AR for 2008 - Abterra

46 ABTERRA
Annual Report 2008
NOTES TO THE FINANCIAL STATEMENTS
For the financial period ended 31 December 2008
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.9 Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid
investments readily convertible to known amounts of cash and subject to insignificant risk of changes
in values.
Cash and cash equivalents comprise of cash balances and bank deposits. For the purpose of the
statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are
repayable on demand and which form an integral part of the Group’s cash management.
2.10 Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest method, less allowance for impairment. An allowance for impairment
of trade and other receivables is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of the receivables. The amount of the
allowance is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. The amount of the allowance is
recognised in the income statement.
2.11 Inventories
Inventories are valued at the lower of cost and net realisable value. Cost includes materials, all direct
expenditure and an attributable proportion of overheads, determined on a first-in, first-out basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost
of completion and the estimated costs necessary to make the sale.
Impairment losses are made for deteriorated, damaged, expired and slow-moving inventories.
2.12 Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised
cost, using the effective interest method.
2.13 Operating leases
Leases of property, plant and equipment where a significant portion of the risks and rewards of ownership
are retained by the lessor are classified as operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are recognised in the income statement on a straight-line
basis over the period of the lease.
When an operating lease is terminated before the lease period has expired, any payment required to
be made to the lessor by way of penalty is recognised as an expense in the period in which termination
takes place.