notes to the financial statements - Food Empire Holdings Limited

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
For the year ended 31 December 2012
2. Summary of significant accounting policies (cont’d)
2.14 Impairment of financial assets (cont’d)
(c)
Available-for-sale financial assets (cont’d)
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial
assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the
difference between the amortised cost and the current fair value, less any impairment loss on that investment previously
recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the
asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The
interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases
and the increases can be objectively related to an event occurring after the impairment loss was recognised in profit or loss,
the impairment loss is reversed in profit or loss.
2.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and cash with banks or financial institutions, including fixed deposits and shortterm,
highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of
changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.
2.16 Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location
and condition are accounted for as follows:
• Raw materials: costs of direct materials and goods purchased for resale are stated on a weighted average basis
• Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based
on normal operating capacity. These costs are assigned on a weighted average basis.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to
the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
2.17 Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of the obligation
can be estimated reliably.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that
an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value
of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the
liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
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