Quality - UAC Berhad

Notes to The Financial StatementsFor The Financial Year Ended 31 December 20053 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)jDividendsDividends are recognised as liabilities when declared and accounted for in shareholders' equity as anappropriation of retained earnings in the year.kCash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, bank balances,fixed deposits and short term, highly liquid investments that are readily convertible to known amounts of cashand which are subject to an insignificant risk of changes in value.lProvision for warrantiesProvision for warranties is recognised when the underlying products and services are sold. This provision is based onthe past history of the level of replacements and a review of possible outcomes against the associated probabilities.m Financial instrumentsiFinancial instruments recognised on the balance sheetThe particular recognition method adopted for financial instruments recognised on the balance sheet isdisclosed in the individual policy statements associated with each item.iiFinancial instruments not recognised on the balance sheetThe Company is a party to financial instruments which comprise foreign currency forward contracts andthese instruments are not recognised in the financial statements on inception.The Company enters into foreign currency forward contracts to hedge its risks from movements in exchangerates by establishing the rate at which a foreign currency liability will be settled.Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions aredeferred until the date of such transaction, at which time they are included in the measurement of suchtransactions.iii Fair value estimation for disclosure purposesThe market value of publicly traded securities based on quoted market prices at the balance sheet datereflect their fair values.The fair values of financial liabilities and guarantees are estimated by discounting the future estimated cashflows at the current market interest rates available to the Group for similar financial instruments.The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed toapproximate their fair values.58 UAC BERHAD (5149-H) (Incorporated in Malaysia)