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TANJUNG OFFSHORE BERHAD

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NOTES TO THE FINANCIAL STATEMENTS<br />

31 DECEMBER 2009<br />

3. SIGNIFICANT ACCOUNTING POLICIES (continued)<br />

t) Signifi cant Accounting Estimates and Judgements (continued)<br />

Share-based payments to employees<br />

81<br />

<strong>TANJUNG</strong> <strong>OFFSHORE</strong> <strong>BERHAD</strong> (662315-U)<br />

ANNUAL REPORT 2009<br />

The cost of providing the share-based payments to the employees is charged to the income statement over the vesting<br />

period. The cost is based on the fair value of the options and the number of the options expected to vest. The fair value<br />

of the options is determined using Black Scholes pricing model.<br />

Amortisation of intangible assets<br />

The goodwill of patent and purchases are amortised on a straight line basis over their useful lives over 17 years and 10<br />

years respectively. The Group assesses annually the useful lives of the intangible assets and if the expectation differs from<br />

the original estimate, such difference will impact the amortisation expenses in the period in which such estimate has been<br />

charged.<br />

4. FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES<br />

The operation of the Group and the Company is subject to a variety of fi nancial risks. The Group’s and the Company’s overall<br />

fi nancial risk management objective is to ensure that the Group and the Company creates value for its shareholders.<br />

The main areas of fi nancial risks faced by the Group and the Company are as follows:<br />

i) Credit risk<br />

The Group’s main exposure to credit risk is in respect of its trade and other receivables. The Group manages the exposure<br />

to credit risk by performing credit evaluation on the major customers and outstanding debts are being monitored and<br />

pursued for full recovery.<br />

ii) Liquidity and cash fl ow risk<br />

The Group and the Company actively manages its debts maturity profi le, operating cash fl ows and availability of funding<br />

so as to ensure that all repayment and funding needs are met.<br />

iii) Interest rate risk<br />

The Group and the Company have cash and bank balances and deposits placed with licensed banks. The Group and the<br />

Company manages its interest rate risks by placing such balances on varying maturities and interest rate terms.<br />

The Group and the Company are also exposed to interest rate risk through the impact of rate charges on its borrowings.<br />

To mitigate the interest rate risk, the management of the Group and the Company consistently monitors the interest rate<br />

exposure against the existing/potential income from operations.<br />

iv) Foreign currency exchange risk<br />

The Group and the Company imports a wide range of engineering equipment and spare parts for its business operations<br />

from various countries, subjecting its purchase costs to foreign exchange fl uctuations. In this aspect, the Group and<br />

the Company mitigates its exposure to foreign exchange fl uctuations through back-to-back purchase and selling<br />

arrangements between its customers and the foreign suppliers. As a result, the Group’s and the Company’s purchase<br />

costs and currencies transacted are matched to the revenues generated from the sale of the Group’s products, thus<br />

forming a natural hedge.

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