Guidance

1. In (a), the three-year average should be calculated on the basis of the last three yearly observations at the end of the Authorised Person's financial year. When audited figures are not available, business estimates may be used.
2. As an example of the approach to be used for (a)(ii), if an Authorised Person has two positive yearly gross incomes of $20 each and the final yearly observation shows a negative figure of $5, then the average should be calculated as $20 being $40 (the sum of the positive figures) divided by 2 (the number of years for which the figures are positive).
3. The circumstances in (b) may arise, for example, where an Authorised Person is a start-up, is part of a merger or it acquires or divests itself of a significant business unit.
4. Net interest income in A7.1.1(4) is the interest income minus interest expense. Guidance on what constitutes interest income and interest expense can be found in the PRU rules.
5. Net non-interest income in A7.1.1(4) includes the income from fees and commissions, net income from trading Securities, net income from Investment Securities, income from Islamic Contracts and other operating income minus fee and commission expense. Guidance on non-interest income can be found in the PRU rules.
6. In A7.1.1(4)(ii), outsourcing fees paid by the Authorised Person should be excluded whereas any outsourcing fee received by the Authorised Person should be included as part of the gross income.
7. When income from revaluation of trading items is included in the income statement, such revaluation income should be included in the calculation of the gross income.