cont'd - KNM Steel Sdn Bhd

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<strong>KNM</strong> GROUP BERHAD I Annual Report 201269Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(m)Revenue and other income(i)Construction contractsContract revenue includes the initial amount agreed in the contract plus any variations in contractwork, claims and incentive payments to the extent that it is probable that they will result in revenueand can be measured reliably. As soon as the outcome of a construction contract can be estimatedreliably, contract revenue and expenses are recognised in the profit or loss in proportion to thestage of completion of the contract. Contract expenses are recognised as incurred unless theycreate an asset related future contract activity.The stage of completion is assessed by reference to surveys of work performed/completion of aphysical proportion of contract work.When the outcome of a construction contract cannot be estimated reliably, contract revenue isrecognised only to the extent of contract costs incurred that are likely to be recoverable. An expectedloss on a contract is recognised immediately in the profit or loss.(ii)Dividend incomeDividend income is recognised in profit or loss on the date that the Group’s or the Company’s rightto receive payment is established, which in the case of quoted securities is the ex-dividend date.(iii)Management feeManagement fee is recognised on an accrual basis.(iv)ServicesRevenue from services rendered is recognised in the profit or loss in proportion to the stage ofcompletion of the transaction at the end of the reporting period. The stage of completion is assessedby reference to surveys of work performed.(v)Goods soldRevenue from the sale of goods is measured at fair value of the consideration received or receivable,net of returns and allowances, trade discounts and volume rebates. Revenue is recognised whenthe significant risks and rewards of ownership have been transferred to the buyer, recovery of theconsideration is probable, the associated costs and possible return of goods can be estimatedreliably, and there is no continuing management involvement with the goods, and the amount ofrevenue can be measured reliably.(vi)Interest incomeInterest income is recognised as it accrues using the effective interest method in profit or lossexcept for interest income arising from temporary investment of borrowings taken specifically for thepurpose of obtaining a qualifying asset which is accounted for in accordance with the accountingpolicy on borrowing costs.(n)Borrowing costsBorrowing costs that are not directly attributable to the acquisition, construction or production of aqualifying asset are recognised in profit or loss using the effective interest method.
70<strong>KNM</strong> GROUP BERHAD I Annual Report 2012Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(n)Borrowing costs (cont’d)Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset,which are assets that necessarily take a substantial period of time to get ready for their intended use orsale, are capitalised as part of the cost of those assets.The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditurefor the asset is being incurred, borrowing costs are being incurred and activities that are necessaryto prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs issuspended or ceases when substantially all the activities necessary to prepare the qualifying asset forits intended use or sale are interrupted or completed.(o)Income taxIncome tax expense comprises current and deferred tax. Current tax and deferred tax is recognised inthe profit or loss except to the extent that it relates to a business combination or items recognised directlyin equity or other comprehensive income.Current tax is the expected tax payable or receivable on the taxable income or loss for the year, usingtax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to taxpayable in respect of previous financial years.Deferred tax is recognised using the liability method, providing for temporary differences between thecarrying amounts of assets and liabilities in the statement of financial position and their taxes bases.Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill,the initial recognition of assets or liabilities in a transaction that is not a business combination and thataffects neither accounting nor taxable profit nor loss. Deferred tax is measured at the tax rates that areexpected to be applied to the temporary differences when they reverse, based on the laws that havebeen enacted or substantively enacted by the end of the reporting period.Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current taxliabilities and assets, and they relate to income taxes levied by the same tax authority on the sametaxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on anet basis or their tax assets and liabilities will be realised simultaneously.A deferred tax asset is recognised to the extent that it is probable that future taxable profits will beavailable against which temporary difference can be utilised. Deferred tax assets are reviewed at theend of each reporting period and are reduced to the extent that it is no longer probable that the relatedtax benefit will be realised.Unutilised reinvestment allowance and investment tax allowance, being tax incentive that is not a taxbase of an asset, is recognised as a deferred tax asset to the extent that it is probable that the futuretaxable profits will be available against the unutilised tax incentive can be utilised.(p)Earnings per ordinary shareThe Group presents basic and diluted earnings per ordinary share (“EPS”) data for its ordinary shares.Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Companyby the weighted average number of ordinary shares outstanding during the period, adjusted for ownshares held.Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and theweighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinaryshares, which comprise warrants issued by the Company.
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