Osim FR 050407.indd

Notes to the Financial Statements - 31 December 2006 (cont’d)2. Summary of significant accounting policies (cont’d)2.3 Significant accounting estimates and judgments (cont’d)b) Critical judgements made in applying accounting policiesThe following is the judgement made by management in the process of applying the Group’s accounting policies thathave the most signifi cant effect on the amounts recognised in the fi nancial statements:Impairment of financial assetsThe Group follows the guidance of FRS 39 on determining when a fi nancial asset is considered impaired. Thisdetermination requires signifi cant judgement. The Group evaluates, among other factors, the duration and extent towhich the fair value of a fi nancial asset is less than its cost; and the fi nancial health of and the near-term businessoutlook of the issuer of the instrument, including factors such as industry performance, changes in technology andoperational and fi nancing cash fl ows.2.4 Functional and foreign currencya) Functional currencyThe management has determined the currency of the primary economic environment in which the Company operates(i.e. functional currency), to be SGD. Sales prices and major costs of providing goods and services including majoroperating expenses are primarily infl uenced by fl uctuations in SGD.b) Foreign currency transactionsTransactions in foreign currencies are measured in the respective functional currencies of the Company and itssubsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximatingthose ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translatedat the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms ofhistorical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the datewhen the fair value was determined.Exchange differences arising on the settlement of monetary items or on translating monetary items at the balancesheet date are recognised in the profi t and loss account except for exchange differences arising on monetary itemsthat form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separatecomponent of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in theconsolidated profi t and loss account on disposal of the subsidiary.Notes to the Financial Statements 87Annual Report 2006