WCT-Page 30 to ProxyForm (2.4MB).pdf - Announcements - Bursa ...

102
WCT Berhad (66538-K)
annual report 2011
NOTES TO THE FINANCIAL STATEMENTS
31 December 2011
cont’d
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES cont’d
2.25 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the
acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the
activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing
costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended
use or sale.
All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of
interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.
2.26 Bai Bithaman Ajil Islamic Debt Securities ("BAIDS")
The BAIDS are bonds issued in accordance with the Islamic finance concept of Bai Bithaman Ajil. In accordance
with such concept, the Group and the Company sold certain assets to a trustee, and repurchased them at the
same price together with an agreed profit margin. The payment of the purchase price is deferred in accordance
with the maturities of the BAIDS, whilst the profit element is paid half-yearly.
The BAIDS are initially recognised at cost, being the fair value of the consideration received. After initial recognition,
the profit element attributable to the BAIDS in each period is recognised as an expense at a constant rate to the
maturity of each series respectively. Further details of the BAIDS in issue are disclosed in Note 25.
2.27 Islamic Serial Redeemable Bonds ("SUKUK")
The SUKUK are issued in accordance with the Islamic finance concept of Musyarakah. In accordance with such
concept, the Company and the Sukukholder entered into a joint venture established pursuant to the terms
of Musyarakah Agreement. The Musyarakah Venture is to participate directly into the general business of
the Company. The primary subscriber as the initial Sukukholder contributed RM300 million to the capital of
Musyarakah Venture. As a complement to the contribution made by the primary subscriber, the Company grants
warrants rights which were detached from the SUKUK upon issuance and offered to the entitled shareholders of
the Company. The total proceeds arising from the warrants were channelled to the Musyarakah Venture as part
of the Sukukholders capital contribution.
The proceed from the issue of warrants, net of issue costs, will be credited to a warrants reserve account which
is non-distributable. Warrants reserve will be transferred to the share premium accounts upon the exercise of
warrants and the warrants reserve in relation to the unexercised warrants on the expiry date of the exercise
period will be transferred to retained earnings.
The SUKUK is initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent
periods, SUKUK is stated at amortised cost using the effective yield method; any difference between proceeds
(net of transaction costs) and the redemption value is recognised in the income statements over the period of the
borrowings.
Further details of the SUKUK in issue are disclosed in Note 26 to the financial statements.