Annual Report 2007 - Hmdatalink.com hm datalink

Notes to the consolidated financial statementsfor the year ended 31 December 20074. SIGNIFICANT ACCOUNTING POLICIES (Continued)(d)InventoriesInventories are stated at the lower of cost and net realisable value. Cost, which comprises all costsof purchase and, where applicable, cost of conversion and other costs that have been incurred inbringing the inventories to their present location and condition, is calculated using the weightedaverage method. Net realisable value represents the estimated selling price in the ordinary course ofbusiness less the estimated costs of completion and the estimated costs necessary to make the sale.(e)Foreign currenciesIn preparing the financial statements of each individual group entity, transactions in currencies otherthan the functional currency of that entity (foreign currencies) are recorded in its functional currency(i.e. the currency of the primary economic environment in which the entity operates) at the rates ofexchanges prevailing on the dates of the transactions. At each balance sheet date, monetary itemsdenominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.Non-monetary items carried at fair value that are denominated in foreign currencies are retranslatedat the rates prevailing on the date when the fair value was determined. Non-monetary items that aremeasured in terms of historical cost in a foreign currency are not retranslated.Exchange differences arising on the settlement of monetary items, and on the translation of monetaryitems, are recognised in income statement in the period in which they arise, except for exchangedifference arising on a monetary item that forms part of the Company’s net investment in a foreignoperation, in which case such exchange differences are recognised in equity in the consolidatedfinancial statements. Exchange differences arising on the retranslation of non-monetary items carriedat fair value are included in income statement for the period except for differences arising on theretranslation of non-monetary items in respect of which gains and losses are recognised directly inequity, in which cases, the exchange differences are also recognised directly in equity.For the purposes of presenting the consolidated financial statements, the assets and liabilities ofthe Group’s foreign operations are translated into the presentation currency of the Company (i.e.Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their incomeand expenses are translated at the average exchange rates for the year, unless exchange ratesfluctuate significantly during the period, in which case, the exchange rates prevailing at the dates oftransactions are used. Exchange differences arising, if any, are recognised as a separate component ofequity (the translation reserve). Such exchange differences are recognised in income statement in theperiod in which the foreign operation is disposed of.GEELY AUTOMOBILE HOLDINGS LIMITED66ANNUAL REPORT 2 0 0 7