2003 - KNM Steel Sdn Bhd

KNM GROUP BERHAD (521348-H)NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003(k)Capitalisation of Borrowing CostsBorrowing costs incurred on gross amount due from contract customers are capitalised. The amount ofborrowing costs eligible for capitalisation is the actual borrowing cost incurred on borrowings madespecifically for the purpose of financing gross amount due from contract customers.Capitalisation of borrowing costs will cease when the assets are ready for their intended use.(l)Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquidinvestments which have an insignificant risk of changes in value. For the purpose of the cash flowstatement, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.(m)ImpairmentThe carrying amount of the Group’s assets, other than inventories (refer Note 1(h)), assets arising fromconstruction contracts, deferred tax assets and financial assets (other than investments in subsidiaries andassociates), are reviewed at each balance sheet date to determine whether there is any indication ofimpairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment lossis recognised whenever the carrying amount of an asset or the cash-generating unit to which it belongsexceeds its recoverable amount. Impairment losses are recognised in the income statement, unless theasset is carried at a revalued amount, in which case the impairment loss is charged to equity.The recoverable amount is the greater of the asset’s net selling price and its value in use. In assessing valuein use, estimated future cash flows are discounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money and the risks specific to the asset. For anasset that does not generate largely independent cash inflows, the recoverable amount is determined forthe cash-generating unit to which the asset belongs.In respect of other assets, an impairment loss is reversed if there has been a change in the estimates usedto determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’scarrying amount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised. The reversal is recognised in the incomestatement, unless it reverses an impairment loss on a revalued asset, in which case it is taken to equity.(n)Employee BenefitsObligations for contributions to defined contribution plans are recognised as an expense in the incomestatement as incurred.(o)LiabilitiesBorrowings and trade and other payables are stated at cost.2003 ANNUAL REPORT39