Notes to Financial Statements

More documents

Recommendations

Info

42Middle East Development Singapore Ltd.Annual Report 2008Notes to Financial Statements30 June 20082 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)LEASES (Cont’d)The Group as lesseeAssets held under fi nance leases are recognised as assets of the Group at their fair value at the inception of thelease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessoris included in the balance sheet as a fi nance lease obligation. Lease payments are apportioned between fi nancecharges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balanceof the liability. Finance charges are charged directly to profi t or loss unless they are directly attributable to qualifyingassets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (seebelow).Rental payable under operating leases are charged to profi t or loss on a straight–line basis over the term of therelevant lease unless another systematic basis is more representative of the time pattern in which economic benefi tsfrom the leased asset are consumed. Contingent rentals arising under operating leases are recognised as anexpense in the period in which they are incurred.In the event that lease incentives are received to enter into operating leases, such incentives are recognised as aliability. The aggregate benefi t of incentives is recognised as a reduction of rental expense on a straight–line basis,except where another systematic basis is more representative of the time pattern in which economic benefi ts fromthe leased asset are consumed.INVENTORIES – Inventories are stated at the lower of cost or net realisable value. Cost comprises direct materialsand, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventoriesto their present location and condition. Cost is calculated using the weighted average method. Net realisable valuerepresents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing,selling and distribution.PROPERTY, PLANT AND EQUIPMENT – Property, plant and equipment are stated at cost less accumulateddepreciation and any accumulated impairment losses.Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight–linemethod, on the following bases:Leasehold land and building – over the term of lease which is 3.6% to 4.5%Leasehold improvements – 10%Motor vehicles – 10% to 40%Plant and equipment – 10% to 100%The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect ofany changes in estimate accounted for on a prospective basis.Assets held under fi nance lease arrangements are depreciated over their expected useful lives on the same basis asowned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the assetshall be fully depreciated over the shorter of the lease term and its useful life.The gain or loss arising from the disposal or retirement of an item of property, plant and equipment asset isdetermined as the difference between the sales proceeds and the carrying amounts of the asset and is recognisedin profi t or loss.IMPAIRMENT OF ASSETS – At each balance sheet date, the Group reviews the carrying amounts of its assets todetermine whether there is any indication that those assets have suffered an impairment loss. If any such indicationexists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss (ifany). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates therecoverable amount of the cash–generating unit to which the asset belongs.
Middle East Development Singapore Ltd.Annual Report 2008 43Notes to Financial Statements30 June 20082 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)IMPAIRMENT OF ASSETS (Cont’d)Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, theestimated future cash fl ows are discounted to their present value using a pre–tax discount rate that refl ects currentmarket assessments of the time value of money and the risks specifi c to the asset.If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, thecarrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. Impairment losses arerecognised as an expense immediately in profi t and loss.Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) isincreased to the revised estimate of its recoverable amount, but only to the extent that the increased carryingamount does not exceed the carrying amount that would have been determined had no impairment loss beenrecognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognisedimmediately in profi t and loss.ASSOCIATES - An associate is an entity over which the group has signifi cant infl uence and that is neither asubsidiary nor an interest in a joint venture. Signifi cant infl uence is the power to participate in the fi nancial andoperating policy decisions of the investee but is not control or joint control over those policies.The results and assets and liabilities of associates are incorporated in these fi nancial statements using the equitymethod of accounting, except when the investment is classifi ed as held for sale, in which case it is accountedfor under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method,investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisitionchanges in the Group’s share of the net assets of the associate, less any impairment in the value of individualinvestments. Losses of an associate in excess of the Group’s interest in that associate (which includes any longterminterests that, in substance, form part of the Group’s net investment in the associate) are not recognised,unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate.Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifi able assets, liabilitiesand contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. Thegoodwill is included within the carrying amount of the investment and is assessed for impairment as part of theinvestment. Any excess of the Group’s share of the net fair value of the identifi able assets, liabilities and contingentliabilities over the cost of acquisition, after reassessment, is recognised immediately in profi t or loss.Where a group entity transacts with an associate of the Group, profi ts and losses are eliminated to the extent of theGroup’s interest in the relevant associate.PROVISIONS – Provisions are recognised when the Group has a present obligation (legal or constructive) as a resultof a past event it is probable that the Group will be required to settle that obligation, and a reliable estimate can bemade of the amount of the obligation.The amount recognised as a provision is the best estimate of the consideration required to settle the presentobligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount isthe present value of those cash fl ows.When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a thirdparty, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and theamount of the receivable can be measured reliably.WARRANTIES – Provisions for warranty costs are recognised at the date of sales of the relevant products, at themanagement’s best estimate of the expenditure required to settle the Company’s obligation.
Page 2: Mission & VisionThe Building Proble
Page 8 and 9: 0Middle Middle East East Developmen
Page 10 and 11: 0Middle East Development Singapore
Page 84 and 85: Notes :1. A Shareholder entitled to
Page 86 and 87: This page has been intentionally le

Notes to Financial Statements

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?