Contents - Genting Group
Contents - Genting Group
Contents - Genting Group
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GENTING BERHAD • Annual Report 2001<br />
3. SIGNIFICANT ACCOUNTING POLICIES (Cont'd)<br />
Investments (Cont'd)<br />
Investments in subsidiary companies are eliminated on consolidation while investments in associated companies are<br />
accounted for by the equity method of accounting.<br />
Associated companies are companies in which the <strong>Group</strong> exercises significant influence. Significant influence is the power<br />
to participate in the financial and operating policy decisions of the associated companies but not control over those policies.<br />
Unrealised gains on transactions between the <strong>Group</strong> and its associated undertakings are eliminated to the extent of the<br />
<strong>Group</strong>'s interest in the associated undertakings; unrealised losses are also eliminated unless the transaction provides<br />
evidence of impairment on the assets transferred.<br />
Equity accounting involves recognising in the income statement the <strong>Group</strong>'s share of the associated companies' results for<br />
the financial year. The <strong>Group</strong>'s interest in associated companies is stated at cost net of goodwill written off plus adjustments<br />
to reflect changes in the <strong>Group</strong>'s share of the net assets of the associated companies.<br />
Short term quoted investments are stated at the lower of cost and market value, determined on a portfolio basis by comparing<br />
aggregate cost against aggregate market value. Money market instruments are stated at the lower of cost and net realisable<br />
value.<br />
Exploration Cost<br />
Exploration cost is accounted for in accordance with the full cost method. Under this method, all costs relating to the<br />
exploration activities are capitalised when incurred. Where it is determined that the exploration activities will not yield significant<br />
oil and gas discoveries, the related exploration cost will be written off to the income statement.<br />
Goodwill<br />
Goodwill arising on consolidation which represents the excess of the purchase price over the fair value of the net assets of<br />
the subsidiary/associated companies at the date of acquisition, is written off to the income statement in the financial year of<br />
acquisition.<br />
Inventories<br />
Inventories are stated at the lower of cost and net realisable value. Cost includes, where relevant appropriate proportions of<br />
overheads and is determined on a weighted average basis. Net realisable value is the estimate of the selling price in the<br />
ordinary course of business, less costs to completion and selling expenses. Allowance is made for obsolete and slow<br />
moving inventories in determining net realisable value.<br />
Receivables<br />
Receivables are carried at estimated realisable value. An allowance is made for doubtful receivables based on a review of<br />
all outstanding amounts at the financial year end. Bad debts are written off during the financial year in which they are<br />
identified.<br />
Derivative Financial Instruments<br />
Derivative financial instruments, which include interest rate swap agreements and interest rate and currency swap agreements,<br />
are used in the <strong>Group</strong>'s risk management of foreign currency and interest rate risk exposures of its financial liabilities.<br />
The <strong>Group</strong> uses interest rate swap and currency swap agreements in order to limit the <strong>Group</strong>'s exposure in relation to<br />
underlying debt instruments resulting from adverse fluctuations in interest rates or foreign currency exchange rates and to<br />
diversify sources of funding.<br />
Hedge accounting principles are applied for the accounting of the underlying exposures and their respective hedge derivative<br />
instruments. The related interest differentials paid or received under the swap agreements are recognised over the terms of<br />
the agreements in interest expense. The underlying foreign currency liabilities, which have been effectively hedged by<br />
currency swap agreements, and designated as a hedge, are translated in the respective hedged currencies, at their prevailing<br />
rates as at the reporting date.<br />
Provision for Retirement Gratuities<br />
In 1991, the Board introduced a retirement gratuity scheme for executives and executive directors of the Company and<br />
certain subsidiary companies. The level of retirement gratuities payable is determined by the Board and is based either on<br />
length of service and basic salary or the immediate past three years' emoluments.<br />
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