notes to the financial statements - Singapore Technologies ...

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128 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(f)Investment property (continued)Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupiedproperty, the carrying value at the date of change in use becomes the cost for subsequent accounting. For a transfer from owner-occupiedproperty to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment setout in Note 3(d) up to the date of change in use.(g)Inventories and work-in-progressInventories are measured at the lower of cost and net realisable value. Cost is calculated on a first-in, first-out basis or by weighted average costdepending on the nature and use of the inventories. Cost includes expenditure incurred in acquiring the inventories, production or conversioncosts and other costs incurred in bringing them to their existing location and condition. Cost may also include transfers from equity of any gainor loss on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete andslow-moving inventories.Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costsnecessary to make the sale.Work-in-progress is measured at cost plus profits recognised to date less progress billings and recognised losses. Cost includes all directmaterial and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses and may also include transfersfrom equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of such services. Provision for foreseeable losseson uncompleted contracts is made in the year in which such losses are determined.Work-in-progress is included in current assets in the balance sheet for all contracts in which costs incurred plus recognised profits exceedprogress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as “progress billings inexcess of work-in-progress” and is included in current liabilities in the balance sheet.(h)Impairment(i)Non-derivative financial assetsThe Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not carried at fairvalue through profit or loss is impaired.To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the Group considersfactors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, default or significant delay inpayments, significant adverse changes in the business environment where the debtor/issuer operates and disappearance of an activemarket for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below itscost is objective evidence of impairment.Financial assets carried at amortised costThe Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant,and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence ofimpairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financialassets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Financial assetsthat are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in acollective assessment of impairment.
SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011129NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(h)Impairment (continued)(i)Non-derivative financial assets (continued)Financial assets carried at amortised cost (continued)In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and theamount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that theactual losses are likely to be greater or less than suggested by historical trends.If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortisedcost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the presentvalue of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’soriginal effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall bereduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of animpairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost atthe reversal date.Financial assets carried at costIf there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because itsfair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquotedequity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount andthe present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The lossrecognised is not reversed in future periods.Available-for-sale financial assetsIf an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal paymentand amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferredfrom equity to profit or loss.Reversals in respect of impairment losses on equity instruments classified as available-for-sale are recognised in other comprehensiveincome. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of theinstrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.(ii)Other non-financial assetsThe Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investmentproperty, inventories and deferred tax assets, may be impaired. Goodwill is reviewed for impairment, annually or more frequently ifevents or changes in circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group makesan estimate of the asset’s recoverable amount. An impairment loss is recognised if the carrying amount of an asset or its related cashgeneratingunit (“CGU”) exceeds its estimated recoverable amount.
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