cont'd - KNM Steel Sdn Bhd

KNM GROUP BERHAD I Annual Report 201271Notes to the Financial Statements (cont’d)2. Significant accounting policies (Cont’d)(q)Operating segmentsAn operating segment is a component of the Group that engages in business activities from which it mayearn revenues and incur expenses, including revenues and expenses that relate to transactions withany of the Group’s other components. All operating segment’s operating results are reviewed regularlyby the chief operating decision maker, which in this case is the Chief Executive Officer of the Group, tomake decisions about resources to be allocated to the segment and assess its performance, and forwhich discrete financial information is available.(r)ProvisionsA provision is recognised if, as a result of a past event, the Group has a present legal or constructiveobligation that can be estimated reliably, and it is probable that an outflow of economic benefit will berequired to settle the obligation. Provisions are determined by discounting the expected future cashflows at a pre-tax rate that reflects current market assessments of the time value of money and the risksspecific to the liability.(s)Contingent(i)Contingent liabilitiesWhere it is not probable that an outflow of economic benefits will be required, or the amount cannotbe estimated reliably, the obligation is not recognised in the statements of financial position and isdisclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrenceof one or more future events, are also disclosed as contingent liabilities unless the probability ofoutflow of economic benefits is remote.Where the Company enters into financial guarantee contracts to guarantee the indebtedness ofother companies within its group, the Company considers these to be insurance arrangements,and accounts for them as such. In this respect, the Company treats the guarantee contract as acontingent liability until such time as it becomes probable that the Company will be required tomake a payment under the guarantee.(ii)Contingent assetsWhere it is not probable that there is an inflow of economic benefits, or the amount cannot beestimated reliably, the asset is not recognised in the statements of financial position and is disclosedas a contingent asset, unless the probability of inflow of economic benefits is remote. Possibleobligations, whose existence will only be confirmed by the occurrence or non-occurrence of oneor more future events, are also disclosed as contingent assets unless the probability of inflow ofeconomic benefits is remote.