Change - S P Setia Berhad

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94 Annual report 2008 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2008 1. SIGNIFICANT ACCOUNTING POLICIES (cont’d) (w) Employee benefits (cont’d) (iii) Share-based payment transactions The Group operates an equity-settled share-based compensation plan for its employees. The fair value of share options granted to employees is recognised as an employee cost over the vesting period with a corresponding increase in the share option reserve within equity. The amount to be expensed over the vesting period is determined by reference to the fair value of the share options at the date of the grant. The fair value of the share option is computed using the binomial model. The fair value of share options recognised in the share option reserve is transferred to share premium when the share option is exercised, or transferred directly to unappropriated profit when the share option expires or lapses. (x) Borrowing costs Borrowing costs incurred on assets under development that take a substantial period of time for completion are capitalised into the carrying value of the assets. Capitalisation of borrowing costs ceases when that assets are completed or during extended periods when active development is interrupted. All other borrowing costs are charged to the income statement in the period in which they are incurred. The interest component of hire purchase payments is charged to the income statement over the hire purchase period so as to give a constant periodic rate of interest on the remaining tenure of the hire purchase liabilities. (y) Taxation The tax expense in the income statement represents the aggregate amount of current tax and deferred tax included in the determination of profit or loss for the financial year. On the balance sheet, a deferred tax liability is recognised for taxable temporary differences while a deferred tax asset is recognised for deductible temporary differences and unutilised tax losses only to the extent that it is probable that taxable profit will be available in future against which the deductible temporary differences and tax losses can be utilised. No deferred tax is recognised for temporary differences arising from the initial recognition of: (i) (ii) goodwill, or an asset or liability which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit. Deferred tax assets and liabilities are measured based on tax consequences that would follow from the manner in which the asset or liability is expected to be recovered or settled, and based on tax rates enacted or substantively enacted by the balance sheet date that are expected to apply to the period when the asset is realised or when the liability is settled. Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are credited or charged, whether in the same or a different period, directly to equity. (z) Cash equivalents Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. For the purposes of the cash flow statements, cash and cash equivalents are presented net of bank overdrafts and exclude fixed deposits, sinking fund accounts and escrow accounts pledged to secure banking facilities.
95 S P <strong>Setia</strong> <strong>Berhad</strong> Group NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 OCTOBER 2008 1. SIGNIFICANT ACCOUNTING POLICIES (cont’d) (aa) Financial instruments A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. (i) Financial instruments recognised in the balance sheet The Group’s financial instruments which are recognised in the balance sheet comprise cash and cash equivalents, other investments, receivables, payables, bank borrowings, hire purchase liabilities, redeemable serial bonds and ordinary shares. These financial instruments are recognised when a contractual relationship has been established. The accounting policies and methods adopted, including the basis of measurement applied are disclosed above, where relevant. The information about the extent and nature of these recognised financial instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows are disclosed in the respective notes below, where applicable. (ii) Financial instruments not recognised in the balance sheet The Group and the Company have provided corporate guarantees to banks for credit facilities granted to jointly controlled entities and subsidiary companies, respectively, which represent present obligations existing at the balance sheet date. The corporate guarantees are not recognised in the financial statements at inception because it is not probable that an outflow of economic benefits will be required to settle the obligations. (ab) Segment reporting Segment revenue, expense, assets and liabilities are those amounts resulting from operating activities of a segment that are directly attributable to the segment and a relevant portion that can be allocated on a reasonable basis to the segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment. (ac) Disclosure of fair value Cash and cash equivalents, trade and other receivables, trade and other payables, short term investments and short term borrowings The carrying amounts of these financial instruments approximate fair values because of their short maturities. Long term investments The fair value of quoted investments is estimated based on quoted market price. For unquoted investments, a reasonable estimate of fair value is not practical due to the lack of comparable quoted market prices and available market data for valuation. Therefore, such investments are valued at cost subject to review for diminution in value. Long term borrowings, redeemable serial bonds and debts The carrying amounts of the Group’s long term floating-rate borrowings approximate fair value. The fair value of the Group’s long term fixed-rate borrowings and debts is estimated using discounted cash flow analyses, based on current market interest rates available to the Group for similar types of lending and borrowing arrangements. Hire purchase and finance lease liabilities The fair value of the Group’s hire purchase and finance lease liabilities approximate their carrying amounts.
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embracing Change Annual Report 2008
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1 S P Setia Berhad Group Table of c
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3 S P Setia Berhad Group CORPORATE
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15 S P Setia Berhad Group CHAIRMAN
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23 S P Setia Berhad Group REVIEW OF
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group directory HEAD OFFICE S P SET
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Change - S P Setia Berhad

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