Connecting the nation. and Beyond. - ChartNexus

184 / MRCB annual report 2011 /
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2011
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.21 IMPAIRMENT OF NON – FINANCIAL ASSETS
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying
amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which
there is separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.
The impairment loss is charged to the profit or loss. Impairment losses on goodwill are not reversed. In respect of other
assets, any subsequent increase in recoverable amount is recognised in the profit or loss unless it reverse an impairment
loss on a revalued asset in which case it is taken to revaluation surplus reserve.
2.22 INTEREST CAPITALISATION
Interest incurred on borrowings to finance the construction of property, plant and equipment is capitalised as part of
the cost of the asset during the period of time that is required to complete and prepare the assets for its intended use.
Interests relating to property development activities, construction contracts are accounted for in a similar manner. All
other borrowings costs are expensed on an effective interest rate method.
2.23 REVENUE RECOGNITION
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the
ordinary course of the Group’s and the Company’s activities. Revenue is shown net of service tax, returns, rebates and
discounts and after eliminating sales within the Group.
The Group and the Company recognise revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s and the
Company’s activities as described below. The amount of revenue is not considered to be reliably measurable until all
contingencies relating to the sale have been resolved. The Group and the Company base its estimates on historical
results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
Revenue relating to long term engineering contracts and property development activities are accounted for using the
percentage of completion method.
Other revenues earned by the Group and the Company are recognised on the following bases:
Rental income – on the accrual basis
Interest income – on the effective interest rate method
Dividend income – when the shareholder’s right to receive payment is established
Building services – on the accrual basis
Management fees – on the accrual basis