KOTRA INDUSTRIES BERHAD - Kotra Pharma

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KOTRA INDUSTRIES BERHAD (Incorporated in Malaysia) Company No. : 497632 – P NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007 5. BASIS OF PREPARATION The financial statements of the Group and of the Company are prepared under the historical cost convention and modified to include other bases of valuation as disclosed in other sections under significant accounting policies, and in compliance with applicable MASB approved accounting standards in Malaysia for Entities Other Than Private Entities and the provisions of the Companies Act, 1965. In the current financial year, the Group has adopted all the new and revised Financial Reporting Standards (“FRS”) issued by the Malaysian Accounting Standards Board which are relevant to its operations and effective for financial periods beginning on or after 1 January 2006. FRS 117 – Leases and FRS 124 - Related Party Disclosures has been issued and effective for the financial periods beginning on or after 1 October 2006 but the Group has elected to adopt these accounting standards in advance of their effective date. The adoption of these new and revised FRS does not have any material effects on the financial statements of the Group and the Company except for:- (a) (b) (c) (d) FRS 110 – Events after the Balance Sheet Date; FRS 117 – Leases; FRS 127 – Consolidated and Separate Financial Statements, and FRS 140 – Investment Property The effects of adopting the above FRS on the accounting policies are disclosed in Notes 6(g), 6(i), and 6(q) and the effects on the comparative figures are disclosed in Note 43 to the financial statements. The following revised FRS have been issued and are effective for financial periods beginning on or after 1 July 2007 and will be effective for the Group and the Company’s financial statements for the financial year ending 30 June 2008:- FRS 107 – Cash Flow Statements FRS 112 – Income Taxes FRS 118 – Revenue FRS 119 – Employee Benefits FRS 121 – The Effects of Changes in Foreign Exchange Rates FRS 134 – Interim Financial Reporting FRS 137 – Provisions, Contingent Liabilities and Contingent Assets FRS 6 – Exploration for and Evaluation of Mineral Resources has been issued and effective for the financial period beginning on or after 1 January 2007. This standard is not relevant to the Group’s operations. FRS 139 – Financial Instruments: Recognition and Measurement has been issued and the effective date has yet to be determined by MASB. This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group will apply this standard when it becomes effective. Page 21
KOTRA INDUSTRIES BERHAD (Incorporated in Malaysia) Company No. : 497632 – P NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007 6. SIGNIFICANT ACCOUNTING POLICIES (a) Critical Accounting Estimates And Judgements Estimates and judgements are continually evaluated by the directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and judgements that affect the application of the Group’s accounting policies and disclosures, and have a significant risk of causing a material adjustment to the carrying amounts of assets, liabilities, incomes and expenses are discussed below. (i) Depreciation of Plant, Property and Equipment The estimates for the residual values, useful lives and related depreciation charges for the property, plant and equipment are based on commercial and production factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions. The Group anticipates that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (ii) Income Taxes There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimate. The Group recognises tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made. (iii) Impairment of Assets When the recoverable amount of an asset is determined based on the estimate of the value-in-use of the cash-generating unit to which the asset is allocated, the management is required to make an estimate of the expected future cash flows from the cash-generating unit and also to apply a suitable discount rate in order to determine the present value of those cash flows. Page 22
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KOTRA INDUSTRIES BERHAD - Kotra Pharma

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