Notes to and forming part of the Unconsolidated Financial Statements

For the year ended December 31, 2018

5.5.1 Finance Lease receivables

Leases, where the Bank transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee
are classified as finance lease. A receivable is recognized at an amount equal to the present value of the minimum lease
payments including guaranteed residual value, if any. Finance lease receivables are included in advances.

5.5.2 Islamic financings and related assets

Receivables under Murabaha financing represent cost price plus an agreed mark-up on deferred sale arrangement. Mark-
up income is recognized on a straight line basis over the period of the instalments.

Ijarah financing represents arrangements whereby the Bank (being the owner of assets) transfers its usufruct to its
customers for an agreed period at an agreed consideration. Assets leased out under Ijarah are stated at cost less
accumulated depreciation and accumulated impairment losses, if any. These are depreciated over the term of the lease.
Ijarah income is recognized on an accrual basis.

Diminishing Musharaka is partnership agreement between the Bank and its customer for financing vehicle or plant and
machinery. The receivable is recorded to the extent of Bank's share in the purchase of asset. Income is recognized on
accrual basis.

5.6 Fixed assets and depreciation

5.6.1 Tangible

Property and equipment, other than land (which is not depreciated) and capital work-in-progress, are stated at cost or
revalued amount less accumulated depreciation and accumulated impairment losses, if any. Land is carried at revalued
amount less impairment losses while capital work-in-progress is stated at cost less impairment losses. The cost and the
accumulated depreciation of property and equipment of foreign branches include exchange differences arising on currency
translation at the year-end rates of exchange.

Depreciation is calculated so as to write off the depreciable amount of the assets over their expected useful lives at the
rates specified in note 11.2 to these unconsolidated financial statements. The depreciation charge for the year is calculated
on a straight line basis after taking into account the residual value, if any. The residual values and useful lives are reviewed
and adjusted, if appropriate, at each statement of financial position date.

Depreciation on additions is charged from the month the asset is available for use. No depreciation is charged in the month
of disposal.

Land and buildings are revalued by independent, professionally qualified valuers with sufficient regularity to ensure that
their net carrying amount does not differ materially from their fair value. An increase arising on revaluation is credited to the
surplus on revaluation of fixed assets account. A decrease arising on revaluation of fixed assets is adjusted against the
surplus of that asset or, if no surplus exists, is charged to the profit and loss account as an impairment of the asset. A
surplus arising subsequently on an impaired asset is reversed through the profit and loss account up to the extent of the
original impairment.

Surplus on revaluation of fixed assets (net of associated deferred tax) to the extent of the incremental depreciation charged
on the related assets is transferred to unappropriated profit.

Gains and losses on sale of fixed assets are included in the profit and loss account, except that the related surplus on
revaluation of fixed assets (net of deferred tax) is transferred directly to unappropriated profit.

Major renewals and improvements are capitalized and the assets so replaced, if any, are retired. Normal repairs and
maintenance are charged to the profit and loss account as and when incurred.

5.6.2 Intangible assets

Intangible assets are stated at cost less accumulated amortization and accumulated impairment losses, if any. The cost
and the accumulated amortization of intangible assets of foreign branches include exchange differences arising on
currency translation at the year-end rates of exchange. Amortization is calculated so as to write off the amortizable amount
of the assets over their expected useful lives at the rates specified in note 12.1 to these unconsolidated financial
statements. The amortization charge for the year is calculated on a straight line basis after taking into account the residual
value, if any. The residual values and useful lives are reviewed and adjusted, if appropriate, at each statement of financial
position date. Amortization on additions is charged from the month the asset is available for use. No amortization is
charged in the month of disposal.

Gains and losses on sale of intangible assets are included in the profit and loss account.

84 United Bank Limited