2010 Annual Report - Petron

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (a) Property, plant and equipment (Continued) The Directors applied the transitional provisions of FRS 116 on Property, Plant and Equipment when MASB first issued the standard in 2000, which allowed property, plant and equipment to be stated at their prevailing valuations less depreciation. The valuations were determined by independent professional valuers on the following bases: Land - Open market value based on existing use Buildings - Depreciated replacement cost No depreciation is provided on freehold land and capital projects that are in progress. Buildings and improvements and plant and equipment are depreciated on a straight-line basis to write-off the cost or valuation of the assets to their residual values, over the term of their estimated service lives. The residual values and service lives are reviewed at each balance sheet date. The principal annual rates of depreciation used are as follows: Buildings and improvements 3% - 5% Plant and equipment 4% - 10% Maintenance and repairs are charged to the income statement as incurred. Major renewals and improvements are capitalised. Included in the respective property, plant and equipment classifications, is the Company's proportionate share in the joint venture assets of the Multi Product Pipeline System and related distribution terminal facilities (MPP). The Company has a 20% participating interest in the MPP. The accounting policy adopted for these jointly controlled assets is consistent with those adopted for the Company's 100% owned property, plant and equipment. (b) Financial assets The Company’s financial assets are loans and receivables. The Company has loans and receivables which are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for financial assets with maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. Such assets are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade and other receivables, amount due from related corporations and cash and cash equivalents (Note 2 (f)). (c) Impairment of assets (i) Non-financial assets The carrying amounts of assets are reviewed annually to determine whether there is any indication that the carrying amounts may not be recoverable. If such an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use and is determined for the cash generating unit to which the asset belongs. Impairment is measured by the amount the carrying value exceeds the recoverable amount. Impairment loss and its subsequent reversal are taken to the income statement. (ii) Financial assets carried at amortised cost A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes significant financial difficulty of the issuer or obligor, a breach of contract, such as a default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise and indications that a debtor will enter bankruptcy or receivership. ANNUAL REPORT & ACCOUNTS <strong>2010</strong> 39
ESSO MALAYSIA BERHAD 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (d) Operating leases Leases of assets under which a significant portion of risks and benefits of ownership over the economic life of the assets are effectively retained by the lessor are classified as operating leases. Prepaid lease rentals on service station sites made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Payments for all other operating leases are charged to the income statement in the year to which they relate. (e) Inventories Crude oil and petroleum product inventories are valued at the lower of cost and net realisable value. Cost includes all applicable purchase costs and production overheads and is determined on the first-in first-out (FIFO) basis. Materials and supplies are valued at cost, determined on a weighted average basis, and a deduction is made for obsolete and slow moving stocks. (f) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents include bank balances, deposits held at call with banks and cash in hand less bank overdrafts. To be included, these items must be readily convertible to cash and must not be subject to a significant risk of a change in value. (g) Provisions Provisions are recognised when it is probable that an outflow of resources will be required to settle a present legal or constructive obligation, and when a reliable estimate of the amount can be made. The provisions are reviewed at year end and adjusted to reflect the current best estimate. (h) Employee / separation benefits (i) Short-term employee benefits Wages, salaries, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Company. (ii) Retirement benefits (a) Defined contribution retirement plan The Company's contribution to the national defined contribution plan, the Employees Provident Fund, is recognised in the income statement as incurred. (b) Retirement benefits The Company operates an unfunded defined benefit retirement plan for its regular national employees. The liability for employees' retirement benefits is determined based on a periodic independent actuarial reappraisal of the plan assumptions. This is based on the schedule of benefits stipulated in the Company's retirement benefits plan. The most recent reappraisal was carried out in December 2009. The projected unit credit method is used to calculate the actuarial plan benefits based on the estimated years of service and employees' projected compensation during their last year of employment. The liability recognised in the balance sheet represents the present value of the defined benefit obligations adjusted for unrecognised actuarial gains or losses and past service cost. Actuarial gains or losses are amortised on a straight-line basis over the average remaining service life of employees expected to receive the plan benefits. (iii) Separation benefits Separation benefits are payments due to employees as a result of the separation from employment before the normal retirement age. The liability for separation benefits is recognised when the Company's commitment is confirmed without any realistic possibility of withdrawal. 40 ANNUAL REPORT & ACCOUNTS <strong>2010</strong>
Page 3: FINANCIAL HIGHLIGHTS 2010 2009 % RM
Page 11 and 12: CAPITAL EXPENDITURE RM MILLION TOTA
Page 13 and 14: ESSO MALAYSIA BERHAD Profile of Dir
Page 15 and 16: ESSO MALAYSIA BERHAD Corporate Citi
Page 17 and 18: ESSO MALAYSIA BERHAD Environmental
Page 20 and 21: CORPORATE GOVERNANCE The Board of D
Page 22 and 23: CORPORATE GOVERNANCE (Continued) An
Page 24 and 25: CORPORATE GOVERNANCE (Continued) In
Page 26 and 27: CORPORATE GOVERNANCE (Continued) Tr
Page 29 and 30: Meetings and Minutes (Continued) Th
Page 31 and 32: ESSO MALAYSIA BERHAD STATUTORY INFO
Page 33 and 34: ESSO MALAYSIA BERHAD STATEMENT OF C
Page 35 and 36: ESSO MALAYSIA BERHAD STATEMENT OF C
Page 37 and 38: ESSO MALAYSIA BERHAD NOTES TO THE F
Page 39: ESSO MALAYSIA BERHAD 1. BASIS OF PR
Page 43 and 44: ESSO MALAYSIA BERHAD 2. SUMMARY OF
Page 45 and 46: ESSO MALAYSIA BERHAD 5. REVENUES 20
Page 47 and 48: ESSO MALAYSIA BERHAD 12. PROPERTY,
Page 49 and 50: ESSO MALAYSIA BERHAD 16. RECEIVABLE
Page 51 and 52: ESSO MALAYSIA BERHAD 18. RETIREMENT
Page 53 and 54: ESSO MALAYSIA BERHAD 23. RESERVES 2
Page 55 and 56: ESSO MALAYSIA BERHAD 29. SUPPLEMENT
Page 57: ESSO MALAYSIA BERHAD INDEPENDENT AU

2010 Annual Report - Petron

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