NOTES TO THE FINANCIAL STATEMENTS
4. SIGNIFICANT ACCOUNTING POLICIES – Cont’d
4.4. Property, plant and equipment and depreciation (Cont’d)
(iii) Depreciation is provided for on the straight-line basis to write off the cost of the assets over their estimated useful lives. The annual rates used are as follows:-
Leasehold land over the remaining leasehold period
Buildings, drainage and roads 5% - 20%
Motor vehicles, plant and machinery 10% - 20%
Equipment and furniture 10% - 20%
Nursery and irrigation systems 10%
(iv) Fully depreciated assets are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets.
(v) Capital work-in-progress is not depreciated until the property, plant and equipment are fully completed and brought into use.
4.5. Inventories
Fresh fruit bunches are valued at the lower of cost and net realisable value determined on a first-in, first out basis.
Cost of sundry stores and consumables is determined on a weighted average basis and comprises the original cost of purchase plus the cost of bringing the inventories to their present location and condition.
Produced inventories comprising crude palm oil and palm kernel are valued at the net realisable value. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.
4.6. Receivables
Receivables are carried at anticipated realisable value. Bad debts are written off in the year in which they are identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.
4.7. Impairment of assets
The carrying amounts of all assets, other than financial assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an item of the
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST AUGUST 2006
4. SIGNIFICANT ACCOUNTING POLICIES – Cont’d 4.7. Impairment of assets
The recoverable amount is the higher of net selling price and value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the assets belong.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised. The reversal is recognised in the income statement, unless it reverses an impairment loss on a revalued asset, in which case it is taken to equity.
4.8. Payables
Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.
4.9. Provisions
Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
4.10. Islamic securities
The Islamic securities are recognised at cost, being the fair value of the consideration received.
4.11. Ordinary shares
Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal value of share issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Cost incurred directly attributable to the issuance of shares are accounted for as a deduction from share premium. Otherwise they are charged to the income statement.
Dividends to shareholders are recognised in equity in the period in which they are declared.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST AUGUST 2006
4. SIGNIFICANT ACCOUNTING POLICIES – Cont’d 4.12. Revenue recognition
Revenue is recognised on the following basis:-
Dividend income is recognised when the shareholder’s right to receive payment is established.
Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyers.
Revenue from services rendered is recognised net of discount as and when the services are performed.
4.13. Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.
Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.
4.14. Employee benefits
(i) Short term employee benefits
Wages, salaries, social security contributions and bonuses are recognised as an expense in the
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST AUGUST 2006
4. SIGNIFICANT ACCOUNTING POLICIES – Cont’d