Eng - IOI Group

Notes To The Financial Statements cont’d5. SIGNIFICANT ACCOUNTING POLICIES cont’d5.2 Foreign Currency cont’d5.2.2 Foreign currency transaction and translationsA foreign currency transaction is recorded, on initial recognition in the functional currency, by applying to the foreign currencyamount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.At each balance sheet date, foreign currency monetary items are translated using the closing rate. Non-monetary itemsthat are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of thetransaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchangerates at the date when the fair value was determined.Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different fromthose at which they were translated on initial recognition during the period or in previous financial statements are recognisedin the income statement in the period in which they arise.Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operationare recognised in the income statement of the Company or the individual financial statements of the foreign operation, asappropriate.In the consolidated financial statements, such exchange differences are recognised initially in the foreign currency translationreserve except for a monetary item that is denominated in a currency other than the functional currency of either the reportingentity or the foreign operation, which exchange differences is recognised in the consolidated income statements. On disposalof the foreign operation, the cumulative amount of the exchange differences relating to the foreign operation is recognisedin the consolidated income statements when the gain or loss on disposal is recognised.For consolidation purpose, the assets and liabilities of foreign operations are translated into Ringgit Malaysia at exchangerates closely approximating to those ruling at the balance sheet date. Income statement items are translated at averageexchange rates for the financial year. All exchange differences arising on translation are included in the foreign currencytranslation reserve until the disposal of the net investment.Goodwill and fair value adjustments arising on the acquisition of a foreign operation on or after 1 January 2006 are treatedas assets and liabilities of the foreign operation and are recorded in the functional currency of the foreign operation andtranslated at closing rate at the balance sheet date.Goodwill and fair value adjustments which arose on the acquisition of a foreign operation prior to 1 January 2006, weredeemed to be assets and liabilities of the parent company and are recorded in the functional currency of the parent companyand translated at rate prevailing at the date of acquisitions.IOI Corporation BerhadANNUAL REPORT 2007 150