cont'd - KNM Steel Sdn Bhd

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<strong>KNM</strong> 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.
66<strong>KNM</strong> GROUP BERHAD I Annual Report 2012Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(h)Constructions work-in-progressConstructions work-in-progress represent the gross unbilled amount expected to be collected fromcustomers for contract work performed to date. It is measured at cost plus profit recognised to date lessprogress billing and recognised losses. Cost includes all expenditure related directly to specific projectsand an allocation of fixed and variable overheads incurred in the Group’s contract activities based onnormal operating capacity.Construction work-in-progress is presented as part of “trade and other receivables” as “amount due fromcontract customers” in the statement of financial position for all contracts in which costs incurred plusrecognised profits exceed progress billings. If progress billings exceed costs incurred plus recognisedprofits, then the difference is presented as “amount due to contract customers” which is part of the“deferred income” in the statement of financial position.(i)Cash and cash equivalentsCash and cash equivalents consist of cash in hand, balances and deposits with banks and financialinstitutions, and are used by the Group and the Company in the management of their short termcommitments. For the purpose of the statement of cash flows, cash and cash equivalents are presentednet of bank overdrafts and pledged deposits.(j)Impairment(i)Financial assetsAll financial assets (except for financial assets categorised as fair value through profit or loss,investments in subsidiaries, associates and jointly-controlled entities) are assessed at eachreporting date whether there is any objective evidence of impairment as a result of one or moreevents having an impact on the estimated future cash flows of the asset. Losses expected as aresult of future events, no matter how likely, are not recognised. For an investment in an equityinstrument, a significant or prolonged decline in the fair value below its cost is an objective evidenceof impairment. If any such objective evidence exists, then the financial asset’s recoverable amountis estimated.An impairment loss in respect of loans and receivables is recognised in profit or loss and is measuredas the difference between the asset’s carrying amount and the present value of estimated futurecash flows discounted at the asset’s original effective interest rate. The carrying amount of theasset is reduced through the use of an allowance account.An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss andis measured as the difference between the asset’s acquisition cost (net of any principal repaymentand amortisation) and the asset’s current fair value, less any impairment loss previously recognised.Where a decline in the fair value of an available-for-sale financial asset has been recognised in theother comprehensive income, the cumulative loss in other comprehensive income is reclassifiedfrom equity and recognised to profit or loss.An impairment loss in respect of unquoted equity instrument that is carried at cost is recognisedin profit or loss and is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows discounted at the current market rate of return for asimilar financial asset.Impairment losses recognised in profit or loss for an investment in an equity instrument classifiedas available for sale is not reversed through profit or loss.If, in a subsequent period, the fair value of a debt instrument increases and the increase can beobjectively related to an event occurring after the impairment loss was recognised in profit or loss,the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceedwhat the carrying amount would have been had the impairment not been recognised at the datethe impairment is reversed. The amount of the reversal is recognised in profit or loss.
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cont'd - KNM Steel Sdn Bhd

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