notes to the financial statements - Far East Orchard Limited

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2008
2. Significant accounting policies (continued)
2.21 Employee compensation
Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions
into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The
Group has no further payment obligations once the contributions have been paid. The Group’s contributions are
recognised as employee compensation expense when they are due, unless they can be capitalised as an asset.
2.22 Currency translation
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency
of the primary economic environment in which the entity operates (“functional currency”). The financial
statements are presented in Singapore Dollar, which is the Company’s functional currency.
(b) Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into
the functional currency using the exchange rates at the dates of the transactions. Currency translation
differences from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the balance sheet date are recognised in the
income statement. Those currency translation differences are recognised in the currency translation reserve
in the consolidated financial statements and transferred to the income statement as part of the gain or loss
on disposal of the foreign operation.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at
the date when the fair values are determined.
(c) Translation of Group entities’ financial statements
The results and financial position of all the Group entities that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:
(i) Assets and liabilities are translated at the closing exchange rates at the date of the balance sheet;
(ii) Income and expenses are translated at average exchange rate (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated using the exchange rates at the dates of the transactions); and
(iii) All resulting exchange differences are recognised in the currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005
are treated as assets and liabilities of the foreign operations and translated at the closing rates at the date
of the balance sheet. For acquisitions prior to 1 January 2005, the exchange rates at the dates of acquisition
are used.
ORCHARD PARADE HOLDINGS LIMITED ANNUAL REPORT 2008 41