TANJUNG OFFSHORE BERHAD

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NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2009 3. SIGNIFICANT ACCOUNTING POLICIES (continued) n) Revenue Recognition (continued) vi) Dividend income o) Taxation Dividend income is recognised when the right to receive payment is established. 79 TANJUNG OFFSHORE BERHAD (662315-U) ANNUAL REPORT 2009 Income tax on the profi t or loss comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profi t for the year and is measured using the enacted tax rates relevant to the fi nancial year. Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profi t will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. p) Inventories Inventories comprising turbine compressor spare parts, work-in-progress and long term contract balances which is stated at the lower of cost (fi rst-in, fi rst-out basis) and net realisable value. Cost of turbine compressor spare parts comprises the original cost of purchase plus cost of bringing the inventories to its location. Cost of work-in-progress long term contract balances includes direct materials, direct labour and an appropriate portion of fi xed and variable overheads. q) Provisions for Liabilities Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date. r) Development Costs Development costs incurred for the development of gas generators are capitalised and are subject to an ongoing assessments of recoverability based on anticipated future revenues and changes in technologies. The cost that are capitalised included purchase price, direct labour and related overhead. Development costs initially recognised as an expense are not recognised as an asset in the subsequent period. Development costs are set off in accordance to the policy on the government grants. Where the development cost are not fully recovered from the grant, the excess of the cost are written off immediately to the income statements. s) Foreign Currency i) Foreign currency transactions In preparing the fi nancial statements of the individual entities, transaction in currencies other than the entity’s functional currency are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in the income statement for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in the income statement.
TANJUNG OFFSHORE BERHAD (662315-U) ANNUAL REPORT 2009 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2009 3. SIGNIFICANT ACCOUNTING POLICIES (continued) s) Foreign Currency (continued) i) Foreign currency transactions (continued) Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in income statement in the Company’s fi nancial statements or individual fi nancial statements of the foreign operation, as appropriate. ii) Foreign operations The results and fi nancial position of foreign operations that have a functional currency different from the presentation currency of the consolidated fi nancial statements are translated into Ringgit Malaysia as follows: i) Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date; ii) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of transactions; and iii) All resulting exchange differences are taken to the foreign currency translation reserve within equity. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. The principal closing rates used in the translation of foreign currency amounts are as follows: 80 31.12.2009 31.12.2008 RM RM 1 United States Dollar (USD) 3.4245 3.4675 1 Great Britain Pounds (GBP) 5.5311 5.0118 1 Rupiah (Rp) 0.0003 0.0003 t) Signifi cant Accounting Estimates and Judgements The signifi cant accounting estimates and judgements that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below. Useful lives and residual value of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives after deducting its residual value. The management exercises their judgement in estimating the useful lives and the residual value of the depreciable assets. The Group and the Company assesses annually the residual value and the useful lives of the property, plant and equipment and if the expectation differs from the original estimate, such difference will impact the depreciation in the period in which such estimate has been charged. Deferred tax assets Deferred tax assets are recognised for all unabsorbed capital allowances to the extent that it is probable that future taxable profi ts will be available against which the capital allowances can be utilised. Signifi cant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profi ts together with future tax planning strategies. The total carrying amounts of unabsorbed capital allowances are disclosed in Note 9 to the fi nancial statements.
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TANJUNG OFFSHORE BERHAD

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