EAPCC_Annual_Report_.. - Investing In Africa

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2010/2011 EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2011 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (m) Hedge accounting (continued) At the inception of the hedge relationship, a formal assessment is undertaken to ensure the hedging instrument is expected to be highly effective in offsetting the designated risk in the hedged item. Hedges are formally assessed semi-annually. A hedge is expected to be highly effective if the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated are expected to offset in a range of 80% to 125%. For situations where that hedged item is a forecast transaction, the company assesses whether the transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss. Fair value hedges For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in profit or loss in ‘other income’. Meanwhile, the change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in profit or loss in ‘other income’. If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated. For hedged items recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortised over the remaining term of the original hedge using the effective interest rate. If the hedged item is derecognised, the unamortised fair value adjustment is recognised immediately in profit or loss. Cash flow hedges For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognised in other comprehensive income and accumulated in the ‘Cash flow hedge’ reserve in equity. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in ‘other income’. When the hedged transaction affects profit or loss, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of comprehensive income. When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised when the hedged forecast transaction is ultimately recognized in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately recycled through other comprehensive income into profit or loss. (n) Dividends payable Dividends payable on ordinary shares are charged to retained earnings in the period in which they are declared. Proposed dividends are not accrued for until ratified in an <strong>Annual</strong> General Meeting. 52 EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2010/2011
EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2010/2011 NOTES TO THE FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 30 JUNE 2011 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (o) Employee benefits i) Short-term benefits Short-term benefits consist of salaries, bonuses and any non-monetary benefits such as medical aid contributions and free services. They exclude equity based benefits and termination benefits. Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under a short-term cash bonus only if the company has a present legal or constructive obligation to pay this amount as a result of past services provided by the employee and if the obligation can be measured reliably. ii) Retirement benefit costs The company operates a funded defined contribution pension scheme for senior and supervisory staff, as well as an in-house gratuity scheme for unionisable employees. The company also contributes to the statutory National Social Security Fund. This is a defined contribution scheme registered under the National Social Security Act. The company’s obligations under the scheme are limited to specific contributions legislated from time to time and are currently limited to a maximum of KShs 200 per month per employee. The company’s obligations to all staff retirement benefits schemes are charged to the profit or loss as they fall due. (p) (q) (r) Provision for employee entitlements Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave accrued at the reporting date. The company’s unionisable staff who resign or whose services are terminated either due to illness or other reasons after completion of ten years of continuous and meritorious service are entitled to twenty one days pay for each completed year of service by way of gratuity, based on the wages or salary at the time of such resignation or termination of services, as provided for in the trade union agreement. An employee who is dismissed or terminated for gross misconduct is not entitled to gratuity. The service gratuity is provided for in the financial statements at present value of benefits payable as it accrues to each employee. Mining and exploration costs All exploration costs for the mining of limestone are expensed in the period that they occur and form part of cost of sales. Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditure expected to be required to settle the obligation, discounted at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. EAST AFRICAN PORTLAND CEMENT COMPANY LIMITED ANNUAL REPORT AND FINANCIAL STATEMENTS 2010/2011 53
Page 1 and 2: EAST AFRICAN PORTLAND CEMENT COMPAN
Page 3 and 4: BUSINESS REVIEW Five Years Financia
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Page 20 and 21: Board of Directors 1 2 3 4 5 6 7 8
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