Full Annual Report 2006 - Singapore Technologies Engineering

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Notes to the Financial Statements 31 DECEMBER 2006
(Currency – Singapore dollars unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Stocks and work-in-progress
Stocks are stated at the lower of cost (principally on the first-in, first-out basis) and net realisable value. Allowance is made
for deteriorated, damaged, obsolete and slow-moving stocks.
Work-in-progress is valued at cost less progress payments received and receivable. Cost includes all direct material
and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses. Provision for
foreseeable losses on uncompleted contracts is made in the year in which such losses are determined.
(i) Trade and other debtors
Trade and other debtors are classified as loans and receivables under FRS 39. The accounting policy for this category of
financial assets is stated in Note 2(e).
An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect
the debt. Known bad debts are written off. Further details on the accounting policy for impairment of financial assets are
stated in Note 2(k).
(j) Cash and cash equivalents
Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalents
are short-term, highly liquid investments and short-term loans to related corporations that are readily convertible to known
amounts of cash and that are subject to insignificant risk of changes in value.
For the purposes of the statement of cash flows, cash and cash equivalents are shown net of outstanding bank overdrafts.
Cash and cash equivalents carried in the balance sheets are classified as loans and receivables under FRS 39. The
accounting policy for this category of financial assets is stated in Note 2(e).
(k) Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
(i) Assets carried at amortised costs
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The
carrying amount of the asset shall be reduced either directly or through use of an amortisation account. The amount of
the loss shall be recognised in profit or loss.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If it is
determined that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the assets is included in a group of financial assets with similar credit risk characteristics and that
group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is or continues to be recognised are not included in a collective assessment of
impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.
Any subsequent reversal of an impairment loss is recognised in the statement of profit and loss, to the extent that the
carrying value of the asset does not exceed its amortised cost at the reversal date.