Annual Report 2012 - IOI Group

NOTES TO THEFINANCIAL STATEMENTS5. SIGNIFICANT ACCOUNTING POLICIES (Continued)5.2 Foreign Currency5.2.1 Functional and presentation currencyThe separate financial statements of each entity of the Group are measured using the currency of the primaryeconomic environment in which the entity operates (“the functional currency”). The consolidated financial statementsare presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency.5.2.2 Foreign currency translation and balancesTransactions in foreign currencies are converted into the relevant functional currency at rates of exchange ruling at thetransaction dates. Monetary assets and liabilities in foreign currencies at the end of the reporting period are translatedinto the relevant functional currency at rates of exchange ruling at that date. All exchange differences arising from thesettlement of foreign currency transactions and from the translation of foreign currency monetary assets and liabilitiesare included in profit or loss in the period in which they arise. Non-monetary items initially denominated in foreigncurrencies, which are carried at historical cost are translated using the historical rate as of the date of acquisition, andnon-monetary items which are carried at fair value are translated using the exchange rate that existed when the valueswere determined for presentation currency purposes.5.2.3 Foreign operationsFinancial statements of foreign operations are translated at the end of the reporting period exchange rates with respectto their assets and liabilities, and at exchange rates at the dates of the transactions with respect to the incomestatement. All resulting translation differences are recognised as a separate component of equity.Exchange differences arising on a monetary item that forms part of the net investment of the Company in a foreignoperation shall be recognised in profit or loss in the separate financial statements of the Company or the foreignoperation, as appropriate. In the consolidated financial statements, such exchange differences shall be recognisedinitially as a separate component of equity and recognised in profit or loss upon disposal of the net investment. Whena foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognisedin profit or loss as part of the gain or loss on disposal.Goodwill and fair value adjustments to the assets and liabilities arising from the acquisition of a foreign operation aretreated as assets and liabilities of the acquired entity and translated at the exchange rate ruling at the end of thereporting period.5.3 Property, Plant and Equipment and DepreciationAll items of property, plant and equipment are initially measured at cost. Cost includes expenditure that is directly attributableto the acquisition of the items. The cost of self-constructed assets includes the cost of materials and direct labour, any othercosts directly attributable to bringing the assets to working condition for its intended use, and the costs of dismantling andremoving the items and restoring the site on which they are located.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when thecost is incurred and it is probable that future economic benefits associated with the cost will flow to the Group and the cost ofthe item can be measured reliably. The carrying amount of parts that are replaced is derecognised. The cost of the day-to-dayservicing of property, plant and equipment are charged to profit or loss during the financial period in which they are incurred.Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the itemand which have different useful lives, is depreciated separately.136IOI CORPORATION BERHADAnnual Report 2012