Eng - IOI Group

Notes To The Financial Statements cont’d5. SIGNIFICANT ACCOUNTING POLICIES cont’d5.10 InventoriesInventories are stated at the lower of cost and net realisable value.Cost is determined on a first-in first-out or weighted average basis. Cost comprises the original cost of purchase plus the costof bringing the inventories to their intended location and condition. The cost of produce and finished goods includes the costof raw materials, direct labour and a proportion of production overheads.Inventories of completed development properties are stated at the lower of cost and net realisable value. Cost is determinedon a specific identification basis and includes land, all direct building costs and other related development costs.Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completionand selling expenses.5.11 Cash and Cash EquivalentsCash and cash equivalents include cash and bank balances, bank overdrafts, deposits and other short term, highly liquidinvestments and short term funds with maturity of less than three months which have an insignificant risk of changes in value.5.12 GoodwillGoodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiableassets, liabilities and contingent liabilities of the acquiree.Goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewedfor impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may beimpaired. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.5.13 Impairment of Non-financial AssetsThe carrying values of assets, other than inventories, deferred tax assets, assets arising from construction contracts, assetsarising from employee benefits and financial assets (other than investment in subsidiaries, associates, and jointly controlledentity) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indicationexists, impairment is measured by comparing the carrying value of the assets with their recoverable amounts.For goodwill, the recoverable amount is estimated at each balance sheet date or more frequently when indicators ofimpairment are identified.155ANNUAL REPORT 2007IOI Corporation Berhad