OTHER
5.12 Goodwill
Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amounts may be impaired.
Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
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The carrying amounts of assets, other than inventories, deferred tax assets, assets arising from construction contracts, assets arising from employee benefits and financial assets (other than investments in subsidiaries, associates and jointly controlled entities) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, impairment is measured by comparing the carrying value of the assets with their recoverable amounts.
For goodwill, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified.
For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the Cash-generating unit (“CGu”) to which the asset belongs. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGus, or groups of CGus, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.
Following the adoption of FrS 8 Operating Segments as disclosed in Note 5.23 to the financial statements, the consequential amendment to FrS 136 Impairment of assets is also mandatory for financial periods beginning on or after 1 July 2009. This amendment requires goodwill acquired in a business combination to be tested for impairment as part of the impairment testing of CGu to which it relates.
The CGu to which goodwill is allocated shall represent the lowest level within the Group at which the goodwill is monitored for internal management purposes and shall not be larger than an operating segment determined in accordance with FrS 8.
recoverable amount is the higher of net selling price and value-in-use, which is measured by reference to discounted future cash flows.
In estimating the value-in-use, the estimated future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. recoverable amounts are estimated for individual assets or, if it is not possible, for the CGu to which the assets belong.
an impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss is charged to the income statement unless it reverses a previous revaluation in which case it will be charged to equity.
Impairment loss on goodwill is not reversed in subsequent period. an impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. a reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.
5 siGniFicant accountinG Policies (CONT’D) 5.14 Financial instruments
5.14.1 Financial instruments recognised on the balance sheets
a financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.
a financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive cash or another financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially favourable to the Group.
a financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or a contractual obligation to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially unfavourable to the Group.
Financial instruments are classified as assets, liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends and losses and gains relating to a financial instrument or a component that is a financial liability shall be recognised as income or expense in the income statement. Distributions to holders of an equity instrument are debited directly to equity, net of any related tax effect. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.
5.14.1.1 other long term investments
Long term investments other than investments in subsidiaries, associates, jointly controlled entities and investment properties are stated at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified.
5.14.1.2 short term investments
Short term investments are stated at the lower of cost and market value, determined on a portfolio basis. Cost is determined on weighted average basis while market value is determined based on quoted market values. Increase or decrease in the carrying amount of short term investments is recognised in the income statement.
Investments in fixed income trust funds that do not meet the definition of cash and cash equivalents are classified as short term investments.
upon disposal of an investment, the difference between the net disposal proceeds and its carrying amount is recognised in the income statement.
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5.14.1 Financial instruments recognised on the balance sheets (cont’d) 5.14.1.3 receivables
Trade and other receivables, including amounts owing by associates and related parties, are carried at anticipated realisable value. These receivables are not held for trading purposes.
Bad debts are written off to the income statement in the period in which they are identified. an estimate is made for doubtful debts based on a review of all outstanding amounts at the balance sheet date.
5.14.1.4 Payables
Liabilities for trade and other amounts payable, including amounts owing to associates and related parties, are initially recognised at fair value of the consideration to be paid in the future for goods and services received, and subsequently measured at amortised cost using the effective interest method.
5.14.1.5 Guaranteed notes
Notes issued by the special purpose entity are stated at the net proceeds received on issue. The difference between the net proceeds and the total amount of the payments of these borrowings are allocated to periods over the term of the borrowings at a constant rate on the carrying amount and are charged to the income statement.
Interest, losses and gains relating to a financial instrument classified as a liability is reported within finance cost in the income statement.
5.14.1.6 exchangeable bonds
The exchangeable bonds are regarded as compound instruments, consisting of a liability component and an equity component.
at the date of issue, the fair value of the liability component is estimated based on the present value of the contractually determined stream of future cash flows discounted at the prevailing market interest rate applicable to similar instruments, but without the exchangeable option. The difference between the proceeds from the exchangeable bonds and the fair value assigned to the liability component, representing the embedded option for the holder to exchange the bonds into equity of the Company, is included in equity (capital reserves).
The liability component is subsequently stated at amortised cost using the effective interest rate method until extinguished on conversion or redemption, whilst the value of the equity component is not adjusted in subsequent periods. The imputed interest is charged to the income statement together with the effective tax effect and is added to the carrying value of the exchangeable bonds.
5 siGniFicant accountinG Policies (CONT’D) 5.14 Financial instruments (cont’d)
5.14.1 Financial instruments recognised on the balance sheets (cont’d) 5.14.1.7 interest bearing loans and borrowings
all loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable costs. after initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
5.14.1.8 equity instruments
Ordinary shares are classified as equity which are recorded at the nominal value and proceeds in excess of the nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Dividends on ordinary shares are recognised as liabilities when declared.
The transaction costs of an equity transaction 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.
When issued shares of the Company are repurchased, the consideration paid, including any attributable transaction costs is presented as a change in equity. repurchased shares that have not been cancelled 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. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount of the treasury shares is shown as a movement in equity.
5.14.2 Financial instruments not recognised on the balance sheets
The Group uses derivative financial instruments, including foreign exchange forward, interest rate swap and option and commodity future and swap contracts, to hedge its exposure to foreign currency translation, interest rate and commodity price fluctuation arising from operational, financing and investment activities. These instruments are not recognised in the financial statements on inception.
Derivative financial instruments used for hedging purposes are accounted for on an equivalent basis as the underlying assets, liabilities or net positions. any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or net positions.
5.14.2.1 Foreign currency forward contracts
Foreign currency forward contracts are used to hedge foreign exposures as a result of receipts and payments in foreign currency. any gains or losses arising from these contracts are deferred until the dates of such transactions at which time they are included in the measurement of such transactions.
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5.14.2 Financial instruments not recognised on the balance sheets (cont’d) 5.14.2.2 interest rate swap contracts
Interest rate swap and option contracts are used to hedge the Group’s exposures to movements in interest rates. The differential in interest rates to be paid is recognised in the income statement over the life of the contract as part of interest expense.
5.14.2.3 commodity futures contracts
Commodity futures contracts are used to hedge the Group’s exposures to price fluctuation risk on sale and purchases of vegetable oil commodities. The net unrecognised gain or loss on the commodity futures contracts have been deferred until the related future transactions occur, at which time they will be included in the measurement of the transactions.