Sample Disclosure in Financial Statements – Page 11

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.

Sample Disclosure – Significant Accounting Estimates and Judgements (7 December 2008)

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

a) Critical judgements made in applying accounting policies

The following is the judgements made by management in the process of applying the Group’s accounting policies that have most significant effect on the amounts recognised in the financial statements:

As disclosed in note xx, a subsidiary company has entered into Settlement Agreement with a trade debtor to acquire two parcels of vacant land as full settlement of the outstanding amount of RMx,xxx,xxx as at the end of the financial year.

As at the date of this report, the transaction has not been completed. In light of the transaction not been completed, the directors are required to consider whether allowance for doubtful debts are required to be made on the outstanding balance.

No allowances for doubtful debts have been made for these balances as the directors are of the view that the transaction will be completed and any outstanding amount will be able to collect from the suppliers concerned.

b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Depreciation of property, plant and equipment

The estimates of the residual values, useful lives and related depreciation charges for its property, plant and equipment are based on commercial and production factors which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group and the Company anticipate that the residual values of its property, plant and equipment to be insignificant. As a result, residual values are not being taken into consideration for the computation of depreciable amount.

The depreciation charge will increase when useful lives are less than previously estimated.

(ii) Income taxes

There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company recognise tax liabilities based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income tax and deferred tax provisions in the period in which such determination is made.

(iii) Allowance for doubtful debts

The collectibility of receivables is assessed on an on going basis. An allowance for doubtful debts is made for any account considered to be doubtful of collection.

The carrying amount of the Group’s receivables as at the end of the financial year was RMxx,xxx,xxx (2007 – RMxx,xxx,xxx).

Allowance for doubtful debts is made based on a review of all outstanding accounts as at the balance sheet date. A considerable amount of judgement and estimate is required in assessing the ultimate realisation of these receivables, including the creditworthiness, the past collection history of each customer and subsequent collection up to date of report. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

(iv) Inventories obsolescence and inventories write down

Inventories are stated at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories based on an assessment of committed sales prices.

Inventories are reviewed on a regular basis and the Group will make allowance for excess or obsolete inventories and write down to net realizable value based primarily on historical trends and management estimates of expected and future product demand and related pricing.

The carrying amount of the Group’s inventories as at the end of the financial year was RMxx,xxx,xxx (2007 – RMxx,xxx,xxx).

Demand levels, exchange rates, technological advances and pricing competition could change from time to time. If such factors result in an adverse effect on the Group’s products, the Group may be required to reduce the value of its inventories and additional allowance for slow moving inventories may be required

Sample Disclosure – Note On Reserves (4 December 2008)

RESERVES

2008

2007

RM

RM

Non-distributable

Assets revaluation reserve

x,xxx,xxx

x,xxx,xxx

Reversal of deferred tax liability

xx,xxx

xx,xxx

Distributable

Accumulated profits

x,xxx,xxx

x,xxx,xxx

x,xxx,xxx

x,xx,xxx

Sample Disclosure – Note On Deferred Tax Liabilities (4 December 2008)

DEFERRED TAX LIABILITIES

The movements and components of deferred tax liabilities are as follows:-

	2008	2007
	RM	RM

At beginning of year	xx,xxx	xx,xxx
Acquisition of subsidiary	x,xxx	x,xxx
Transfer to/(from) income statement	x,xxx	(x,xxx)

At end of year	xx,xxx	xx,xxx

Represented by:
Property, plant and equipment
– Difference between carrying value and tax base	xx,xxx	xx,xxx

Sample Disclosure – Note on Investment In Subsidiaries (4 December 2008)

INVESTMENT IN SUBSIDIARY COMPANIES


	2008	2007
	RM	RM

At cost:
Unquoted shares inMalaysia	x,xxx,xxx	–

Details of the subsidiary companies are as follows:

Name of Companies	Country of Incorporation	Effective Equity Interest (%)		Principal Activities
		2008	2007

ABC Sdn. Bhd.	Malaysia	100	–	Investment holding.

DEF Sdn. Bhd.	Malaysia	60	–	Investment holding, provision of consultancy, strategic, financial and corporate planning services.
GHI Sdn. Bhd.	Malaysia	100	–	Provision of asset management services.

JKL Sdn. Bhd. *	Malaysia	100	50	Investment holding.

MNO Sdn. Bhd.	Malaysia	100	–	Investment in shares, land and properties.


Subsidiaries of JKL Sdn. Bhd.

PQR Sdn. Bhd.	Malaysia	80	35	Property development.

Subsidiaries of PQR Sdn. Bhd.

STU Sdn. Bhd.	Malaysia	100	–	Investment holding.

VWXSdn. Bhd.	Malaysia	100	–	Investment in land and properties.

*During the financial year, the Company acquired 50% equity interest of JKL Sdn. Bhd. for a total consideration of RMx,xxx,xxx.

As a result of the acquisition, JKL Sdn. Bhd. became a wholly-owned subsidiary of the Company.

	2008		2007
	Number of shares	Nominal value RM	Number of shares	Nominal value RM

Authorised:
Ordinary shares of RM1 each	x,xxx,xxx	x,xxx,xxx	x,xxx,xxx	x,xxx,xxx

Issued and fully paid:
Ordinary shares of RM1 each	x,xxx,xxx	x,xxx,xxx	x,xxx,xxx	x,xxx,xxx

	2008	2007
	RM	RM

Non-distributable
Assets revaluation reserve	x,xxx,xxx	x,xxx,xxx
Reversal of deferred tax liability	xx,xxx	xx,xxx

Distributable
Accumulated profits	x,xxx,xxx	x,xxx,xxx

	x,xxx,xxx	x,xx,xxx