cont'd - KNM Steel Sdn Bhd

KNM GROUP BERHAD I Annual Report 201265Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(f)Intangible assets (cont’d)(ii)Other intangible assetsIntangible assets, other than goodwill, that are acquired by the Group, which have finite useful lives,are stated at cost less any accumulated amortisation and any accumulated impairment losses.The fair value of technology and marketing related intangible assets acquired in a businesscombination is based on the discounted estimated royalty payments that have been avoided as aresult of the intangible assets being owned. The fair value of customer related intangible assetsacquired in a business combination is determined using the multi-period excess earnings method,whereby the subject assets is valued after deducting a fair return on all other assets that are partof creating the related cash flows.The fair value of other intangible assets is based on the discounted cash flows expected to bederived from the use and eventual sale of the assets.(iii)Subsequent expenditureSubsequent expenditure is capitalised only when it increases the future economic benefits embodiedin the specific asset to which it relates. All other expenditure, including expenditure on internallygenerated goodwill and brands, is recognised in profit or loss as incurred.(iv)AmortisationGoodwill and intangible assets with indefinite useful lives are tested for impairment annually andwhenever there is an indication that they may be impaired.Other intangible assets are amortised from the date that they are available for use.Amortisation of intangible assets is recognised in profit or loss on a straight-line basis over theestimated useful lives of intangible assets from the date that they are available for use.The estimated useful lives for the current and comparative periods are as follows:• Technology related intangible asset 5 - 15 years• Customer and marketing related intangible asset 1 - 20 yearsAmortisation methods, useful lives and residual values are reviewed at the end of each reportingperiod and adjusted, if appropriate.(g)InventoriesInventories are measured at the lower of cost and net realisable value.The cost of raw materials, tools and consumables is determined on a first-in first-out principle and includesthe cost of direct materials and incidental costs in bringing these inventories to their existing locationand condition. In the case of work-in-progress and finished goods, cost includes an appropriate shareof production overheads based on normal operating capacity.Net realisable value is the estimated selling price in the ordinary course of business, less the estimatedcosts of completion and the estimated costs necessary to make the sale.The fair value of inventories acquired in a business combination is determined based on its estimatedselling price in the ordinary course of business less the estimated costs of completion and sale, and areasonable profit margin based on the effort required to complete and sell the inventories.