Tag: Accounting policy

Sample Disclosure – Intangible Assets (14 April 2009)

 

Intangible assets

 

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use of the specific software. These costs are amortised over their estimated useful lives. Costs associated with developing or maintaining computer software programmes are recognised as an expense when incurred. Cost that are directly associated with identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include employee costs incurred as a result of developing software and an appropriate portion of relevant of overheads. Costs which enhances or extends the performance of computer software programme beyond their original specifications is recognised as a capital improvement and added to the original cost of software. Computer software development costs recognised as assets are amortised using straight line method over their estimated useful lives, not exceeding a period of 10 years.

Sample Disclosure – Financial Instruments (19 February 2009)

Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instruments. Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are charged directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

Other Non-Current Investments                

Other non-current investments (other than investments in subsidiaries, associates and investment properties) are stated at cost less allowance for diminution in value. Cost is determined on the weighted average basis while market value is determined based on quoted market values. On disposal of an investment, the difference between the net disposal proceeds and its carrying amount is recognised in the income statement.

Trade Receivables

Trade receivables are recognised and stated at original invoiced amounts and carried at anticipated realizable values. Bad debts are written off when it is established that they are irrecoverable. Specific allowance is made for known doubtful debts. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, balances and deposits with licensed financial institutions and fixed income trust funds that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, net of outstanding bank overdraft.

Trade Payables

Trade payables are stated at cost which approximates the fair value of the consideration to be paid in the future for goods and services rendered.

Interest-Bearing Borrowings

Interest-bearing bank loans and overdrafts are recorded at the amount of proceeds received, net of transaction costs. Borrowing costs directly attributable to the acquisition and construction of plant and equipment are capitalized as part of the cost of those assets, until such time as the assets are ready for their intended use. All other borrowing costs are charged to the income statement as an expense in the period in which they are incurred.

Equity Instruments

Ordinary shares are classified as equity. Dividends payable on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction, other than in the context of a business combination, are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. Cost of issuing equity securities in connection with a business combination is included in the cost of acquisition. When the share capital of the Company is repurchased, the consideration paid, including any attributable transaction costs, is presented as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in the income statement on the sale, re-issuance or cancellation of treasury shares. Consideration received is presented in the financial statements as a change in equity.

Derivative Financial Instruments

The Group uses derivative financial instruments in the form of forward exchange contracts to hedge its exposure to foreign exchange arising from operating, financing and investing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are not recognised in the financial statements on inception. The underlying foreign currency assets or liabilities are translated at their respective hedged exchange rates and all exchange gains or losses are recognised as income or expense in the income statement in the same period as the exchange differences on the underlying hedged items. Exchange gains and losses arising on contracts entered into as hedges of anticipated future transactions are deferred until the date of such transaction, at which time they are included in the measurement of such transactions.

Sample Disclosure – Biological Assets and Replanting Expenditure (19 February 2009)

Biological Assets and Replanting Expenditure

(i) Plantation development expenditure

New planting expenditure incurred on land clearing and upkeep of trees to maturity is capitalised as plantation development expenditure under biological assets and is not amortised.

(ii) Replanting expenditure

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

Sample Disclosure – Intangible Assets (6 January 2009)

Intangible assets

i. Brand name

The Company’s brand name is stated at cost less any impairment loss. The useful life of the Company’s brand name is estimated to be indefinite because based on the Company’s current product market share, the directors are of the opinion that there is no foreseeable limit to the period over which the brand name is expected to generate net cash flows to the Company. They are not amortised but tested for impairment annually or more frequently when indicators of impairment are identified.

ii. Computer software

Acquired computer software licences are capitalised on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over their expected useful lives.

Sample Disclosure – Change In Accounting Policy On Leasehold Land For Own Use (4 January 2009)

Except for the changes in accounting policies and their effects as discussed below, the adoption of the new and revised FRSs, amendments to FRSs and interpretations do not have any other significant impact on the financial statements of the Group and of the Company:

Leasehold land held for own use

Prior to day/month/year, leasehold land held for own use was classified as property, plant and equipment and was stated at cost less accumulated depreciation and any accumulated impairment losses. The adoption of the revised FRS 117 has resulted in a change in the accounting policy relating to the classification of leases of land and buildings. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land held for own use is now classified as operating lease and where necessary, the minimum lease payments or the up-front payments made are allocated between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment relating to the land element represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitional provisions of FRS 117. At day/month/year, the unamortised amount of leasehold land is retained as the surrogate carrying amount of prepaid lease payments as allowed by the transitional provisions. The effects on the consolidated balance sheet as at day/month/year are set out below:

Group

2008

RM

Decrease in property, plant and equipment

(1,000,000)

Decrease in investment properties

(900,000)

Increase in prepaid land lease payments

1,900,000

There were no effects on the consolidated income statement for the year ended day/month/year and the Company’s separate financial statements.

The reclassification of leasehold land as prepaid land lease payments has been accounted for retrospectively and as such, certain comparatives have been restated.

Previously Stated

Adjustment

Restated

2007

2007

2007

Property, plant and equipment

38,000,000

(1,000,000)

37,000,000

Investment properties

7,000,000

(900,000)

6,100,000

Prepaid land lease payments

–

1,900,000

1,900,000

Sample Disclosure – Employee Benefits (7 December 2008)

 

Employee benefits

i)              Short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absence. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

ii)             Post-employment benefits

The Group contributes to the Employees Provident Fund, the national defined contribution plan. Such contributions are charged to the income statements in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations.

iii)            Share-based compensation

The Company’s Employees’ Share Option Scheme (“ESOS”), and equity-settled, share-based compensation plan, allows the Group’s employees to acquire ordinary shares of the Company. The total fair value of share options granted to employees is recognised as an expense in the income statement with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable on vesting date. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve until the option is exercised, upon which it will be transferred to share premium, or until the option expires, upon which it will be transferred directly to retained profit. Under the transitional provisions of FRS 2, this FRS will apply to share options which were granted after day/month/year and had not yet vested on day/month/year. The adoption of this FRS has not resulted in any financial impact to the Group as there were no new shares options issued after day/month/year which remain unvested on day/month/year. The proceeds received net of any directly attributable transaction costs are credited to equitywhen the options are exercised.

iv)           Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.