cont'd - KNM Steel Sdn Bhd

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<strong>KNM</strong> GROUP BERHAD I Annual Report 201259Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(a)Basis of consolidation (cont’d)(viii) Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income and expenses arising fromintra-group transactions, are eliminated in preparing the consolidated financial statements.Unrealised gains arising from transactions with associates are eliminated against the investmentto the extent of the Group’s interest in the associates. Unrealised losses are eliminated in thesame way as unrealised gains, but only to the extent that there is no evidence of impairment.(b)Foreign currency(i)Foreign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of Groupentities at exchange rates at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the end of the reporting periodare retranslated to the respective functional currencies of Group entities at the exchange rate atthat date.Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at theend of the reporting date except for those that are measured at fair value are retranslated to thefunctional currency at the exchange rate at the date that the fair value was determined.Foreign currency differences arising on retranslation are recognised in profit or loss, except fordifferences arising on the retranslation of available-for-sale equity instruments or a financialinstrument designated as a hedge of currency risk, which are recognised in other comprehensiveincome.(ii)Operations denominated in functional currencies other than Ringgit Malaysia (RM)The assets and liabilities of operations in functional currencies other than RM, including goodwilland fair value adjustments arising on acquisition, are translated to RM at exchange rates at theend of the reporting period. The income and expenses of foreign operations are translated to RMat exchange rates at the dates of the transactions.Foreign currency differences are recognised in other comprehensive income and accumulatedin the foreign currency translation reserve (“FCTR”) in equity. However, if the operation is a nonwholly-ownedsubsidiary, then the relevant proportionate share of the translation difference isallocated to the non-controlling interests. When a foreign operation is disposed of such control,significant influence or joint control is lost, the cumulative amount in the FCTR related to thatforeign operation is reclassified to profit or loss as part of the profit or loss on disposal.When the Group disposes of only part of its interest in a subsidiary that includes a foreign operationwhile retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrollinginterests. When the Group disposes of only part of its investment in an associate orjoint venture that includes a foreign operation while retaining significant influence or joint control,the relevant proportion of the cumulative amount is reclassified to profit or loss.In the consolidated financial statements, when settlement of a monetary item receivable fromor payable to a foreign operation is neither planned nor likely in the foreseeable future, foreignexchange gains and losses arising from such a monetary item are considered to form part of anet investment in a foreign operation and are recognised in other comprehensive income, and arepresented in the FCTR within equity.
60<strong>KNM</strong> GROUP BERHAD I Annual Report 2012Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(c)Financial instruments(i)Initial recognition and measurementA financial assets or a financial liability is recognised in the statement of financial position when,and only when, the Group or the Company becomes a party to the contractual provisions of theinstrument.A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrumentnot at fair value through profit or loss, transaction costs that are directly attributable to the acquisitionor issue of the financial instrument.An embedded derivative is recognised separately from the host contract and accounted for asa derivative if, and only if, it is not closely related to the economic characteristics and risks ofthe host contract and the host contract is not categorised at fair value through profit or loss. Thehost contract, in the event an embedded derivative is recognised separately, is accounted for inaccordance with policy applicable to the nature of the host contract.(ii)Financial instrument categories and subsequent measurementThe Group and the Company categorise financial instruments as follows:Financial assets(a)Financial assets at fair value through profit or lossFair value through profit or loss category comprises financial assets that are held for trading,including derivatives (except for a derivative that is a designated and effective hedginginstrument) or financial assets that are specifically designated into this category upon initialrecognition.Derivatives that are linked to and must be settled by delivery of unquoted equity instrumentswhose fair values cannot be reliably measured are measured at cost.Other financial assets categorised as fair value through profit or loss are subsequentlymeasured at their fair values with the gain or loss recognised in profit or loss.(b)Loans and receivablesLoans and receivables category comprises debt instruments that are not quoted in an activemarket, trade and other receivables and cash and cash equivalents.Financial assets categorised as loans and receivables are subsequently measured atamortised cost using the effective interest method.(c)Available-for-sale financial assetsAvailable-for-sale category comprises investment in equity and debt securities instrumentsthat are not held for trading.Investments in equity instruments that do not have a quoted market price in an active marketand whose fair value cannot be reliably measured are measured at cost.
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