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Notes to the Financial Statements (cont’d)<br />
For the financial year ended 31 December 2011<br />
2. Summary of significant accounting policies (cont’d)<br />
2.2 Changes in accounting policies (cont’d)<br />
Amendments to FRS 7: Improving Disclosures about Financial Instruments<br />
The amended standard requires enhanced disclosure about fair value measurement and liquidity risk. Fair value<br />
measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value<br />
hierarchy (Level 1, Level 2 and Level 3), by class, for all financial instruments recognised at fair value. A reconciliation<br />
between the beginning and ending balance for Level 3 fair value measurements is required. Any significant transfers<br />
between levels of the fair value hierarchy and the reasons for those transfers need to be disclosed. The amendments<br />
also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for<br />
liquidity management. The fair value measurement disclosures are presented in Note 39. The liquidity risk disclosures<br />
are presented in Note 38(c).<br />
2.3 Malaysian Financial Reporting Standards (MFRS)<br />
On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting<br />
framework, the Malaysian Financial Reporting Standards (MFRS Framework).<br />
The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or<br />
after 1 January 2012, with the exception of entities that are within the scope of MFRS 141 Agriculture (MFRS 141) and<br />
IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including its parent, significant investor and<br />
venturer.<br />
The Group and the Company will be required to prepare financial statements using the MFRS Framework in its first<br />
MFRS financial statements for the year ending 31 December 2012. In presenting its first MFRS financial statements,<br />
the Group and the Company will be required to restate the comparative financial statements to amounts reflecting the<br />
application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively,<br />
against opening retained profits.<br />
The Group and the Company have started the assessment of the differences between Financial Reporting Standards<br />
and accounting standards under the MFRS Framework and are in the process of assessing the financial effects of the<br />
differences. Accordingly, the financial performance and financial position as disclosed in these financial statements for<br />
the year ended 31 December 2011 could be different if prepared under the MFRS Framework.<br />
The Group and the Company consider that it is achieving its scheduled milestones and expects to be in a position to<br />
fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2012.<br />
2.4 Basis of consolidation<br />
Business combinations from 1 January 2011<br />
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at<br />
the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial<br />
statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like<br />
transactions and events in similar circumstances.<br />
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions<br />
are eliminated in full.<br />
Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and<br />
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisitionrelated<br />
costs are recognised as expenses in the periods in which the costs are incurred and the services are received.<br />
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification<br />
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the<br />
acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.<br />
MALAYSIA SMELTING CORPORATION (43072-A) • ANNUAL REPORT 2011 87