Sunny Tew

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(h) Financial liabilities (Continued)The accounting policies adopted for specific financial liabilities are set out below:(i)Trade and other payablesTrade and other payables is recognised initially at cost which represents the fair value of the consideration to be paid in the future, less transaction cost,for goods received or services rendered, whether or not billed to the Group and the Company, and are subsequently measured at amortised cost using theeffective interest method.Gains or losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.(ii)Finance lease payablesLeases in which the Group and the Company assume substantially the risks and rewards of ownership are classified as finance leases.Upon initial recognition, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of the minimumlease payments. Any initial direct costs are also added to the amount capitalised.Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Lease payments are apportionedbetween finance charge and reduction of the lease liability. The finance charge is allocated to each period during the lease term so as to achieve a constantperiodic rate of interest on the remaining balance of the finance lease liability. Finance charge is recognised in the income statement.Contingent lease payments are recognised as an expense in the income statement in the financial year in which they are incurred.Capitalised leased asset are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty thatthe Group and the Company will obtain ownership by the end of the finance lease term.(iii)Bank borrowingsBorrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using theeffective interest method.Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least12 months after the balance sheet date.50 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007