p.o box 435 safat 13005 kuwait tel : 222 30 600 fax : 222 ......8 agenda of the ordinary general...

P.O Box 435 Safat 13005 KuwaitTel : 222 30 600

Fax : 222 30 595 / 6 / 7email : [email protected] : www.yiacokuwait.com

In The Name Of Allah

H.H. SheikhSabah Al Ahmed Al Sabah

Amir of The State of Kuwait

H. H.SheikhJaber Al Mubarak Al Sabah

The Prime MinisterState of Kuwait

H. H. SheikhNawaf Al Ahmed Al Sabah

Crown Prince ofThe State of Kuwait

4

To serve as Focal Point In healthcare services in the state of Kuwait while being the landmark of all Regional Healthcare business relation.

To be the first choice in our region when it comes to healthcare supplies

• Representing the largest number of world wide recognized multinational pharmaceutical principals.

• Providing the highest quality & latest technology in medical equipments business.

• Being the best healthcare provider in our business entities.

• Excellence We are dedicated for excellence in all our offerings and services.

• Leadership In the market we seek to maintain our leading position and role models.

• Improvement Stand still is unacceptable; we improve whenever it serves our Innovation customers, patients and colleagues.

• Professionalism We believes in efficient processes, in structures, and in systematic analyses when dealing with each other internally, with our market partners, and with our competitors.

• Honesty When dealing with the market, we strive for transparency and open exchange.

• International If necessary, we have no problem in going the “extra mile” or Business even on detour; not only for our principals and patients but also for our colleagues, our subordinates, and our superior.

• Flexibility Whenever there is a better way, we make the effort and try to take it.

• Relationship Trust is the basis of our business; we prefer long term orientation when developing relationship and net works.

• Organization Learning organization as hard as we may try, we know that we can always do even better; progress is improvement which has been achieved.

Our Vision

Our Mission

Our values

6

Contents

7

1-Agenda of the ordinary General Assembly

2- Agenda of the Extra-ordinary General Assembly

3-Board of Directors

4-Report of the Board of Directors

5-Independent auditors’ report

6-Consolidated statement of income

7-Consolidated statement of comprehensive income

8-Consolidated statement of financial position

9-Consolidated statement of changes in equity

10-Consolidated statement of cash flows

11-Notes to the consolidated financial statements

8

Agenda of the Ordinary General Assembly1 • Hearing the Report of the Board of Directors for the Financial Year ended 31st December

2012, discussing and approving the same.

2 • Hearing and approval of the Independent Auditor’s Report for the Financial Year ended 31st December 2012.

3 • Hearing the report of the Supervisory Board.

4 • Hearing the report of sanctions and irregularities that have been imposed on the company by the regulatory authorities for the financial year ended on 31/12/2012.

5 • Discussing and approval of the consolidated financial statements of the company for the Financial Year ended 31st December 2012.

6 • Approving on the Board of Directors’ proposal to distribute cash dividend for the Financial Year ended 31st December 2012 at 10% of the nominal value. i.e. ( fils 10 per share)and distribution of bonus shares 5% of the paid –up Capital (5 shares for every 100 shares) to the shareholders registered in the company’s records as on the date of General Assembly meeting after approval of the concerned authorities.

7 • Approving the Company’s dealing with related parties.

8 • Approving of the recommendation of Board of Directors to remunerate the Members of the Board of Directors for the Financial Year ended 31st December 2012.

9 • Release the Members of the Board of Directors from Liabilities related to their legal actions for the Financial Year ended 31st December 2012.

10 • Elected and appointed members of the Board of Directors for the next three years

11 • The appointment and re-appointment of the Supervisory Board

12 • Agree to maintain the calculation of the voluntary reserve and general reserve.

13 • Appoint or re-appoint the Company’s Accounts Auditors for the Financial Year ended 31st December 2013 and authorize the Board of Directors to determine their Fees.

9

The agenda of the Extraordinary General Assembly1 • Work on the amendment of Article (6) of the company’s Memorandum of Association

and Article No. (5) of the Regulations:

The current text:Select the company’s capital in the amount of KD 16,500,000 (sixteen million five hundred thousand Kuwaiti Dinar) distributed over 165,000,000 shares (one hundred and sixty-five million shares) value of 100 fils per share (one hundred fils) and all cash stocks.

The proposed text:Current Capital of 16,500,000 KD (Sixteen million, five hundred thousand Kuwaiti Dinars) shall be increased by 825,000 KD (Eight hundred twenty-five thousand Kuwaiti Dinars) to reflect a new balance of 17.325 million KD (Seventeen million, three hundred twenty-five thousand Kuwaiti Dinars). This shall be effected through the distribution of stock dividends of five (5) shares for every one hundred (100) shares to stockholders of record as of the financial year ended 31/12/2012. Hence, the new share capital balance of 17.325 million KD shall be divided into 173,250,000 shares (one hundred seventy-three million, two hundred fifty thousand shares) with a par value of One hundred (100) fils per share.

2 • Hearing the report of the Supervisory board.

10

Board of Directors

Dr. Hamed Ahmed Hamada Chairman and Managing Director

Mr. Walid Abdulrehman Al SumaieVice Chairman

Abdullah Fouad Al-thaqeb Board of Director

Dr. Ameer Habib BehbehaniBoard of Director

Dr. Tareq Fahed AlabduljaderBoard of Director

Dr. Ayman Salem Al-MutawaBoard of Director

Mr. Abdullah Bader AlMukhaizemBoard of Director

12

Report of the Board of Directors For the year ended 31 December 2012In The Name of God, Most Gracious, Most Merciful,,,

Dear Honorable Shareholders,

It gives me great pleasure to welcome you on this annual occasion to convene the Annual Assembly for YIACO Medical Co.

YIACO Medical Co. continues to successfully overcome all the economic and political difficulties the region has been through. Although the necessary provisions have been taken to meet any changes in the region’s general conditions, in 2012 the company managed to achieve record performances that gives a strong sign of our sound financial position as a leading company in the healthcare sector in the State of Kuwait. This would have not been possible without the guidance of the Almighty Allah and dedicated hard work of the company’s staff members as well as the support of the Board of Directors and Shareholders to achieve these amazing results to our shareholders.

Dear Shareholders, in 2012 YIACO Medical Co. managed to expand and diversify its business to dominate the healthcare services market in the State of Kuwait. These remarkable results have placed YIACO Medical Co. as one of the leading companies in the GCC and MENA region not only in the medical sector, but in the overall Services sector. YIACO Medical Co. was listed in two different categories in the November issue of FORBES MIDDLE EAST as the “Strongest Executive Management Share Holding Companies in the GCC & MENA Region” coming in at number 17 and also the “Strongest Executive Managements in the ‘Services’ sector in the GCC & MENA Region” coming in at a proud number 5. These outstanding results reflect not only on the members of the board and the Executive Management, but as a collective team spirit of every individual working for YIACO.

Esteemed Shareholders, the year 2013 is expected to be a continuum of the volatility prevailing in the local and international markets as an unstable political and economic environment continues to encourage a conservative trend. In the Arab region, we live in an era of political changes in a number of countries, which will inevitably have a direct impact on capital markets in the concerned jurisdictions and an indirect impact on our markets, which requires us to continue adopting aggressive methods and evaluating the investment opportunities unveiled by these changes and subsequently seize the most favorable ones.

A low interest rate environment normally brings signs of promising opportunities that could be seized but this should be done in a very prudent way. This will require supporting the company with quality professionals who are able to keep up with the responsibilities of the coming era, taking into consideration effective participation in the infrastructure projects which will be introduced by the government over the forthcoming period.

Dear Honorable Shareholders, it is my honor to extend my sincere thanks and gratitude to all whom supported the company and contributed to its success starting with our always studious shareholders, financial points of support, professional and governmental institutions that have supported the national economy and are keen to provide the right climate for investment. I would also like to extend my sincere gratitude and appreciation to

13

the formidable staff who has dedicated a large part of their life to serve the company and to make sure that through the spirit of teamwork, diligence and devotion, their company rises in stature.

As regards to the company’s dividend distribution for the fiscal year ended 31/12/2012, I have recommended to the Board of Directors to declare and distribute cash dividend to the shareholders registered in the company’s records at the date of the General Assembly, equivalent to 10% of the nominal value of shares (10 Kuwaiti fils per share). Also, the distribution of bonus shares of 5% of the paid-up capital (5 shares for every 100 shares).

On my behalf and my fellow members of the board, I would like to extend my sincere gratitude and appreciation to the management and staff members for their dedicated efforts throughout the past year to help YIACO Medical Co. maintain its position as the leading medical company in the State of Kuwait.

Thank you all.

Dr. Hamed Ahmed Hamada Chairman and Managing Director

14

Sales

Gross Profit

Net Profit

15

Earning per Share

Assets

Owners Equity

16

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF YIACO MEDICAL COMPANY – K.S.C. (CLOSED)Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of YIACO Medical Company – K.S.C. (Closed) (the “Parent Company”) and its subsidiaries (collectively the “Group”), which comprise the consolidated statement of financial position as at 31 December 2012 and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, 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.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

17

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF YIACO MEDICAL COMPANY – K.S.C. (CLOSED) (continued)

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2012 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory RequirementsFurthermore, in our opinion proper books of account have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Parent Company’s Board of Directors relating to these consolidated financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the consolidated financial statements incorporate all information that is required by the Companies Law No 25 of 2012, and by the Parent Company›s Articles of Association, that an inventory was duly carried out and that, to the best of our knowledge and belief, no violations of the Companies Law No 25 of 2012, nor of the Articles of Association have occurred during the year ended 31 December 2012 that might have had a material effect on the business of the Parent Company or on its financial position.

WALEED A. AL OSAIMILICENCE NO. 68-A

OF ERNST & YOUNGAL AIBAN, AL OSAIMI & PARTNERS

Abdullatif M. Al-Aiban (CPA)(LICENCE NO. 94-A)

OF GRANT THORNTON – AL-QATAMI, AL-AIBAN & PARTNERS

26 March 2013Kuwait

20

YIACO Medical Company – K.S.C. (Closed) and SubsidiariesConsolidated statement OF INCOMEYear ended 31 December 2012

Notes 2012 2011KD KD

Sales 3 96,206,605 88,526,030

Cost of sales (74,530,923) (68,579,725)

ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Gross profit 21,675,682 19,946,305

Other operating income 496,758 746,485

Distribution costs (4,141,373) (3,834,103)

Administrative expenses (12,314,593) (11,130,433)

Allowance for bad and doubtful debts 12 (285,007) (432,925)


5,431,467 5,295,329

Dividend income - 27,500

Loss on sale of property, plant and equipment and intangible assets (1,548) (85,872)

Share of results of associates 9 859,771 802,633

Net (loss) gain on investments carried at fair value through income statement

(43,645) 114,556

Impairment of financial assets available for sale - (39,480)

Finance costs (833,363) (766,653)


Profit for the year before income tax 5,412,682 5,348,013

Income taxes for overseas subsidiaries (44,574) (21,344)


Profit before directors’ remuneration, contribution to Kuwait Foun-dation for the Advancement of Sciences (KFAS), National Labour Support Tax (NLST) and Zakat

5,368,108 5,326,669

Directors’ remuneration (49,000) (21,000)

KFAS (39,508) (39,823)

NLST (158,295) (164,463)

Zakat (54,720) (57,759)


Profit for the year 4 5,066,585 5,043,624ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Attributable to:Equity holders of the Parent Company 5,043,575 5,033,537Non-controlling interests 23,010 10,087


5,066,585 5,043,624ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Basic and diluted earnings per share attributable to equity holders of the Parent Company

5 30.57 fils 30.50 fils


The attached notes 1 to 23 from part of these consolidated financial statements.

21

YIACO Medical Company – K.S.C. (Closed) and Subsidiaries Consolidated statement of comprehensive incomeYear ended 31 December 2012

2012 2011

KD KD

Profit for the year 5,066,585 5,043,624


Other comprehensive income:

Exchange differences arising on translation of foreign operations (27,839) (85,292)


Other comprehensive loss for the year (27,839) (85,292)


Total comprehensive income for the year 5,038,746 4,958,332


Attributable to:

Equity holders of the Parent Company 5,020,999 4,979,556

Non-controlling interests 17,747 (21,224)


5,038,746 4,958,332



22

Notes 2012 2011KD KD

ASSETSNon-current assetsProperty, plant and equipment 6 8,229,401 9,070,827Inventory assigned to customers 7 22,426 26,419Intangible assets 8 1,067,501 1,231,083Investment in associates 9 7,467,528 6,880,769Investments carried at fair value through income statement 10 971,180 1,134,100Financial assets available for sale 78,120 78,120



Current assetsInventories 11 24,816,169 24,152,640Accounts receivable and prepayments 12 33,337,627 25,524,536Bank balances and cash 8,737,537 5,477,754



Total assets 84,727,489 73,576,248ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

EQUITY AND LIABILITIESEquityShare capital 13 16,500,000 16,500,000Statutory reserve 14 3,722,086 3,187,576Voluntary reserve 14 120,622 120,622General reserve 14 637,472 637,472Foreign currency translation reserve (8,004) 14,572Retained earnings 11,264,689 9,230,624


Equity attributable to the equity holders of the Parent Company 32,236,865 29,690,866Non-controlling interests 194,800 177,053


Total equity 32,431,665 29,867,919ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Non-current liabilities Murabaha payables 15 109,748 195,503Employees’ end of service benefits 16 1,913,390 1,665,345



Current liabilitiesAccounts payable and accruals 17 25,179,040 24,769,038Murabaha payables 15 25,093,646 17,078,443



Total liabilities 52,295,824 43,708,329ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Total equity and liabilities 84,727,489 73,576,248ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

YIACO Medical Company – K.S.C. (Closed) and SubsidiariesConsolidated statement of financial positionAt 31 December 2012

Dr. Hamed A. Hamadah Mr. Walid Abu Zaid Chairman & Managing Director Chief Financial OfficerThe attached notes 1 to 23 from part of these consolidated financial statements.

23

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24

YIACO Medical Company – K.S.C. (Closed) and Subsidiaries Consolidated statement of cash flows At 31 December 2012

Notes 2012 2011

KD KD

OPERATING ACTIVITIES

Profit for the year 5,066,585 5,043,624

Adjustments for:

Depreciation and amortisation 2,169,522 1,846,901

Provision for employees’ end of service benefits 16 364,504 557,302

Loss on disposal of property, plant and equipment and intangible assets

1,548 85,872

Net loss (gain) on investments carried at fair value through income statement

43,645 (114,556)

Impairment on financial assets available for sale - 39,480

Dividend income - (27,500)

Finance costs 833,363 766,653

Write-off of inventory assigned to customers 7 3,993 59,302

Provision for slow moving and expired items 11 394,025 421,150

Allowance for bad and doubtful debts 12 285,007 432,925

Share of results of associates 9 (859,771) (802,633)

Income taxes for overseas subsidiaries 44,574 21,344


8,346,995 8,329,864

Working capital changes:

Inventories (1,057,554) (4,605,568)

Accounts receivable and prepayments (8,098,098) (2,805,068)

Accounts payable and accruals 396,769 1,568,286


Cash flows (used in) from operations (411,888) 2,487,514

Employees’ end of service benefits paid 16 (116,459) (167,203)

Income taxes for overseas subsidiaries paid (44,574) (21,344)


Net cash flows (used in) from operating activities (572,921) 2,298,967


INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment and intangi-ble assets

2,485 50,043

Purchase of property, plant and equipment 6 (1,170,248) (3,255,821)

Purchase of intangible assets 8 (4,082) (158,000)

Purchase of investment in associates 9 - (222,995)

Proceeds from sale of investments carried at fair value through in-come statement

119,275 572,456

Net movement in inventory assigned to customers 7 - 34,268

Dividend income received from associate 9 273,012 136,506

25

Dividend income received - 27,500


Net cash flows (used in) investing activities (779,558) (2,816,043)


FINANCING ACTIVITIESFinance costs paid (820,130) (625,946)

Proceeds from murabaha payable 7,929,448 1,078,243

Dividend paid (2,475,000) (1,650,000)


Net cash flows from (used in) financing activities 4,634,318 (1,197,703)


INCREASE (DECREASE) IN BANK BALANCES AND CASH 3,281,839 (1,714,779)

Net impact of foreign currency translation adjustments (22,056) (72,896)

Bank balances and cash at 1 January 5,477,754 7,265,429


BANK BALANCES AND CASH AT 31 DECEMBER 8,737,537 5,477,754



26

1. CORPORATE INFORMATIONThe consolidated financial statements of YIACO Medical Company – K.S.C. (Closed) (“the Parent Company”) and its subsidiaries (collectively “the Group”) for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the Parent Company’s Board of Directors on 26 March 2013. The general assembly of the Parent Company’s shareholders has the power to amend the consolidated financial statements after their issuance. The Par-ent Company is a Kuwaiti closed shareholding Company and its shares are listed on the Kuwait Stock Exchange. The Parent Company was incorporated on 15 January 1969 in Kuwait and is governed by the Islamic Shareea in its activities. The Group is engaged in the import and sale of medical, chemical and dental products and equipment, and mainly operate in Kuwait and Egypt. The address of the Parent Company’s registered office is P.O. Box 435, Safat 13005, State of Kuwait.

2.1 BASIS OF PREPARATIONThe consolidated financial statements have been prepared on a historical cost basis except for the measurement of fair value of financial assets at fair value through income statement.The Companies Law issued on 26 November 2012 by Decree Law no 25 of 2012 (the “Companies Law”), which was published in the Official Gazette on 29 November 2012, cancelled the Commercial Companies Law No 15 of 1960. According to article 2 of the Decree, the Company has a period of 6 months from 29 November 2012 to regularize its affairs in accordance with the Companies Law.The consolidated financial statements are presented in Kuwaiti Dinars (KD) which is the functional and presentation currency of the Parent Company.

2.2 STATEMENT OF COMPLIANCEThe consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (IASB).

2.3 Basis of consolidationThe consolidated financial statements comprise the financial statements of the Parent Company and its subsidiaries. The financial statements of the subsidiaries are prepared at same reporting date as that of the Parent Company, using consistent accounting policies. All material inter-group balances and transactions, including inter-group profits and unrealised profits and losses are eliminated on consolidation. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. Control is achieved where the Parent Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Non-controlling interests represent the equity in the subsidiaries not attributable directly, or indirectly, to the equity holders of the Parent Company. Equity and net income attributable to non-controlling interests are shown separately in the consolidated statement of financial position, consolidated statement of income, consolidated statement of comprehensive income and consolidated statement of changes in equity. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance.

Notes to the consolidated financial statements At 31 December 2012

27

2.3 BASIS OF CONSOLIDATION (continued)A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:• Derecognises the assets (including goodwill) and liabilities of the subsidiary.• Derecognises the carrying amount of any non-controlling interest.• Derecognises the cumulative translation differences recorded in equity.• Recognises the fair value of the consideration received.• Recognises the fair value of any investment retained.• Recognises any surplus or deficit in consolidated statement of income.• Reclassifies the parent’s share of components previously recognised in other comprehensive income to consolidated statement of income or retained earnings, as appropriate.The principal subsidiaries of the Group are as follows:

% holding

EntityCountry of

incorporationPrincipal activities 2012 2011

Al Kamal Import and Marketing Company – W.L.L.

Egypt

Engaged in import, marketing and manufacture of medical raw material and medical and chemical equipment.

85.40% 85.40%

Universal Industrial Medical Company- E.S.C. ***

Egypt

Engaged in the manufacture of laboratory chemicals, medical supplies, pharmaceuticals and children’s food and packing of the company’s products in Egypt.

- 100%

Al Raya Health Care Company W.L.L.

KuwaitEngaged in providing medi-cal services.

99%* 99%*

Al Bayt Medical FZCO United Arab

EmiratesEngaged in trading of phar-maceuticals.

100% 100%

* The Parent Company has 100% beneficial ownership in these entities. An insignificant holding of shares in these entities are registered in the names of related parties, as nominees of the Parent Company.** During the year, the parent company liquidated Universal Industrial Medical Company – E.S.C incorporated in Egypt, a subsidiary in which it previously had 100% ownership. The Group recognised a profit of KD 3,698 on liquida-tion which is included in other operating income.*** The subsidiary company Universal Industrial Medical Company E.S.C. was liquidated during the year. The discon-tinued operations disclosure was not incorporated in the Group’s consolidated financial statement on the grounds of materiality.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business combinations and goodwillA business combination is the bringing together of separate entities or businesses into one reporting entity as a result one entity, the acquirer, obtaining control of one or more other businesses. The acquisition method of accounting is used to account for business combinations. Under this method, the acquirer recognises, separately from goodwill, identifiable assets acquired, liabilities assumed and any non-controlling interests in the acquiree at the acquisition date. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in other expenses.


28

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Business combinations and goodwill (continued)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.If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through consolidated statement of income.Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in consolidated statement of income or as a change to other comprehensive income. If the contingent consideration is classified as equity, it should not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of IAS 39, it is measured in accordance with the appropriate IFRS.Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the consolidated statement of income.After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.Where goodwill forms part of a cash-generating unit (group of cash generating units) and part of the operations within that unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Revenue recognitionRevenue is recognised to the extent that future economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in all of its income arrangements.The following specific recognition criteria must also be met before revenue is recognised:

Sale of goodsRevenue from sale of medical supplies is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably, normally on delivery to the customer.

Rendering of servicesRevenue from rendering of services, included in sales, is initially deferred and is included in other liabilities and is recognised as revenue in the period when the service is performed.In recognising after-sale service and maintenance revenues, the Group considers the nature of the services and the customer’s use of the related products, based on historical experience.

DividendsDividend income, other than those from investment in associates, is recognised when the Group’s right to receive payment is established.


29

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Kuwait Foundation for the Advancement of Sciences (KFAS)The Group calculates the contribution to KFAS at 1% of profit for the year in accordance with the modified calculation based on the Foundation’s Board of Directors resolution, which states transfer to statutory reserves, should be excluded from profit for the year attributable to the shareholders of the Group when determining the contribution.

National Labour Support Tax (NLST)The Group calculates the NLST in accordance with Law No. 19 of 2000 and the Minister of Finance Resolutions No. 24 of 2006 at 2.5% of taxable profit for the year. As per law, income from associates and subsidiaries, cash dividends from listed companies which are subjected to NLST have been deducted from the taxable profit for the year.

ZakatContribution to Zakat is calculated at 1% of the profit of the Group in accordance with the regulations Ministry of Finance has provided for zakat in accordance with the requirements of Law No. 46 of 2006.

Taxation on overseas subsidiaries Taxation on overseas subsidiaries is calculated on the basis of the tax rates applicable and prescribed according to the prevailing laws, regulations and instructions of the countries where these subsidiaries operate.

Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any impairment in value.Free hold land is not depreciated. Depreciation is calculated on a straight-line basis over the estimated useful lives of all other assets as follows:Building 10 to 50 yearsMotor vehicles 3 yearsFurniture and office equipment 6 to 10 yearsMachinery and equipment 3 to 10 yearsThe carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recognised in the consolidated statement of income as the expense is incurred.An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of income when the asset is derecognised.

Inventory assigned to customersThe cost of certain inventory items assigned for the use of customers, less any recovery, is treated as inventory assigned to customers. The cost of inventory assigned to customers is charged to consolidated statement of income over the period of the respective customer agreement.


30

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Intangible assets Intangible assets comprise of key money paid in respect of new pharmacies premises are capitalised and are stated at cost less amortisation and impairment, if any. Amortisation is calculated using the straight-line method at rates calculated to write-off the expenditure over the estimated useful lives, ranging between 3 to 10 years. Intangible assets also include costs incurred to acquire licences from international pharmaceutical companies to distribute their products and to act as their principle agent inside Kuwait. They are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives, ranging between 3 - 10 years. Residual values and useful lives are reviewed at each reporting date.Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangible assets are not capitalised and expenditure is reflected in the consolidated statement of income in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the consolidated statement of income in the expense category consistent with the function of the intangible assets.Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of income when the asset is derecognised.

Investment in associateThe Group’s investment in its associate is accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture.Under the equity method, investment in an associate is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.The Group recognises in the consolidated statement of income its share of the total recognised profit or loss of the associate from the date that influence or ownership effectively commenced until the date that it effectively ceases. Distributions received from an associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Group’s share in the associate arising from changes in the associate’s equity that have not been recognised in the associate’s statement of income. The Group’s share of those changes is recognised in consolidated statement of comprehensive income. An assessment of investment in an associate is performed when there is an indication that the asset has been impaired, or that impairment losses recognised in prior years no longer exist. Whenever impairment requirements of IAS 36, indicate that investment in an associate may be impaired, the entire carrying amount of investment is tested by comparing its recoverable amount with its carrying value.Unrealised gains on transactions with an associate are eliminated to the extent of the Group’s share in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred.


31

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Investment in associate (continued)The difference in reporting dates of the associates and the Group is not more than three months. Adjustments are made for the effects of significant transactions or events that occur between that date and the date of the Group’s consolidated financial statements. The associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances.Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any differences between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal are recognised in the consolidated statement of income.

Financial instruments - initial recognition and subsequent measurement

Financial assets – Initial recognition and measurementFinancial assets within the scope of IAS 39 are classified as financial assets carried at fair value through income statement, loans and receivables, or financial assets available for sale as appropriate. The Group determines the classification of its financial assets at initial recognition.Financial assets are recognised initially at fair value plus, in the case of financial assets not at fair value through income statement, directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within the framework established by regulation or convention in the market place (regular way purchases) are recognised on the trade date, i.e., the date that Group commits to purchase or sell the asset. The Group’s financial assets include quoted and unquoted financial instruments, cash and bank balance, and accounts receivable.

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as follows:

Financial assets carried at fair value through income statementFinancial assets carried at fair value through income statement include financial assets held for trading and financial assets designated upon initial recognition as at fair value through income statement. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on financial assets held for trading are recognised in the consolidated statement of income. Financial assets are designated at fair value through income statement if they are managed, and their performance is evaluated on reliable fair value basis in accordance with a documented investment strategy.After initial recognition financial assets at fair value through income statement are remeasured at fair value with all changes in fair value recognised in the consolidated statement of income.The Group evaluates its financial assets at fair value through income statement whether the intent to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intent to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rare circumstances.

Financial assets available for saleFinancial assets available for sale are those non-derivative financial assets that are designated as available for sale or are not classified as investments at fair value through income statement, investments held to maturity or loans and receivables.


32

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Financial instruments - initial recognition and subsequent measurement (continued)Financial assets available for sale (continued)After initial recognition, financial assets available for sale are measured at fair value with unrealised gains and losses being recognised as other comprehensive income in the cumulative changes in fair value reserve until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain and loss previously reported in equity is recognised in the consolidated statement of income. Financial assets whose fair value cannot be reliably measured are carried at cost less impairment losses, if any.The Group evaluates whether the ability and intention to sell its available for sale financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held to maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.For a financial asset reclassified from the available for sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to consolidated statement of income over the remaining life of the investment using the effective interest rate method (EIR). Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the consolidated statement of income.

Accounts receivableAccounts receivable are stated at original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

Derecognition of financial assetsA financial asset (or, where applicable a part of financial asset or part of group of similar financial assets) is derecognised when:• rights to receive cash flows from the assets have expired; • the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass through’ arrangement and either a) the Group has transferred substantially all the risks and rewards of the asset or b) the Group has neither transferred nor retained substantially all risks and rewards of the asset but hastransferred control of the asset.Where the Group has transferred its rights to receive cash flows from an asset or has entered into a pass through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, a new asset is recognised to the extent of the Group’s continuing involvement in the asset.

Financial liabilities - Initial recognition and measurementFinancial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through income statement and loan and borrowings, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, including directly attributable transaction costs.The Group’s financial liabilities include murabaha payable and accounts payable.


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2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:

Accounts payable and accrualsLiabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Murabaha payablesMurabaha payables represent amounts payable on a deferred settlement basis for assets purchased under murabaha arrangements. Murabaha payables are stated at the gross amount of the payable, net of deferred finance cost. Deferred finance cost is expensed on a time apportionment basis taking into account the borrowing rate attributable and the balance outstanding.

ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, 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. The expense relating to any provision is presented in the consolidated statement of income

Derecognition of financial liabilities 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 a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in consolidated statement of income.

Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Fair value of financial instrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.Financial instruments with no reliable measures of their fair values and for which no fair value information could be obtained are carried at their initial cost less impairment in value. The fair value of interest bearing financial instruments is estimated based on discounted cash flows using profit rates for items with similar terms and risk characteristics An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 23.

Impairment of financial assetsAn assessment is made at each reporting date to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in economic conditions that correlate with defaults. If such evidence exists, an impairment loss is recognised in the consolidated statement of income.


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2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Impairment of financial assets (continued)Financial assets carried at amortised costFor financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated statement of income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the consolidated statement of income.

Financial assets available for saleFor financial assets available for sale, the Group assesses at each reporting date whether there is objective evidence that a financial asset available for sale or a group of financial assets available for sale is impaired.In the case of equity investments classified as financial assets available for sale, objective evidence would include a significant or prolonged decline in the fair value of the equity investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on those financial assets available for sale previously recognised in the consolidated statement of income - is removed from other comprehensive income and recognised in the consolidated statement of income. Impairment losses on equity investments are not reversed through consolidated statement of income; increases in their fair value after impairment are recognised directly in consolidated statement of comprehensive income.

InventoriesInventories are stated at the lower of cost and net realisable value. Costs are those expenses incurred in bringing each product to its present location and condition, as follows: Goods in transit - purchase cost incurred up to the reporting date Goods for resale - on weighted average basisNet realisable value is based on estimated selling price less any further costs expected to be incurred on completion and disposal.

Impairment of non-financial assetsThe 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 cash-generating unit’s (CGU) fair value less costs to sell and its value in use and 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 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 to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.


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2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Impairment of non-financial assets (continued)These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.Impairment losses are recognised in the consolidated statement of income in expense categories consistent with the function of the impaired asset.For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or CGUs recoverable amount. A previously recognised 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 recognised. 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 recognised for the asset in prior years. Such reversal is recognised in the consolidated income statement unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.The following assets have specific characteristics for impairment testing:

GoodwillGoodwill is tested for impairment annually (as at 31 December) and when circumstances indicate that the carrying value may be impaired.Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assetsIntangible assets with indefinite useful lives are tested for impairment annually as at 31 December either individually or at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

ContingenciesContingent liabilities are not recognised in the consolidated financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote.Contingent assets are not recognised in the consolidated financial statements but disclosed when an inflow of economic benefits is probable.

Employees’ end of service benefitsThe Group provides end of service benefits to its employees. The entitlement to these benefits is based upon the employees’ final salary and length of service, subject to the completion of a minimum service period in accordance with relevant labour law and the employees’ contracts. The expected costs of these benefits are accrued over the period of employment. With respect to its Kuwaiti national employees, the Group makes contributions to the Public Institution for Social Security calculated as a percentage of the employees’ salaries. The Group’s obligations are limited to these contributions, which are expensed when due.

Foreign currenciesEach entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.


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2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Foreign currencies (continued)Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in consolidated statement of income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively)

Group companiesAs at the reporting date, the assets and liabilities of foreign subsidiaries, and the carrying amount of foreign associates, are translated into the Parent Company’s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at the reporting date, and their statement of income are translated at the average exchange rates for the year. Exchange differences arising on translation are recognised in other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in consolidated statement of income relating to the particular foreign operation is recognised in the consolidated statement of comprehensive income. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

Operating segmentAn operating segment is a component of the Group:(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and

expenses relating to transactions with other components of the same entity),(b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions

about resources to be allocated to the segment and assess its performance, and(c) for which discrete financial information is available.

Equity, reserves and dividend paymentsShare capital represents the nominal value of shares that have been issued and paid up.Statutory and voluntary reserves comprise appropriations of current and prior period profits in accordance with the requirements of the Parent Company’s Articles of Association. Foreign currency translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the group’s foreign entities into Kuwaiti Dinars (KD)Retained earnings includes all current and prior years retained profits. All transactions with owners of the Parent Company are recorded separately within equity. Dividend distributions payable to equity shareholders are included in accounts payable and accruals when the dividends have been approved by the general assembly of the Parent Company’s shareholders.


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2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Foreign currencies (continued)Transactions and balancesTransactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of income. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in consolidated statement of income.Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on retranslation of non-monetary items is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively)

Group companiesAs at the reporting date, the assets and liabilities of foreign subsidiaries, and the carrying amount of foreign associates, are translated into the Parent Company’s presentation currency (the Kuwaiti Dinars) at the rate of exchange ruling at the reporting date, and their statement of income are translated at the average exchange rates for the year. Exchange differences arising on translation are recognised in other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in consolidated statement of income relating to the particular foreign operation is recognised in the consolidated statement of comprehensive income. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

Operating segmentAn operating segment is a component of the Group:(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and

expenses relating to transactions with other components of the same entity),(b) whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions

about resources to be allocated to the segment and assess its performance, and(c) for which discrete financial information is available.

Equity, reserves and dividend paymentsShare capital represents the nominal value of shares that have been issued and paid up.Statutory and voluntary reserves comprise appropriations of current and prior period profits in accordance with the requirements of the Parent Company’s Articles of Association. Foreign currency translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the group’s foreign entities into Kuwaiti Dinars (KD)Retained earnings includes all current and prior years retained profits. All transactions with owners of the Parent Company are recorded separately within equity. Dividend distributions payable to equity shareholders are included in accounts payable and accruals when the dividends have been approved by the general assembly of the Parent Company’s shareholders.


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2.5 Significant accounting judgments, estimates and assumption

Equity, reserves and dividend payments (continued)The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. However uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the consolidated statement of income.

JudgementsIn the process of applying the Group’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements:

Classification of financial instrumentsManagement decides on acquisition of financial assets whether it should be classified as investment carried at fair value through income statement or financial assets available for sale. The Group classifies financial assets as investment carried at fair value through income statement if they are acquired primarily for the purpose of short term profit making.Classification of financial assets as investment carried at fair value through income statement depends on how management monitor the performance of these investments. When investments have readily available fair values and the changes in fair values are reported as part of profit or loss in the management accounts, they are classified as investment carried at fair value through income statement. All other investments are classified as financial assets available for sale. Fair values of assets and liabilities acquired The determination of the fair value of the assets, liabilities and contingent liabilities as a result of business combination requires significant judgement.Impairment of available for sale equity investmentsThe Group treats available for sale equity investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires considerable judgment.

Estimates and assumptions The key assumptions concerning the future and key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of the assets and liabilities within the next financial year are discussed below:The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Impairment of associatesAfter application of the equity method, the Group determines whether it is necessary to recognise any impairment loss on the Group’s investment in its associated company, at each reporting date based on existence of any objective evidence that the investment in the associate is impaired. If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the consolidated statement of income.


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2.5 Significant accounting judgments, estimates and assumptionEstimates and assumptions (continued)Impairment of intangible assets The Group determines intangible assets are impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

Valuation of unquoted investmentsValuation of unquoted equity investments is normally based on one of the following:• recent arm’s length market transactions;• current fair value of another instrument that is substantially the same;• an earnings multiple or industry specific earnings multiple;• the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics; or• other valuation models.

Impairment of accounts receivableAn estimate of the collectible amount of trade accounts 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 a provision applied according to the length of time past due, based on historical recovery rates.

Impairment of inventoriesInventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on historical selling prices.

Useful lives of property, plant and equipmentThe Group’s management determines the estimated useful lives of its property, plant and equipment for calculating depreciation. This estimate is determined after considering the expected usage of the asset or physical wear and tear. Management reviews the residual value and useful lives annually and future depreciation charge would be adjusted where the management believes the useful lives differ from previous estimates.

Impairment of key moneyAn impairment loss is recognised whenever the carrying amount exceeds its recoverable amount. The recoverable amount is the greater of their fair value less cost to sell and value in use. The impairment losses are recognised in the consolidated income statement.

2.6 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of the following standards: IFRS 3: Business Combinations (Amendment)IFRS 7 Financial Instruments: Disclosures – Enhanced Derecognition Disclosure RequirementsIFRS 3: Business Combinations (Amendment) (effective 1 July 2011)The measurement options available for non controlling interest have been amended. Only components of non controlling interest that constitute a present ownership interest that entitles their holder to a proportionate share of the entity’s net assets in the event of liquidation shall be measured at either fair value or at the present ownership instruments’ proportionate share of the acquiree’s identifiable net assets. All other components are to be measured at their acquisition date fair value. The amendment has no effect on the Group’s financial position, performance or its disclosures.


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2.6 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)New and amended standards and interpretations (continued)IFRS 7 Financial Instruments: Disclosures — Enhanced Derecognition Disclosure RequirementsThe amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the Group’s financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about the entity’s continuing involvement in derecognised assets to enable the users to evaluate the nature of, and risks associated with, such involvement. The amendment is effective for annual periods beginning on or after 1 July 2011. The Group does not have any assets with these characteristics so there has been no effect on the presentation of its financial statements.

Improvements to IFRSsThese improvements will not have an impact on the Group, but include:

IAS 1 Presentation of Financial StatementsThis improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period.

IAS 16 Property Plant and EquipmentThis improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory.

IAS 32 Financial Instruments, PresentationThis improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes.

IAS 34 Interim Financial ReportingThe amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures.These improvements are effective for annual periods beginning on or after 1 January 2013.

2.7 STANDARDS ISSUED BUT NOT YET EFFECTIVEStandards issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below. This listing is of standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The Group intends to adopt those standards when they become effective.

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1The amendment becomes effective for annual periods beginning on or after 1 July 2012. The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or ‘recycled’) to profit or loss at a future point in time would be presented separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group’s financial position or Performance.

IAS 19 Employee Benefits (Revised)The amendment becomes effective for annual periods beginning on or after 1 January 2013.The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording.

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)The revised standard becomes effective for annual periods beginning on or after 1 January 2013. As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates.


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2.7 STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2014.

IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities — Amendments to IFRS 7The amendment is effective for annual periods beginning on or after 1 January 2013.These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group’s financial position or performance.

IFRS 9 Financial Instruments: Classification and MeasurementIFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.

IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial StatementsThis standard becomes effective for annual periods beginning on or after 1 January 2013. IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore are required to be consolidated by a Parent, compared with the requirements that were in IAS 27.


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2.7 STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)IFRS 11 Joint ArrangementsThis standard becomes effective for annual periods beginning on or after 1 January 2013, and is to be applied retrospectively for joint arrangements held at the date of initial application. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The application of this standard is deemed to have no impact on the financial statements of the Group.

IFRS 12 Disclosure of Interests in Other EntitiesThis standard becomes effective for annual periods beginning on or after 1 January 2013. IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group’s financial position or performance.

IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted.

3 SALES2012 2011

KD KD

Pharmaceutical supplies 71,445,179 63,880,197

Medical, scientific and dental equipment and services 16,749,123 17,413,860

Medical centers 8,012,303 7,231,973


96,206,605 88,526,030


4 PROFIT FOR THE YEAR The profit for the year is stated after charging:

2012 2011

KD KD

Staff costs 8,436,297 7,588,030ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Depreciation and amortisation 2,169,522 1,846,901ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Rent 1,538,352 1,323,582ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ


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5 BASIC AND DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANYBasic and diluted earnings per share attributable to equity holders of the Parent Company are calculated by dividing the profit for the year attributable to the shareholders of the Parent Company by the weighted average number of shares outstanding during the year as follows:

2012 2011

Profit for the year attributable to shareholders of the Parent Company (KD) 5,043,575 5,033,537ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Weighted average number of shares outstanding during the year 165,000,000 165,000,000ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Basic and diluted earnings per share 30.57 fils 30.50 filsــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

As the Parent Company has no potential ordinary shares, basic and diluted earnings per share attributable to the equity holders of the Parent Company are identical.


44

6 PR

OPE

RTY,

PLA

NT A

ND E

QUI

PMEN

T Land

Build

ings

on

free

hold

land

an

d le

aseh

old

land

Mot

or

vehi

cles

Furn

iture

and

of

fice

equi

p-m

ent

Mac

hine

ry a

nd

equi

pmen

t

Capi

tal w

ork

in

prog

ress

Tota

l

KDKD

KDKD

KDKD

KD

Cost

At 1

Janu

ary

2012

2,20

8,06

83,

354,

898

394,

478

4,23

1,22

26,

921,

847

423,

001

17,5

33,5

14

Addi

tions

- 25

,113

83,4

1154

0,88

420

9,63

431

1,20

61,

170,

248

Dis

posa

ls-

- (2

4,14

1)(7

19,8

37)

(86,

832)

- (8

30,8

10)

Tran

sfer

s-

- -

446,

177

4,10

8(4

50,2

85)

-

Tran

sfer

to k

ey m

oney

(Not

e 8)

- -

- -

- (9

3,01

6)(9

3,01

6)

Fore

ign

curr

ency

tran

slat

ion

- (4

,690

)(6

,150

)(3

53)

(1,4

70)

- (1

2,66

3)

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

At 3

1 D

ecem

ber 2

012

2,20

8,06

83,

375,

321

447,

598

4,49

8,09

37,

047,

287

190,

906

17,7

67,2

73

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Accu

mul

ated

dep

reci

atio

n

At 1

Janu

ary

2012

- 1,

475,

134

275,

000

2,83

1,89

83,

880,

655

- 8,

462,

687

Char

ge fo

r the

yea

r-

257,

164

45,7

4654

9,55

71,

056,

375

- 1,

908,

842

Rela

ting

to d

ispo

sals

- -

(22,

260)

(718

,145

)(8

6,37

2)-

(826

,777

)

Fore

ign

curr

ency

tran

slat

ion

adju

stm

ent

- (9

42)

(4,6

83)

(207

)(1

,048

)-

(6,8

80)

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

At 3

1 D

ecem

ber 2

012

- 1,

731,

356

293,

803

2,66

3,10

34,

849,

610

- 9,

537,

872

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Net

car

ryin

g am

ount

At 3

1 D

ecem

ber

2012

2,20

8,06

81,

643,

965

153,

795

1,83

4,99

02,

197,

677

190,

906

8,22

9,40

1

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Build

ing

with

net

boo

k va

lue

of K

D 8

45,2

99 (2

011:

KD

858

,208

) is

mor

tgag

ed a

gain

st th

e m

urab

aha

paya

ble

(Not

e 15

).

Dep

reci

atio

n ch

arge

for t

he y

ear i

s in

clud

ed u

nder

adm

inis

trat

ive

expe

nses

in th

e co

nsol

idat

ed s

tate

men

t of i

ncom

e.

Not

es to

the

cons

olid

ated

fina

ncia

l sta

tem

ents

At 3

1 D

ecem

ber 2

012

45

6 PR

OPE

RTY,

PLA

NT A

ND E

QUI

PMEN

T (c

ontin

ued)

Land

Build

ings

on

free

hold

land

an

d le

aseh

old

land

Mot

or

veh

icle

s

Furn

iture

and

of

fice

equi

p-m

ent

Mac

hine

ry a

nd

equi

pmen

t

Capi

tal w

ork

in

prog

ress

Tota

l

KDKD

KDKD

KDKD

KD

Cost

At 1

Janu

ary

2011

800,

000

3,46

7,13

235

5,45

63,

685,

714

6,22

3,56

016

,602

14,5

48,4

64

Addi

tions

782,

565

521,

710

62,8

9616

0,63

177

7,42

495

0,59

53,

255,

821

Dis

posa

ls-

- (1

2,53

5)(1

58,6

09)

(76,

825)

- (2

47,9

69)

Tran

sfer

s62

5,50

3(6

25,5

03)

- 54

4,19

6-

(544

,196

)-

Fore

ign

curr

ency

tran

slat

ion

- (8

,441

)(1

1,33

9)(7

10)

(2,3

12)

- (2

2,80

2)

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

At 3

1 D

ecem

ber 2

011

2,20

8,06

83,

354,

898

394,

478

4,23

1,22

26,

921,

847

423,

001

17,5

33,5

14

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Accu

mul

ated

dep

reci

atio

n

At 1

Janu

ary

2011

- 1,

362,

630

242,

848

2,57

2,32

92,

941,

246

- 7,

119,

053

Char

ge fo

r the

yea

r-

267,

114

51,5

3135

1,19

394

9,33

9-

1,61

9,17

7

Rela

ting

to d

ispo

sals

- -

(12,

532)

(91,

277)

(8,2

45)

- (1

12,0

54)

Adju

stm

ent (

see

note

bel

ow)

- (1

53,0

83)

- -

- -

(153

,083

)

Fore

ign

curr

ency

tran

slat

ion

adju

stm

ent

- (1

,527

)(6

,847

)(3

47)

(1,6

85)

- (1

0,40

6)

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

At 3

1 D

ecem

ber 2

011

- 1,

475,

134

275,

000

2,83

1,89

83,

880,

655

- 8,

462,

687

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Net

car

ryin

g am

ount

At 3

1 D

ecem

ber

2011

2,20

8,06

81,

879,

764

119,

478

1,39

9,32

43,

041,

192

423,

001

9,07

0,82

7

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

ــــــ

Dur

ing

the

year

end

ed 3

1 D

ecem

ber

2011

,the

Pare

nt C

ompa

ny h

as s

egre

gate

d th

e ca

rryi

ng v

alue

of o

ne o

f its

pro

pert

ies

betw

een

land

and

bui

ldin

g fo

r w

hich

no

sepa

rate

va

luat

ion

was

pre

viou

sly

avai

labl

e. T

here

fore

, the

ent

ire p

rope

rty

was

cla

ssifi

ed a

s bui

ldin

g an

d de

prec

iate

d ov

er a

use

ful l

ife o

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46

7 INVENTORY ASSIGNED TO CUSTOMERS2012 2011

KD KD

At 1 January 26,419 119,989

Utilised during the year - (34,268)

Write off during the year (3,993) (59,302)ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

At 31 December 22,426 26,419ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

8 INTANGIBLE ASSETS 2012 2011

KD KD

Cost

At 1 January 1,899,830 1,741,830

Transfer from property, plant and equipment (Note 6) 93,016 -

Additions 4,082 158,000ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

At 31 December 1,996,928 1,899,830ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Amortisation

At 1 January 668,747 441,023

Charge for the year 260,680 227,724ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

At 31 December 929,427 668,747ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Net carrying amount

at 31 December 1,067,501 1,231,083ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Intangible assets include licence fee for international pharmaceutical companies amounting to KD 742,857 (2011: KD 928,571).During the year Parent Company transferred KD 93,016 relating to new pharmacies key money from capital working progress of upon commencement of operations in these pharmacies.

9 INVESTMENT IN ASSOCIATES The Group’s associates include the following entities:

Ownership %

NameCountry of

incorporation2012 2011 Activities

Al Salam Hospital Company K.S.C. (Closed)

Kuwait 20.86% 20.86%

Trading in medcines and medical equipment and related products and providing inpatient and out-patient medical care services

Al Mazaya Medical Company W.L.L.

Kuwait - 25%Medical equipment and related products

During the year, the associate company Al Mazaya Medical Company W.L.L. was liquidated based on the resolution of its Board of Directors.


47

9 INVESTMENT IN ASSOCIATES (continued)The following table illustrates summarised information of the Group’s investments in associates:

2012 2011KD KD

Carrying amount of investment in associate:

At 1 January 6,880,769 5,991,647Addition - 222,995Share of results 859,771 802,633Dividend received (273,012) (136,506)


At 31 December 7,467,528 6,880,769ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Aggregate of associates’ statement of financial position:Current assets 2,036,547 2,325,965Non-current assets 5,447,281 4,528,025Current liabilities (998,298) (1,142,194)Non-current liabilities (668,382) (481,407)


5,817,148 5,230,389Goodwill included in the associate’s carrying value 1,650,380 1,650,380



Aggregate of associates’ revenue and profit: Revenue 4,119,847 4,060,797


Profit 859,771 802,633ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

The investment in associate is pledged against the murabaha payable (Note 15).

10 INVESTMENTS CARRIED AT FAIR VALUE THROUGH INCOME STATEMENT

2012 2011KD KD

Local unquoted fund – designated 971,180 1,134,100ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

11 INVENTORIES 2012 2011

KD KDMedicines 18,044,741 17,920,476Over the counter products - 992,065Nutrition products - 12,691Equipment 6,771,428 5,227,408



During the year ended 31 December 2012, an amount of KD 394,025 (2011: KD 421,150) was recognised as a provision for slow moving and expired items in the consolidated statement of income.


48

12 ACCOUNTS RECEIVABLE AND PREPAYMENTS 2012 2011

KD KD

Trade accounts receivable 28,899,982 22,310,664Amounts due from related parties (Note 19) 399,687 108,341Other receivables 194,859 214,297Reimbursable expenses 2,717,145 1,894,811Advance to supplier 598,730 445,630Prepaid expenses 440,183 517,664Staff receivables 87,041 33,129



As at 31 December 2012, trade receivables at nominal value of KD 3,581,835 (2011: KD 3,646,339) were partially impaired.Movement in the allowance for impairment of trade accounts receivable were as follows:

2012KD

2011KD

At 1 January 2,479,481 2,046,556

Charge during the year 285,007 432,925


At 31 December 2,764,488 2,479,481


As at 31 December, the ageing of unimpaired trade accounts receivables is as follows:

Neither past due norimpaired

KD

Past due but not impaired

Total

KD

< 60 days

KD

60 – 90 days

KD

90 – 120 days

KD

>120 days

KD

2012 28,899,982 16,592,023 3,764,775 3,395,157 1,131,567 4,016,460

2011 22,310,664 9,457,246 5,755,852 2,130,410 951,071 4,016,085 Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables.

13 SHARE CAPITAL Authorised,

Issued and fully paid

2012 2011

KD KD

Shares of fils 100 each 16,500,000 16,500,000


For the year ended 31 December 2012, the Board of Directors of the Parent Company has proposed the distribution of cash dividend of 10% and bonus shares of 5% of the Parent Company’s paid up share capital which is subject to approval of the Parent Company’s shareholders in the annual general assembly. The annual general assembly of the Parent Company’s shareholders held on 16 April 2012 approved the consolidated financial statements for the year ended 31 December 2011 and the distribution of cash dividend of 15 fils (31 December 2010: 10 fils) per share amounting to KD 2,475,000 for the year ended 31 December 2011 (31 December 2010: KD 1,650,000) which was paid following the approval.


49

14 RESERVESStatutory reserveIn accordance with the Parent Company’s articles of association, 10% of the profit for the year attributable to the shareholders of the Parent Company before Directors’ remuneration, contribution to KFAS, NLST and Zakat has been transferred to statutory reserve. The shareholders of the Parent Company may resolve to discontinue such annual transfers when the reserve totals 50% of the paid up share capital. Distribution of the reserve is limited to the amount required to enable the payment of a dividend of 5% of paid up share capital to be made in years when retained earnings are not sufficient for the payment of a dividend of that amount.

Voluntary and general reservesIn accordance with the Parent Company’s articles of association, the Parent Company has resolved to discontinue the annual transfer of 10% of the profit for the year before directors’ remuneration, contribution to KFAS, NLST and Zakat to the voluntary and general reserves. There are no restrictions on distribution of these reserves.

15 MURABAHA PAYABLES Murabaha payables represents commodities purchased on a deferred settlement basis from local Islamic banks which carries effective profit payable rates ranging from 4% to 5% (2011: 4.5% to 9.5%) per annum. The murabaha is payable on different dates ending 31 May 2015 and are secured over certain property, plant and equipment with net book value of KD 845,299 (2011: KD 858,208) (Note 6) and against an investment in an associate with carrying value of KD 7,467,528 (Note 9). Amounts payable within the next twelve months are shown as current liabilities in the consolidated statement of financial position.

16 EMPLOYEES’ END OF SERVICE BENEFITS Movement in the provision recognised in the consolidated statement of financial position is as follows:

2012 2011

KD KD

At 1 January 1,665,345 1,275,246

Charge for the year 364,504 557,302

Payments made during the year (116,459) (167,203)ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ


17 ACCOUNTS PAYABLE AND ACCRUALS 2012 2011

KD KD

Trade accounts payable 18,555,596 18,110,713

Amounts due to related parties (Note 19) 15,842 6,782

Other payables 2,491,769 2,930,785

Accrued expenses 2,296,706 1,724,668

Agency liabilities 1,300,000 1,560,470

Advances from customers 519,127 435,620ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ



50

18 CONTINGENT ASSETS AND LIABILITIESAt 31 December 2012 the Group had contingent liabilities in respect of outstanding letters of guarantees arising in the ordinary course of business amounting to KD 17,682,415 (2011: KD 14,140,025).The Parent Company has submitted claims of KD 14,265,715 related to additional services provided to one of the projects with the government. However, these claims were not yet approved.

19 RELATED PARTY TRANSACTIONS Related parties represent major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Parent Company’s management.Balances with related parties included in consolidated statement of financial position are as follows:

2012 2012 2012 2011

KD KD KD KD

Associate Company

Other related parties Total Total

Amount due from related parties (Note 12) 399,687 - 399,687 108,341

Amounts due to related parties (Note17) - 15,842 15,842 6,782

Transactions with the related parties included in the consolidated statement of income are as follows:

2012 2012 2012 2011

KD KD KD KD

Associate Company

Other related parties Total Total

Write –off inventory assigned to customers 3,993 - 3,993 59,302

Year ended 31 December

2012

Year ended 31 December

2011

KD KD

Compensation of key management:

Directors remuneration 49,000 21,000

Management fees (*) 433,386 434,408

Salaries and short-term benefits 308,055 307,798

End of service benefits 18,067 22,919ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

808,508 786,125


(*) Represents management fees payable to key management personnel based on 7.5% of the profit before directors’ remuneration, contribution to KFAS, NLST and Zakat.

Directors’ remuneration of KD 49,000 for the year ended 31 December 2012 is subject to approval by the annual General Assembly meeting of Parent Company’s of shareholders.

Directors’ remuneration of KD 21,000 for the year ended 31 December 2011 was approved by the annual General Assembly meeting held on 16 April 2012.


51

20 SEGMENTAL INFORMATIONThe Group’s primary basis of segment reporting is by business segments, which consist of medical and related activities and investments.Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments.

Medical and related

activitiesInvestment Total

KD KD KDAt 31 December 2012Segment revenue 96,206,605 - 96,206,605

ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Segment results 4,596,556 816,126 5,412,682═══════ ═══════ ═══════

Unallocated expenses - - (346,097)ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Profit for the year - - 5,066,585ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Segment assets 76,210,663 8,516,828 84,727,489ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Segment liabilities 52,295,824 - 52,295,824ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Other disclosures: Share of results of an associate - 859,771 859,771 Depreciation and amortisation 2,169,522 - 2,169,522 Finance cost 833,363 - 833,363


Other disclosures: Investment in an associate - 7,467,528 7,467,528 Capital expenditure 1,170,248 - 1,170,248


Medical and related

activitiesInvestment Total

KD KD KDAt 31 December 2011Segment revenue 88,526,030 - 88,526,030


Segment results 4,442,804 905,209 5,348,013ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Unallocated expenses - - (304,389)ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Profit for the year - - 5,043,624ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Segment assets 65,483,259 8,092,989 73,576,248ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Segment liabilities 43,708,329 - 43,708,329ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Other disclosures: Share of results of an associate - 802,633 802,633 Depreciation and amortisation 1,846,901 - 1,846,901 Impairment of financial assets available for sale - 39,480 39,480 Finance cost 766,653 - 766,653


Investment in an associate - 6,880,769 6,880,769 Capital expenditure 3,255,821 - 3,255,821



52

20 SEGMENTAL INFORMATION (continued)

Geographic informationThe Group reports its secondary segmental information according to geographical location of its customers as follows:

Dubai Kuwait Egypt Total

KD KD KD KD

At 31 December 2012

Segment revenue 1,153,677 89,349,461 5,703,467 96,206,605

ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

At 31 December 2011

Segment revenue 665,639 83,114,186 4,746,205 88,526,030

ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESIntroductionRisk is inherent in the Group’s activities but it 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 Group’s continuing profitability and each individual within the Group is accountable for the risk exposures relating to his or her responsibilities.

The Group is exposed to market risk, credit risk, and liquidity risk. It is also subject to operational risks. The independent risk control process does not include business risks such as changes in the environment technology and industry. They are monitored through the Group’s strategic planning process.

No significant changes were made in the risk management objectives and policies during the years ended 31 December 2012 and 31 December 2011.

21.1 Market riskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market variables. Market risk comprises three types of risk: foreign currency risk, equity price risk and profit rate risk.

a) Profit rate risk Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is not exposed to profit rate risk as its financial instruments are Islamic financial instruments with fixed profit rate.

b) Foreign currency riskForeign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.The Group is exposed to foreign currency risk on its foreign trade receivable and payables that are denominated in a currency other than the Kuwaiti Dinar. The Group ensures that the net exposure is kept to an acceptable level, by dealing in currencies that do not fluctuate significantly against the Kuwaiti Dinar.


53

21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)21.1 Market risk (continued)Foreign currency sensitivityThe table below indicates the Group’s foreign currency exposure at 31 December, as a result of its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the KD currency rate against the foreign currencies, with all other variables held constant, on the consolidated statement of income (due to the fair value of currency sensitive monetary assets and liabilities).

Change in currencyrate

Effect on profit for the year

due to increase incurrency rate

KD

Effect on profit for the year

due to decreasein currency rate

KD

2012

US Dollar (+/-) 5% (430,597) 430,597

Euro (+/-) 5% (160,306) 160,306

Others (+/-) 5% (21,353) 21,353

2011

US Dollar (+/-) 5% (455,002) 455,002

Euro (+/-) 5% (174,040) 174,040

Others (+/-) 5% (34,601) 34,601

c) Equity price riskEquity price risk arises from changes in the fair values of equity investments. Equity price risk is managed by the finance department of the Parent Company. The unquoted equity price risk exposure arises from the Group’s investments classified as fair value through income statement or financial assets available for sale.

The effect of change in the fair value of quoted equity instruments at the reporting date due to a reasonable possible change in the equity indices, with all other variables held as constant, is not significant.

21.2 Credit riskCredit 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. The Group is exposed to credit risk on its bank balances, accounts receivable and certain other assets reflected in the consolidated statement of financial position.

The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables. The maximum exposure is the carrying amount as disclosed in Note 12. The Group seeks to limit its credit risk with respect to banks by only dealing with reputable banks.

Maximum risk concentration Concentrations arise when a number of counterparties 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 similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry or geographic location.

The Group sells its products to a large number of customers 76% of outstanding trade accounts receivable at 31 December 2012 (2011: 66%) are concentrated with Governmental agencies.

With respect to credit risk arising from the other financial assets of the Group, including bank balances, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.


54

21 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)21.3 Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments.The Group limits its liquidity risk by ensuring bank facilities are available. The Group’s terms of sales require amounts to be paid within 45-90 days of the date of sale. Trade accounts payable are normally settled within 60 to 90 days of the date of purchase. The maturity profile is monitored by the Group’s management to ensure adequate liquidity is maintained.The table below summarises the maturities of the Group’s undiscounted financial liabilities at 31 December 2012 and 31 December 2011, based on contractual payment dates and current market interest rates.

31 December 2012On

demand

Less than

3 months3 to 12 months

1 to 5

yearsTotal

KD KD KD KD KD

Murabaha finance payable - 17,253,124 8,148,139 116,389 25,517,652

Accounts payable and accruals 1,300,000 6,847,442 14,039,595 2,992,003 25,179,040

ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Total 1,300,000 24,100,566 22,187,734 3,108,392 50,696,692


31 December 2011On

demand

Less than

3 months3 to 12 months

1 to 5

yearsTotal

KD KD KD KD KD

Murabaha finance payable - 17,104,375 74,934 216,301 17,395,610

Accounts payable and accruals 2,966,341 20,028,794 1,331,498 - 24,326,633


Total 2,966,341 37,133,169 1,406,432 216,301 41,722,243


21.4 Operational riskOperational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. Controls include effective segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes.


55

22 CAPITAL RISK MANAGEMENTThe primary objective of the Group’s capital risk management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholder value.The Group manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the years ended 31 December 2012 and 31 December 2011. The Group monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt. The Group includes within net debt, murabaha payables and trade and other payables, less bank balances and cash. Equity represents total equity attributable to equity holders.

2012KD

2011KD

Murabaha payables 25,203,394 17,273,946

Accounts payable and accruals 25,179,040 24,769,038

Employees’ end of service benefits 1,913,390 1,665,345

Less: bank balances and cash (8,737,537) (5,477,754)ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Net debt 43,558,287 38,230,575ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Total equity 32,431,665 29,867,919ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Equity and net debt 75,989,952 68,098,494ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

Gearing ratio 57 % 56%ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ


56

23 FAIR VALUES OF FINANCIAL INSTRUMENTSFinancial instruments comprise of financial assets and financial liabilities.Financial assets consist of bank balances and cash, receivables, investments carried at fair through income statement and financial asset available for sale. Financial liabilities consist of murabaha payable, accounts payables and accruals.The fair values of financial instruments are not materially different from their carrying values except for financial asset available for sale.The Group uses the following hierarchy for determining and disclosing the fair value of financial assets by valuation technique:Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Level 1 Level 2 Level 3 Total

31 December 2012 KD KD KD KD

Investments carried at fair valuethrough income statement - - 971,180 971,180

Level 1 Level 2 Level 3 Total

31 December 2011 KD KD KD KD

Investments carried at fair valuethrough income statement - - 1,134,100 1,134,100

During the year ending 31 December 2012, there were no transfers between hierarchies.


57

23 FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)The following table shows a reconciliation of the opening and closing amount of level 3 financial assets which are recorded at fair value.

At 1 January

Gain recorded in the consolidated

statement of income At 31 December

KD KD KD

2012

Investments carried at fair value throughincome statement

Local unquoted fund – designated 1,134,100 43,645 971,180ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ

2011

Investments carried at fair value throughincome statement

Local unquoted fund – designated 1,058,200 75,900 1,134,100ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ ــــــــــــــــــــــــــــــ


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