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TNB Financial Report 2002
30
Notes to the Financial Statements (Continued)
– 31 August 2002
2. Summary of Significant Accounting Policies (Continued)
(q)
Revenue recognition
Sales are recognised upon invoiced value of services delivered net of billing adjustments.
Other operating income earned by the Group and Company are recognised on the following bases:
Interest and leasing income:
As it accrues, unless collectibility is in doubt.
Dividend income:
When the shareholders’ right to receive payment is established.
(r)
Government development grants
Government development grants relating to the construction of property, plant and equipment are included in long term liabilities and are
credited to the income statement on a straight line basis over 15 years.
(s)
Financial instruments
Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, payables, leases and
borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.
The Group and Company are also parties to financial instruments that manage exposure to fluctuations in foreign currency exchange and
interest rate. These financial instruments, which mainly comprise foreign currency forward contracts and interest rate swap agreements, are
not recognised in the financial statements on inception. The purpose of these instruments is to reduce risk.
Financial derivatives hedging instruments are used in the Company’s risk management of foreign currency and interest rate risk exposure
of its financial liabilities. Hedge accounting principles are applied for the accounting of the underlying exposures and their hedge instruments.
The underlying foreign currency liabilities are translated at their respective hedged exchange rate, and net differentials in interest receipts
and payments arising from interest rate derivative instruments are accrued, so as to match those net differentials with the related interest
expense on the hedged liabilities. No amounts are recognised in respect of future periods.
(t)
Rural electrification and 7th Malaysia Plan Projects
Rural electrification projects are capitalised as property, plant and equipment. The cost of 7th Malaysia Plan Projects in the State of Sabah
are only capitalised and accounted for as property, plant and equipment upon receipt of formal handover documentation. The corresponding
amounts are recorded as government development grants and such grants are released to the income statement on a straight line basis
over the same period as the expected economic life of the projects.