ANNUAL REPORT  2000

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NOTES TO FINANCIAL STATEMENTS

December 31, 2000

1 . Activities and operations

Bank Al-Madina S.A.L. was established based on the resolution of the Central Council of BDL N: 1/175 dated 25/7/1981. It is a Lebanese joint stock company governed by Lebanese laws and regulations, particularly the Code of Commerce and the Code of Money and Credit. The bank undertakes banking activities within the conditions and limitations imposed by applicable laws and regulations.
The bank was registered in the Commercial Register on December 31,1982 under no 46164. It is also registered in the list of banks under no 105.
2 . Summary of significant accounting policies

A . The financial statements presentation

The financial statements have been presented in accordance with the requirements of BDL circular No. 1522 of April 24th 1997, and in compliance with the special Accounting Plan for banks and financial institutions and the same rules of classification applied in the preparation of the monthly financial position presented to BDL.
Assets and liabilities are grouped according to their nature and listed in approximate order of their relative liquidity.
The notes to the financial statements include all information required by International Accounting Standards No. 30 which deals with disclosures in the financial statements of banks and similar financial institutions.
B . Accounting convention

The financial statements are prepared under the historical cost convention except for financial and tangible fixed assets which were re-evaluated.

C . Revenue recognition

Interest expenses and revenues are accounted for on the accrual basis. Unearned revenue and prepaid expenses are respectively recorded under “order and regularization accounts cr. and dr.” The bank provides also at year end for any accrued interest and expenses related to the financial period.
D . Translation of foreign currencies

Accounts denominated in foreign currencies are translated into Lebanese Pounds at year end at the official rates published by BDL. The resulting difference on exchange is recognized in the income (loss) statement.
Revenues and expenses in foreign currencies are translated at the prevailing rates at the transaction date in the head office and at the monthly official BDL closing rates in the branches.
Fixed assets paid for in foreign currencies are recorded in Lebanese Pounds at the rates prevailing at the transaction date.
Real estate taken in settlement of debts are recorded in the books in the same currency as the related debts and are translated at year end at the official closing rates in accordance with the requirements of regulatory agencies. Differences arising from this translation are recognized in the income (loss) statement.
The difference on exchange arising from the revaluation of foreign currencies position held against capital increases during previous years is recorded under regularization accounts as required by the regulatory agencies.
E . Lebanese treasury bonds and other governmental bonds

Lebanese Treasury bonds are stated at face value less unearned interest, plus accrued interest on the two years bonds. Lebanese Treasury bonds in foreign currencies are stated at cost. Interests and discounts are recognized when due and are classified in the income (loss) statement under “interest and similar income Lebanese treasury bonds”.
F . Debts securities & other financial instruments of fixed income

These accounts include certificates of deposits issued by the Lebanese banks in US dollars. These CDS are recorded at cost and a provision is taken for any decrease in their value (no provision is taken for those intended to be held to maturity). Accrued interest not collected is recorded as an asset as an addition to the CD and recognized in the income statement under the account “ interest and similar income CD's and financial instruments with fixed income”.
G . Marketable securities & financial instruments of variable income

Shares and participations are stated at their acquisition cost and revenues are recognized when received.
 Shares and participations in foreign currencies are recorded at cost translated into Lebanese Pounds at the exchange rate prevailing at the transaction date and revaluated at year end at the closing rates.
The portfolio is shown at year end at the lower of cost or market value.

H . Loans and advances and related provisions

Loans and advances are stated at principal plus accrued interest as of the balance sheet date less the allowance for loan losses and unearned interest.
The bank provides for doubtful debts to cover any expected losses after taking into consideration the related guarantees and the recommendations of the Banking Control Commission. Accrued interest on doubtful debts is recorded under unrealized interest until it is written off or collected, it is deducted from the original value of the loans at year end in accordance with Banking Control Commission circular No. 149.
Recoveries of provisions resulting from the settlement of debts are shown separately in the income (loss) statement and are accounted for in accordance with the requirements of regulatory agencies.
I . Tangible and intangible fixed assets

Tangible and intangible fixed assets are recorded at historical cost (except for fixed assets which were revalued) after deduction of the accumulated depreciation. Payments on maintenance and repair are accounted for as operating expenses.
Fixed assets taken in lieu of debts which were not disposed off during the legal period are provided for in accordance with circular of Banque du Liban no 1877.

J . Revaluation of fixed assets

In accordance with law no 282/1993, the bank proceeded to the revaluation of some of its fixed assets acquired prior to December 31,1993. The resulting revaluation surplus, net of the related tax liability, is shown under both assets and liabilities in the balance sheet. Taxes due on the revaluation surplus were paid to the department of the treasury and the revaluation was approved by Banque du Liban and the ministry of finance.
Upon disposal of the revalued fixed assets the related revaluation surplus is closed to the income (loss) statement.

 K . Depreciation


 Depreciation is charged using the straight line method and the rates allowed by tax authorities.
L . Staff termination indemnity

In accordance with the terms of the Lebanese Labor Law, the NSSF's law and other applicable laws, and the bank special regulations, the bank provides for staff termination indemnity on the basis of one month salary for each year of service calculated and on the basis of the last month salary.
The bank provides annually for any difference between amounts already paid to NSSF and those accrued up to the end of the period.
M. Legal reserve

In accordance with the Code of Commerce and the Code of Money and Credit, the bank allocates 10% of its net annual profits after tax to legal reserve.
N . Reserve for unidentified banking risks

The bank withholds reserve for unidentified banking risks from its net profits in accordance with BDL circular number 1661 dated October 15, 1998.
O . Tax on profit

As per the Lebanese corporate tax law, income tax is computed on the basis of 15% of taxable income arising from the operations of the bank in Lebanon.

P . Related parties transactions

Related parties transactions are subject of a special report from the board of directors to the shareholders in compliance with article 158 of Code of Commerce and article 152 of Code of Money and Credit, in addition to a detailed report issued by the external auditor regarding this subject.

 

 

 

Chairman’s Letter    History    Vision & Values    Board of Directors & Management    Economic Outlook    Report of Independent Auditors

Balance Sheets    Statements of Income    Notes to Financial Statements  Branches    Correspondents