Illustrative Financial Statements 2011 - bdo singapore

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ABC SINGAPORE LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER <strong>2011</strong> (Continued) FRS 1: 112, 117 2. Summary of significant accounting policies (Continued) 2.12 Investment property (Continued) Commentary FRS 40: 75(c) FRS 1: 113 FRS 40: 6 FRS 40: 75(b) FRS 40: 30, 34 (i) When judgement is required to determine the portions of investment property, owner-occupied property and property held for sale in the ordinary course of business, the entity shall disclose the criteria used to distinguish them and the judgements involved. (ii) A property interest that is held by a lessee under an operating lease may be classified and accounted for as an investment property, if and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model to account for the asset recognised. Once this classification is selected for the property held under the operating lease, all properties classified as investment property shall be accounted for using the fair value model. The entity shall disclose in what circumstances that the property interests held under operating leases are classified and accounted for as investment property. (iii) The entity can choose to apply the fair value model or the cost model to its investment property with the exception where the entity, as a lessee, classifies a property interest held by it under an operating lease as investment property. Then where the entity chooses to apply the cost model to its investment property, the following accounting policy may be adopted: FRS 40: 56 FRS 40: 79(a), (b) FRS 40: 79(e) Investment property, which is property held to earn rentals and/or for capital appreciation is initially recognised at cost and subsequently carried at cost less accumulated depreciation and impairment losses. Depreciation is charged, using the straight-line method, so as to write off the cost over their estimated useful lives of [ ] years. The residual values, useful lives and depreciation method of investment properties are reviewed and adjusted as appropriate, at the end of each financial year. The effects of any revision are included in profit or loss when the changes arise. (iv) Under the cost model, the fair value of investment property shall be disclosed at the end of each financial year. In exceptional cases where the entity cannot determine the fair value of investment property reliably, it shall disclose: (a) A description of the investment property; (b) An explanation of why fair value cannot be determined reliably; and (c) If possible, the range of estimates within fair value is highly likely to lie. 2.13 Intangible assets Goodwill FRS 103: 51 FRS 103: 54 FRS 36: 80 FRS 36: 90 FRS 36: 124 Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. 40 | P a g e
ABC SINGAPORE LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER <strong>2011</strong> (Continued) FRS 1: 112, 117 2. Summary of significant accounting policies (Continued) 2.13 Intangible assets (Continued) Goodwill (Continued) FRS 36: 86(a) FRS 28: 23(a) FRS 28: 23(b) On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of gain or loss on disposal. Goodwill on associates is included in the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. Computer software FRS 38: 24, 27 FRS 38: 74 FRS 38: 97 Acquired computer software licences are initially capitalised at cost which includes the purchase price (net of any discounts and rebates) and other directly attributable costs of preparing the software for its intended use. Direct expenditure which enhances or extends the performance of computer software beyond its specifications and which can be reliably measured is added to the original cost of the software. Costs associated with maintaining computer software are recognised as an expense as incurred. Computer software licences are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of 3 years. Research and development FRS 38: 54 FRS 38: 57 FRS 38: 65 FRS 38: 97 FRS 38: 104 Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised, if, any only if, all the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible assets; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. The amortisation period and amortisation method of intangible assets other than goodwill are reviewed at least at end of each financial year. The effects of any revision are recognised in profit or loss when the changes arise. 41 | P a g e
Page 1 and 2: 24 ILLUSTRATIVE FINANCIAL STATEMENT
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