Based on the terms of agreement between TH and UJSB, UJSB has a contractual obligation to pay the entire principal financing and profits to TH at maturity.
This contract allows TH to recognise the income accrued from this sukuk. This income recognition also meets the *Malaysian Financial Reporting Standards - Financial Instruments (MFRS 9), sukuk issued by UJSB meets the conditions of “Solely Payment of Principle and Interest” (SPPI). Therefore the increase in the value of sukuk based on the set rate of return is allowed to be recognised as income by TH.
Furthermore, there is no expectation of credit loss (ECL) on this sukuk as the Government has given a financial commitment to redeem this sukuk fully and the Malaysian Government has never failed to meet any of its financial obligations.