FINANCIAL STATEMENTS (Full Version) - Sembcorp

Notes to the
Financial Statements
Year Ended December 31, 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
v. Revenue Recognition (cont’d)
iv. Service Concession Arrangement (cont’d)
The Group recognises the consideration received or receivable as a financial asset to the extent that it has an
unconditional right to receive cash or another financial asset for the construction services. Financial assets are
accounted for in accordance with the accounting policy set out in Note 2(g).
The Group recognises the consideration receivable as an intangible asset to the extent that it receives a right
to charge users of the public service. Intangible assets are accounted for in accordance with the accounting
policy set out in Note 2(f).
v. Dividend and Interest Income
Dividend income is recognised in the income statement when the right to receive payment is established.
Interest income is recognised as it accrues, using the effective interest method.
vi. Rental Income
Rental income receivable under operating leases is recognised in the income statement on a straight-line basis
over the term of the lease. Lease incentives granted are recognised as an integral part of total rental income,
over the term of the lease.
w. Leases
i. Operating Lease
When entities within the Group are lessees of an operating lease
Where the Group has the use of assets under operating leases, payments made under the leases are recognised
in the income statement on a straight-line basis over the term of the lease. Lease incentives received are
recognised in the income statement as an integral part of the total lease payments made.
ii.
When entities within the Group are lessors of an operating lease
Assets subject to operating leases are included in investment properties and are stated at cost less accumulated
depreciation and impairment losses. Rental income (net of any incentives given to lessees) is recognised on a
straight-line basis over the lease term.
Finance Lease
When entities within the Group are lessors of a finance lease
Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant
periodic rate of return on the Group’s net investment outstanding in respect of the leases.
x. Finance Costs
Interest expense and similar charges are expensed in the income statement in the period in which they are incurred,
except to the extent that they are capitalised as being directly attributable to the acquisition, construction or
production of an asset which necessarily takes a substantial period of time to prepare for its intended use or
sale. The interest component of finance lease payments is recognised in the income statement using the effective
interest rate method.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
y. Segment Reporting
A segment is a distinguishable component of the Group that is engaged either in providing products or services
(business segment), or in providing products or services within a particular economic environment (geographical
segment), which is subject to risks and rewards that are different from those of other segments.
z. Assets (or Disposal Groups) Held For Sale
Non-current assets (or disposal groups) are classified as assets held for sale and measured at the lower of carrying
amount and fair value less costs to sell if they are expected to be recovered principally through a sale transaction
rather than through continuing use.
Any impairment losses on initial classification and subsequent measurement are recognised in the income
statement. Subsequent increases in fair value less costs to sell are recognised in the income statement (not
exceeding the accumulated impairment loss that has been previously recognised).
aa. Financial Guarantee Contracts
Financial guarantee contracts are accounted for as insurance contracts and treated as contingent liabilities until
such time as they become probable that the Company will be required to make a payment under the guarantee.
A provision is recognised based on the Group’s estimate of the ultimate cost of settling all claims incurred but
unpaid at the balance sheet date. The provision is assessed by reviewing individual claims and tested for adequacy
by comparing the amount recognised and the amount that would be required to settle the guarantee contract.
3. SHARE CAPITAL
Group and Company
No. of ordinary shares
2008 2007
Issued and fully paid:
At the beginning of the year 1,783,782,546 1,770,177,555
Exercise of share options 1,568,994 13,604,991
At the end of the year 1,785,351,540 1,783,782,546
a. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual
assets.
b. As at December 31, 2008, there were 10,533,580 (2007: 15,510,729) unissued ordinary shares granted under the
Company’s Share Option Plan.
c. Movements of the share capital account during the year are set out in the Consolidated Statement of Changes in
Equity.
136 Delivering Essential Solutions Sembcorp Industries Annual Report 2008 137