2009 - Malaysia Pacific Corporation Berhad

Malaysia Pacific Corporation BerhadNOTES TO THE FINANCIAL STATEMENTS (Cont’d)30 JUNE 20094. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)4.7 Property development activities (Cont’d)(b)Property development costProperty development cost comprises all cost that are directly attributable to the developmentactivities or that can be allocated on a reasonable basis to such activities. They comprise thecost of land under development, construction costs and other related development costs commonto the whole project including administrative overheads and borrowing costs.Property development costs not recognised as an expense are recognised as an asset measuredat the lower of cost and net realisable value.When revenue recognised in the profit or loss exceeds progress billings to purchasers, the balance isclassified as accrued billings under current asset. When progress billings exceed revenue recognisedin the profit or loss, the balance is classified as progress billings under current liabilities.4.8 Construction contractsContract costs comprise costs related directly to the specific contract and those that are attributableto the contract activity in general and can be allocated to the contract, and such other costs that arespecifically chargeable to the customer under the terms of the contract.When the total of costs incurred on construction contracts plus recognised profits (less recognisedlosses) exceeds progress billings, the balance is classified as amount due from customers for contractwork. When progress billings exceed costs incurred plus recognised profits (less recognised losses), thebalance is classified as amount due to customers for contract work.4.9 Impairment of assetsThe carrying amount of assets, except for financial assets (excluding investments in subsidiaries),inventories, property development costs, investment property measured at fair value and non-currentassets (or disposal groups) held for sale, are reviewed at each balance sheet date to determine whetherthere is any indication of impairment. If any such indication exists, the asset’s recoverable amount isestimated.Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment ormore frequently if events or changes in circumstances indicate that the goodwill or intangible asset mightbe impaired.The recoverable amount of an asset is estimated for an individual asset. Where it is not probable toestimate the recoverable amount of the individual asset, the impairment test is carried out on the cashgenerating unit (“CGU”) to which the asset belongs. Goodwill acquired in a business combination is fromthe acquisition date, allocated to each of the Group’s CGU or groups of CGU that are expected to benefitfrom the synergies of the combination giving rise to the goodwill irrespective of whether other assets orliabilities of the acquiree are assigned to those units or groups of units.The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its valuein use.In estimating the value in use, the estimated future cash inflows and outflows to be derived from continuinguse of the asset and from its ultimate disposal are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risk specificto the asset for which the future cash flow estimates have not been adjusted. An impairment loss isrecognised in the profit or loss when the carrying amount of the asset or the CGU, including the goodwillor intangible asset, exceeds the recoverable amount of the asset or the CGU. The total impairment lossis allocated, first, to reduce the carrying amount of any goodwill allocated to the CGU and then to theother assets of the CGU on a pro-rata basis of the carrying amount of each asset in the CGU.46