013,780 11,112,631

Past due 181-365 days 39,862,089 9,859,692

Past due over 1 year 19,861,262 348,471

698,643,020 470,838,547

Less: Impairment for financing contracts (23,715,317) (5,648,024)

Net of Impairment 674,927,703 465,190,523

Total portfolio coverage ratio 3.39% 1.20%





28

24 Risk Management (Continued)

Concentration Risk (Continued)

The Company manages its credit risk exposure through diversification of investment in financing contracts to

ensure that there is no undue concentration of risks with individuals or groups of customers in spec ific

locations or businesses. The main stream of concentration risk analysis by individual and corporate class

of business which is given below:

Collateral held as security and other credit enhancements

There is no significant collateral other than the vehicles for lease contracts.

24.3.2 Bank balances and other receivables Funds are placed with banks having good credit ratings and therefore are not subject to significant credit risk. Other receivables are neither significant nor exposed to significant credit risk.

24.4 Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they

fall due. Liquidity risk arises because of the possibility that the Company will be required to pay its liabilities

earlier than expected or will face difficulty in raising funds to meet commitments associated with financial

liabilities as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible,

that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed

conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The table below summarizes the Company's financial liabilities only (other than end-of-service indemnities,

zakat provision and advances from financing contracts) into relevant maturity groupings based on the

remaining period at the balance sheet date to contractual maturity date. The amounts in the table are the

contractual undiscounted cash flows.

31 December 2017 31 December 2016

Amount

(SR) Percentage

(%) Amount

(SR) Percentage

(%)

Individuals 567,610,328 84 316,146,997 68

Corporate 5107,317,37 16 149,043,526 32

3674,927,70 100 465,190,523 100

31 December 2017

Carrying Amount

(SR)

Contractual Cashflows

(SR)

Upto 3 months

(SR)

More than 3 months and

upto one year (SR)

More than one year

(SR)

Accounts payable and

Other liabilities 129,011,111 129,011,111 11,179,736 117,831,375 -

Borrowings 200,000,000 214,291,667 14,213,542 41,984,375 158,093,750

329,011,111 343,302,778 25,393,278 159,815,750 158,093,750

31 December 2016

Carrying Amount

(SR)

Contractual Cash flows

(SR)

Upto 3 months

(SR)

More than 3 months and

upto one year

(SR )

More than one year

(SR)) Accounts Payable and other liabilities 102,147,301 102,147,301 102,147,301 - -

102,147,301 102,147,301 102,147,301 - -





29

RISK MANAGEMENT (Continued)

24.4 Liquidity Risk (Continued)

Analysis of financial assets and liabilities based on maturities

The table show analysis of financial assets (other than assets repossessed held for sale, property and equipment and prepayments) and liabilities (other than end-of-service indemnities, zakat provision and advances from financing contracts) according to when they are expected to be recovered or settled:

Note: The Contractual cash flow from borrowings has been estimated on 2 percent SIBOR rate plus 1.5% margin.

2017

Contractual cash-flows

SR

Upto three months

SR

More than three months and upto one

year SR

More than one year

SR

Cash and cash equivalents 37,646,137 37,646,137 - -

Other receivables 1,372,113 1,372,113 - -

Due from a related party 354,000 354,000 - -

Investments 892,850 - - 892,850

Net investment in financing contracts 674,927,703 46,609,641 134,631,268 493,686,794

Financial assets 715,192,803 85,981,891 134,631,268 494,579,644

Accounts Payable and other liabilities 129,011,111 11,179,736 117,831,375 -

Borrowings 214,291,667 14,213,542 41,984,375 158,093,750

Financial liabilities 343,302,778 25,393,278 159,815,750 158,093,750

Maturity Gap 371,890,025 60,588,613 (25,184,482) 336,485,894

Cumulative Maturity Gap 371,890,025 60,588,613 35,404,131 371,890,025

2016

Contractual cash-flows

SR

Upto three months

SR

More than three months and upto one

year SR

More than one year

SR

Cash and cash equivalents 19,592,694 19,592,694 - -

Other receivables 1,600,125 1,600,125 - -

Net investment in financing contracts 465,190,523 42,998,985

90,200,549 331,990,989

Financial assets 486,383,342 64,191,804 90,200,549 331,990,989

Accounts Payable and other liabilities 102,147,301 102,147,301 - -

Financial liabilities 102,147,301 102,147,301 - -

Maturity Gap 384,236,041 (37,955,497) 90,200,549 331,990,989

Cumulative Maturity Gap 384,236,041 (37,955,497) 52,245,052 384,236,041





30

24. RISK MANAGEMENT (Continued) 24.5 FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

24.6 Capital risk management

The objective of the Company when managing capital is to safeguard its ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to maintain a strong capital base to support the sustained development of its business. The Company manages its capital structure and makes adjustments to it in light of the changes in economic conditions and risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2017 and 31 December 2016. The Company monitors aggregate amount of financing offered by the Company on the basis of the regulatory requirements of Regulations for Companies and SAMA. SAMA requires Finance Companies engaged in financing other than real estate, to maintain aggregate financing to capital ratio of three times.

The Company’s financial assets consist of cash and bank balances, net investment in financing contracts and other receivables, its financial liabilities consist of trade payables, short term borrowings, due to related parties and other liabilities.

The Company’s management determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement.

The fair values of financial instruments are not materially different from their carrying values.

31 December 2017 31 December 2016

Carrying Value

SR Fair Value

SR Carrying Value

SR Fair Value

SR

Financial Assets

Net investment in lease contracts 674,927,703 674,927,703 465,190,523 465,190,523

Investment-AFS 892,850 892,850 - -

Total 675,820,553 675,820,553 465,190,523 465,190,523

Note

31 December 2017

SR

31 December 2016

SR

Aggregate financing to capital ratio

(Net investment in financing contracts divided by total equity) 1.7 1.2





31

25. STANDARDS ISSUED BUT NOT YET EFFECTIVE

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards and interpretations, if applicable, when they become effective.

25.1 IFRS 9 Financial Instruments

In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition, Measurement, and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

The Company has performed a preliminary assessment of the potential impact of adoption of IFRS 9 based on its positions as at 30 September 2017. The total estimated adjustment due to adoption of IFRS 9 on the opening balance of the Company’s equity as at 1 January 2018 based on the last assessed position will approximately range between SR 4 million to SR 8 million. In October 2017, the IASB issued Prepayment Features with Negative Compensation (Amendments to IFRS 9). The amendments are effective for annual periods beginning on or after 1 January 2019, with early adoption permitted.

25.2 IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. The Company is currently assessing the impact of IFRS 15 and plans to adopt he new standard on the required effective date.

25.3 IFRS 16 Leases

IFRS 16 is issued in January 2017 that requires lessees to account for all leases (subject to certain exemptions) under a single on balance sheet model (i.e., in a manner comparable to finance leases under IAS 17). Lessees would recognise a liability to pay rentals with a corresponding asset, and would separately recognise interest expense and amortisation. The standard includes two recognition and measurement exemptions for lessees:

The new standard also requires reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee upon certain events. Lessor accounting would be essentially the same as today’s lessor accounting, using IAS 17’s dual classification approach. IFRS 16 is effective for annual periods beginning on or after 1 January 2019. Early application is permitted.

• leases of low-value assets (e.g. small printer;) and

• short-term leases (i.e. leases with a lease term of 12 months or less).





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26. RESTATEMENT OF PRIOR PERIOD FIGURES

As set out in note 3 (change in accounting policy in relation to accounting for zakat), the Company has changed its accounting policy to recognize zakat and income tax charge for the year to retained earnings. Previously, zakat and income tax was charged to the statement of profit or loss. The change in the accounting policy for zakat and income tax has the following impact on the net profit for the year and the statement of changes in equity is as follows:

27. DATE OF AUTHORISATION FOR ISSUE

These financial statements were authorized for issue on 16 Jamada II 1439H (corresponding to 4 March 2018G) by the Board of Directors of the Company.

Balance as previously

reported for the year ended 31

December 2016 SR

Effect of

restatement

Balance restated for the

year ended 31 December

2016 SR

Net profit for the period 38,169,244

7,696,014

45,865,258

AL JABR FINANCING COMPANY (A SAUDI CLOSED ... Jabr - Finance - FS...AL JABR FINANCING COMPANY (A...

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