Astral Foods Annual Report 2008

ACCOUNTING POLICIES (continued)for the year ended 30 September 200824. LEASESLeases of property, plant and equipment, where the group has substantially all the risks and rewards of ownership,are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair valueof the leased property and the present value of the minimum lease payments. Each lease payment is allocatedbetween the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. Thecorresponding rental obligations, net of finance charges, are included in other long-term payables. The interestelement of the finance cost is charged to the income statement over the lease period so as to produce a constantperiodic rate of interest on the remaining balance of the liability for each period. The property, plant andequipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the leaseterm.Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operatingleases. Payments made under operating leases are charged to the income statement on a straight-line basis overthe period of the lease.25. DIVIDEND DISTRIBUTIONDividend distribution to the company’s shareholders is recognised as a liability in the group’s financial statements inthe period in which the shareholders are entitled to the dividend.26. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSThe preparation of the financial statements in accordance with IFRS requires the use of certain critical accountingestimates. It requires management to exercise judgment in the process of applying the group’s accounting policies.The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates aresignificant to the financial statements, are mainly the following;Impairment of trade receivablesA provision for impairment is established when there is evidence of significant financial difficulties of the debtor,probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency inpayments.Impairment of goodwillGoodwill is assessed for impairment at each reporting date. The recoverable amount of the relevant cashgeneratingunits is determined based on value-in-use calculations. These calculations use cash flow projections perbudgets and strategic plan forecasts. These plans are revisited every year and are compiled after consideringmarket conditions and the strategic positioning of the business units within the markets in which they operate.Estimation of useful lives of property, plant and equipment and intangible assetsThe assets’ residual values and useful lives are reviewed annually and adjusted if appropriate, taking into accounttechnology developments and maintenance programmes. Uniform depreciation and amortisation rates areestablished based on the straight-line method which may not represent the actual usage of the assets. An asset’scarrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greaterthan its estimated recoverable amount.Fair value assessment of biological assetsThe determination of fair value is based on active market values, where appropriate, or management’s assessmentof the fair value based on available data and benchmark statistics.Astral Foods Annual Report 2008Fair value of retirement benefitsThe fair value calculation is based on the most recent relevant economic data available. The key estimates andassumptions relating to these areas are disclosed in the relevant note to the financial statements.Inventory net realisable valueInventory net realisable value is based on estimates of future market conditions and the ability to recover the costof inventory.52