FY 2011 Annual Report - Sheng Siong

52 Sheng Siong Annual Report 2011
Notes to the Financial Statements
4 Significant accounting policies (Continued)
4.4 Financial instruments (Continued)
Financial guarantees
Financial guarantees are financial instruments issued by the Group that require the issuer to make specified
payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when
due in accordance with the original or modified terms of a debt instrument.
Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent
to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative
amortisation and the amount that would be recognised if they were accounted for as contingent liabilities.
When financial guarantees are terminated before the original expiry date, the carrying amount of the financial
guarantee is transferred to profit or loss.
Financial guarantee contracts are classified as financial liabilities unless the Group has previously asserted
explicitly that it regards such contracts as insurance contracts and accounted for them as such. Election is
made contract by contract, and each election is irrevocable.
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
are recognised as a deduction from equity, net of any tax effects.
Distribution of non-cash assets to owners of the Group
The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Group at the
fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting
date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount
of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the
carrying amount of the assets distributed and the carrying amount of the liability, in profit or loss.
4.5 Leases
When the Group is a lessee of a finance lease
Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition, property, plant and equipment acquired through finance leases are
capitalised at the lower of its fair value and the present value of the minimum lease payments. Subsequent
to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that
asset.
Leased assets are depreciated over the shorter of the lease term and their useful lives. Lease payments are
apportioned between finance expense and reduction of the lease liability. The finance expense is allocated
to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability.