Ajman Bank : Financial statements for the year of 2021

Ajman Bank PJSC

Report and financial statements

for the year ended 31 December 2021

Ajman Bank PJSC

Report and financial statements

for the year ended 31 December 2021

Contents	Pages
Independent auditor's report	1 - 6
Statement of financial position	7
Income statement	8
Statement of profit or loss and other comprehensive income	9
Statement of changes in equity	10
Statement of cash flows	11
Notes to the financial statements	12 - 87

TO THE SHAREHOLDERS OF AJMAN BANK PJSC

Report on the audit of the financial statements

Opinion

of financial position as at 31 December 2021, and the statement of income and statement of comprehensive income, statement of cash flows and statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2021 and its financial performance and cash flows for the year then

Basis for opinion

the financial statements section of our report. We are independent of the Bank in accordance with the International - requirements that are relevant to our audit of the financial statements in the United Arab Emirates, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements

TO THE SHAREHOLDERS OF AJMAN BANK PJSC (continued)

Report on the audit of the financial statements(continued)

Key audit matter	How our audit addressed the key audit matter
	We have obtained an understanding of

and investing assets. Refer to Note 7 of the financial statements.

The balance of loss allowances on Islamic financing and investing assets represents estimate, at the balance sheet date, of the expected credit losses under the expected credit loss models

Financial Reporting Standard No. 9: Financial

Management first assesses whether the credit risk of Islamic financing and investing assets to customers has increased significantly since their initial recognition, and then applies a three-stage impairment model to calculate the ECL.

For Islamic financing and investing assets classified in stage 1 (no significant increase in credit risk) and stage 2 (with significant increase in credit risk), loss allowances are assessed using the risk parameter modelling approach that incorporates key parameters, including probability of default, loss given default, exposure at default, discount rates and macroeconomic inputs.

For Islamic financing and investing assets in stage 3 (default and credit-impaired), loss allowances are assessed by estimating the future discounted cash flows from the loans.

Management has also applied significant level of judgement in areas noted above in determining the impact of COVID-19 on the allowances for credit losses by considering the following:

1. Forward looking information, including variables used in macroeconomic scenarios and their associated weightings,
2. Stress in specific sectors and industries, and
3. Impact of Government support measures.

Islamic financing and credit impairment provision policy and the ECL modelling methodology.

We have performed process walkthroughs to identify the controls over ECL process. We have tested design and operational effectiveness of the following internal controls relating to the measurement of ECL:

• Review and approval of classification of Islamic financing and investing assets.
• The management regular monitoring of:
• 1. staging and ECL for Islamic financing and investing assets.
  2. identification of loans displaying indicators of impairment (including more than 90 days past due) under stage 3.
  3. macroeconomic variables and forecast
  4. performance of ECL models
  • The review and approval of management overlays and the governance process around such overlays.
  • The model validation function.

We have performed the following substantive audit procedures:

- Reviewed the reasonableness and appropriateness of the methodology and assumptions used in various components of ECL modelling. This typically included challenging key assumptions/judgements relating to significant increase in credit risk, definition of default, probability of default, loss given default, recovery rates, cure rate, and discount rate.

TO THE SHAREHOLDERS OF AJMAN BANK PJSC (continued)

Report on the audit of the financial statements(continued)

Key audit matter

We considered ECL for Islamic financing and investing assets as a key audit matter as the determination of ECL involves significant management judgement such as categorisation of Islamic financing and investing assets into stages 1, 2 or 3, assumptions used in the ECL model such as expected future cash flows, macro-economic factors etc., and additional overlays to reflect current or future external factors. These judgments have a material impact on the financial statements of the Bank.

How our audit addressed the key audit matter

• For selected samples, we performed procedures to determine whether significant increase in credit risk have been correctly identified.
• For forward-looking measurements,

economic indicators, scenarios and application of weightings; assessed the reasonableness of the prediction of economic indicators and performed sensitivity analysis.

• • We have reviewed the impact on expected credit losses on account of COVID 19 with specific focus on reassessment of macroeconomic weights, impact of financial stress on various industries and the consideration of Government support measures.
  • For selected samples, we examined key data inputs into the ECL models.
• We re-performed key elements of the ECL calculations and evaluated the model performance results for accuracy.
• • We assessed the appropriateness of disclosures in the financial statements against the requirements of IFRS.