TANJUNG OFFSHORE BERHAD

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NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2009 3. SIGNIFICANT ACCOUNTING POLICIES (continued) d) Subsidiary Companies (continued) 75 TANJUNG OFFSHORE BERHAD (662315-U) ANNUAL REPORT 2009 Investment in subsidiary companies which is eliminated on consolidation is stated in the Company’s fi nancial statements at cost less impairment losses. The policy for the recognition and measurement of impairment losses are in accordance with Note 3(h) to the fi nancial statements. e) Associate Company An associate company is defi ned as an investment where the Group holds for long-term purposes between 20% to 50% of the issued equity share capital of the investee’s company, and exercises signifi cant infl uence but not control, over the investee’s company management. Investment in associate company is accounted for in the consolidated fi nancial statements using the equity method of accounting based on the management fi nancial statements of the investee’s company made up to the end of the fi nancial year. f) Property, Plant and Equipment All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probably that future economic benefi ts associated with the item will fl ow to the Group and the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the current fi nancial year in which they are incurred. Subsequent to recognition, property, plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Revaluations are made at least once in every fi ve years based on a valuation by an independent valuer on an open market value basis. Any revaluation increase is credited to equity as revaluation surplus, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is recognised in the income statement to the extent of the decrease previously recognised. A revaluation decrease is fi rst offset against unutilised previously recognised revaluation surplus in respect of the same asset and the balance thereafter recognised as an expense. Depreciation of property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life as follows: % Vessels 5 Freehold land and building 2 Leasehold land and building Over 80 months or 50 years Furniture and fi ttings 10 Renovation 10 Workshop tools 20 Offi ce equipment 10 – 33 1/3 Motor vehicles 20 – 25 Machinery 10 – 33 1/3 Depreciation of vessels and equipment under commissioning commences when the vessels and equipment are delivered and ready for their intended use. The residual values, useful life and depreciation method are reviewed at each fi nancial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefi ts embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in the income statement and the unutilised portion of the revaluation surplus on that item is take directly to accumulated profi t.
TANJUNG OFFSHORE BERHAD (662315-U) ANNUAL REPORT 2009 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2009 3. SIGNIFICANT ACCOUNTING POLICIES (continued) g) Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets required in a business combination as their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful life of intangible assets is assessed to be either fi nite or indefi nite. Intangible assets with fi nite lives are amortised on straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortisation period and the amortisation method for an intangible asset with a fi nite useful life are reviewed at least at each balance sheet date. Intangible assets with indefi nite useful lives are not amortised but tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying amount may be impaired either individually or at the cash-generating unit level. The useful life of an intangible asset with an indefi nite life is also reviewed annually to determine whether the useful life assessment continues to be supportable. h) Impairment of Assets At each balance sheet date, the Group and the Company reviews the carrying amounts of its assets to determine whether there is any indication of impairment. If any such indication exists, impairment is measured by comparing the carrying amount of the assets with their recoverable amounts. Recoverable amounts are the higher of net selling price and value in use, which is measured by reference to discounted future cash fl ows. An impairment loss is recognised as an expense in the income statement immediately, unless the assets are carried at a revalued amount. Any impairment losses of revalued assets are treated as a revaluation decrease to the extent of any unutilised previously recognised revaluation surplus for the same assets. Reversal of impairment losses recognised in prior years are recorded when the impairment losses recognised for the assets no longer exist or have decreased. i) Plant and Equipment Acquired Under Hire Purchase Arrangements Plant and equipment acquired under hire purchase arrangements are being capitalised and the corresponding obligations treated as liabilities in the fi nancial statements. Finance costs are allocated to the income statement to give a constant periodic rate of interest on the remaining hire purchase payables. Plant and equipment acquired under hire purchase arrangements are depreciated over their expected useful lives on the same basis as owned assets. j) Leased Assets Leased of assets where substantially all the risks and benefi ts incidental to the ownership of the asset, but not the legal ownership, are transferred to the Group are classifi ed as fi nance leases. Finance leases are capitalised, recording an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased of assets are depreciated on straight-line basis over the term of the lease estimated useful lives where it is likely that the Group will obtain ownership of the asset. Lease payment is allocated between the reduction of the lease liability and the lease interest expense for the year. Leased payments for operating leases, where substantially all the risks and benefi ts remain with the lessor, are charged as an expense in the year in which they are incurred. 76
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TANJUNG OFFSHORE BERHAD

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