Tag: Accounting policy

Sample Disclosure – Accounting Policy On Contingent Liabilities And Contingent Assets (8 September 2009)

Contingent liabilities and contingent assets     

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Group does not recognise a contingent liability but discloses its existence in the financial statements.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiaries by the Group under business combinations, contingent liabilities assumed are measured initially at their fair value at the acquisition date, irrespective of the extent of any minority interest.

Sample Disclosure – Accounting Policy On Investment In Associates (26 August 2009)

Associates

An associate is an entity over which the Group and the Company have significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

In the Company’s separate financial statements, an investment in associate is stated at cost less impairment losses, if any. An investment in associate is accounted for in the consolidated financial statements using the equity method of accounting. The investment in associate in the consolidated balance sheet is initially recognised at cost and adjusted thereafter for the post acquisition change in the Group’s share of net assets of the investment.

The interest in the associate is the carrying amount of the investment in the associate under the equity method together with any long-term interest that, in substance, form part of the Group’s net interest in the associate. The Group’s share of the profit or loss of the associate during the financial year is included in the consolidated financial statements, after adjustment to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

Distributions received from the associate reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the Group’s proportionate interest in the associate arising from changes in the associate’s equity that have not been recognised in the associate’s profit or loss. Such changes include those arising from the revaluation of property, plant and equipment and from foreign exchange translation differences. The Group’s share of those changes is recognised directly in equity of the Group.

Unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate.

When the Group’s share of losses in the associate equals to or exceeds its interest in the associate, the carrying amount of that interest is reduced to nil and the Group does not recognise further losses unless it has incurred legal or constructive obligations or made payments on its behalf. The most recent available financial statements of the associate are used by the Group in applying the equity method. When the reporting dates of the financial statements are not coterminous, the share of results is arrived at using the latest audited financial statements for which difference in reporting dates is no more than three (3) months. Adjustments are made for the effects of any significant transactions or events that occur between the intervening periods.

Upon disposal of an investment in associate, the difference between the net disposal proceeds and its carrying amount is included in income statements.

Sample Disclosure – Accounting Policy On Investment In Subsidiary Companies (26 August 2009)

Subsidiaries

A subsidiary is an entity in which the Group and the Company have power to control the financial and operating policies so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

An investment in subsidiary, which is eliminated on consolidation, is stated in the Company’s separate financial statements at cost less impairment losses, if any. On disposal of such an investment, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.

Sample Disclosure – Accounting Policy On Leases Of Land And Buildings (26 August 2009)

Leases of land and buildings

 For leases of land and building, the land and buildings elements are considered separately for the purpose of lease classification and these leases are classified as operating or finance leases in the same way as leases of other assets.

The minimum lease payments including any lump-sum upfront payments made to acquire the interest in the land and building are allocated between the land and the buildings elements in proportion to the relative fair values for leasehold interest in the land element and the buildings element of the lease at the inception of the lease.

Land that has an indefinite economic life and where it does not transfer substantially all the risk and rewards incidental to ownership is treated as an operating lease.

The lump-sum upfront lease payment made on entering into or acquiring leasehold land are accounted for as prepaid lease payments and are amortised over the lease term on a straight line basis.

The buildings element is classified as a finance or operating lease. If the lease payment cannot be allocated reliably between these two elements, the entire lease is classified as a finance lease, unless it is clear that both elements are operating leases, in which case the entire lease is classified as an operating lease. The Company had previously revalued its leasehold land and has retained the unamortised revalued amount as the surrogate carrying amount of prepaid lease payments in accordance with the transitional provisions in FRS 117. Such prepaid lease payments is amortised over the lease term of 30 to 99 years.

Sample Disclosure – Accounting Policy On Associates (30 May 2009)

Associates

 

Associates are those corporations, partnerships or other business entities in which the Group exercises significant influence, but which it does not control. Significant influence is the power of the Group to participate in the financial and operating policy decisions of its associates but not the power to exercise control over those policies. Such significant influence generally is reflected by a shareholding of between 20% and 50% of the voting rights in these entities, and that is neither a subsidiary nor an interest in a joint venture.  

 

Investments in associates are initially recognised at cost and accounted for in the consolidated financial statements using the equity method of accounting. The Group’s investment in associates includes goodwill on acquisition, net of any accumulated impairment losses. The policy for the recognition and measurement of impairment losses in associates is in accordance with the policy stated in Note X.

 

The audited financial statements of the associates are used by the Group in applying the equity method. In the event that audited financial statements are not available, unaudited financial statements prepared by the mangement of the associates are used. Uniform accounting policies are adopted for similar transactions and events in similar circumstances.

 

Under the equity method, the investment in associate is included in the consolidated balance sheet at cost, adjusted for the Group’s share of post acquisition changes in the net assets of the associate. The Group’s share of the net profit or loss of the associates is recognised in the consolidated income statement, whereas the Group’s share of changes in items recognised directly in the equity of the associate such as reserves and foreign exchage differences, the Group recognises its share of such changes as a component of its equity.

 

In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are eliminated to the extent of Group’s interest in the associates, and the unrealised losses are eliminated to the extent of the costs that can be recovered.

 

When the Group’s share of losses in an associate equals or exceeds its interest in the associates, including any other unsecured receivables, the Group’s interest in this associate is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has legal or constructive obligations over such losses.

 

Associates are equity accounted for in the concolidated financial statements from the date the Group obtain significant influence until the date the Group cease to have significant influence over the associates.

 

Goodwill arises on acquisition of an associate is included in the carrying amount of the investment in the associate and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired. On disposal of such investment, the difference between net disposal proceeds and the carrying amount of the investment in an associate is reflected as a profit or loss on disposal in the consolidated income statement.

Sample Disclosure – Accounting Policy On Plantation Development Expenditure (28 April 2009)

Plantation Development Expenditure

Plantation development expenditure comprises assets held for plantation development activities. These assets include land and buildings used for the purpose of plantation development, infrastructure costs such as roads and bridges attached on the plantation estates, cost of planting and development of crops.

This is stated at cost less accumulated depreciation and impairment losses, if any. Freehold land is stated at cost and is not depreciated.

Depreciation is calculated on the straight-line method to write off the cost over their estimated useful lives. The principal annual rates of depreciation are:

Freehold buildings                               2%

Leasehold buildings                             over the lease period

Bridges and roads                                5%

Mature plantations                               25 years

Cost of preparation of agriculture land, planting, replanting and upkeep of crops, together with other incidental costs are capitalised as immature plantations and transferred to mature plantations account when the trees have matured and meet the criteria for commercial production.

Mature plantations are amortised over the estimated productive life of the trees estimated to be 25 years. The period of the plantations’ yield was determined by vegetative growth calculated and estimated by the management.

Replanting expenditure is expensed to the income statement immediately in the year in which the expenditure is incurred.