Illustrative Financial Statements 2011 - bdo singapore

ABC SINGAPORE LIMITED AND ITS SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011 (Continued)
FRS 1: 112, 117
2. Summary of significant accounting policies (Continued)
2.15 Joint venture (Continued)
Commentary
FRS 31: 38
Jointly-controlled entities may also be consistently accounted for using the equity method and
when so, the policy described in Note 2.14 can be considered.
2.16 Impairment of tangible and intangible assets excluding goodwill
FRS 36: 9
FRS 36: 22
FRS 36: 24
FRS 36: 6
FRS 36: 30, 31
FRS 36: 59
FRS 36: 60
FRS 36: 114
FSR 36: 117
FRS 36: 119
At the end of each financial year, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use
are tested for impairment annually, and whenever there is an indication that the asset
may be impaired.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value
less costs to sell and its value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to
its recoverable amount. An impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable amount, but
so that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognised for the asset
(cash-generating unit) in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is treated as a revaluation increase.
2.17 Financial instruments
FRS 39: 14
Financial assets and financial liabilities are recognised on the Group’s consolidated
statement of financial position when the Group becomes a party to the contractual
provisions of the instrument.
Effective interest method
FRS 39: 9
The effective interest method is a method of calculating the amortised cost of a financial
instrument and allocating the interest income or expense over the relevant period. The
effective interest rate exactly discounts estimated future cash receipts or payments
(including all fees on points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected
life of the financial instrument, or where appropriate, a shorter period, to the net
carrying amount of the financial instrument. Income and expense are recognised on an
effective interest basis for debt instruments other than those financial instruments at fair
value through profit or loss.
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