notes to the financial statements - Food Empire Holdings Limited

Food Empire Holdings Limited Annual Report 2012
NOTES TO THE FINANCIAL STATEMENTS (cont’d)
For the year ended 31 December 2012
2. Summary of significant accounting policies (cont’d)
2.32 Related parties (cont’d)
(iv)
(v)
(vi)
(vii)
one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
the entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related
to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company;
the entity is controlled or jointly controlled by a person identified in (a);
a person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel
of the entity (or of a parent of the entity).
3. Significant accounting estimates and judgments
The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities
at the balance sheet date. However, uncertainty about these assumptions and estimates could result in outcomes that could require
a material adjustment to the carrying amount of the asset or liability affected in the future periods.
3.1 Judgments made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those
involving estimations, which has the most significant effect on the amounts recognised in the financial statements:
(a)
Operating lease commitments – as lessor
The Group has entered into commercial property leases on its investment properties. The Group has determined, based on an
evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership
of these properties and so accounts for the contracts as operating leases.
(b)
Determination of functional currency
The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiaries.
In determining the functional currencies of the entities in the Group, judgment is required to determine the currency that
mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly
determines the sales prices of its goods and services. The functional currencies of the entities in the Group are determined
based on management’s assessment of the economic environment in which the entities operate and the entities’ process of
determining sales prices.
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