Statutory Declaration
2. Summary of significant accounting policies (cont'd) 2 Changes in accounting policies (cont'd)
The adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and of the Company except for the followings:
FRS 7 Financial Instruments: Disclosures
Prior to 1 February 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 Financial Instruments: Disclosure and Presentation. FRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.
The Group and the Company have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Company’s financial statements for the year ended 31 January 2011.
FRS 101 Presentation of Financial Statements (Revised)
The revised FRS 101 introduces changes in the presentation and disclosures of financial statements. The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented as a single line. The Standard also introduces the statement of comprehensive income, with all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense recognised directly in equity, either in one single statement, or in two linked statements.
The Group and the Company have elected to present this statement as one single statement.
In addition, a statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the classification of items in the financial statements.
The revised FRS 101 also requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital (see Note 39).
The revised FRS 101 was adopted retrospectively by the Group and the Company.
Amendments to FRS 117
Prior to 1 February 2010, for all leases of land and buildings, if title is not expected to pass to the lessee by the end of the lease term, the lessee normally does not receive substantially all of the risks and rewards incidental to ownership. Hence, all leasehold land held for own use was classified by the Group as operating lease and where necessary, the minimum lease payments or the up-front payments made were 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 represented prepaid lease payments and were amortised on a straight-line basis over the lease term.
The amendments to FRS 117 Leases clarify that leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. They also clarify that the present value of the residual value of the property in a lease with a term of several decades would be negligible and accounting for the land element as a finance lease in such circumstances would be consistent with the economic position of the lessee. Hence, the adoption of the amendments to FRS 117 has resulted in certain unexpired land leases to be reclassified as finance leases. The Group has applied this change in accounting policy retrospectively and certain comparatives have been restated.
2. Summary of significant accounting policies (cont'd) 2.2 Changes in accounting policies (cont'd)
Amendments to FRS 117 (cont'd)
The following are effects to the statements of financial position as at 31 January 2011 arising from the above change in accounting policy:
Group 2011
RM Increase/(decrease) in:
Property, plant and equipment 173,450,894
Land use rights (173,450,894)
Company
Increase/(decrease) in:
Property, plant and equipment 61,319,903
Land use rights (61,319,903)
The following comparatives have been restated:
As previously
stated Adjustments As restated Consolidated statement of financial position
31 January 2010
Property, plant and equipment 185,197,044 175,798,689 360,995,733
Land use rights 178,735,107 (175,798,689) 2,936,418
1 February 2009
Property, plant and equipment 169,514,979 161,596,259 331,111,238
Land use rights 164,647,337 (161,596,259) 3,051,078
Company statement of financial position 31 January 2010
Property, plant and equipment 5,074,731 62,203,979 67,278,710
Land use rights 62,203,979 (62,203,979) -
1 February 2009
Property, plant and equipment 4,804,904 63,088,055 67,892,959
Land use rights 63,088,055 (63,088,055) -
2. Summary of significant accounting policies (cont'd) 2.2 Changes in accounting policies (cont'd)
FRS 139 Financial Instruments: Recognition and Measurement
FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group and the Company have adopted FRS 139 prospectively on 1 February 2010 in accordance with the transitional provisions. The effects arising from the adoption of this Standard has been accounted for by adjusting the opening balance of retained earnings as at 1 February 2010. Comparatives are not restated. The details of the changes in accounting policies and the effects arising from the adoption of FRS 139 are discussed below:
(i) Equity instruments
Prior to 1 February 2010, the Group classified its investments in equity instruments which were held for non-trading purposes as non-current investments. Such investments were carried at cost less impairment losses. Upon the adoption of FRS 139, these investments, are designated at 1 February 2010 as available-for-sale financial assets and accordingly are stated at their fair values as at that date amounting to RM41,500.
(ii) Financial guarantee contracts
During the current and prior years, the Company provided financial guarantees to banks in connection with bank loans and other banking facilities granted to its subsidiaries. Prior to 1 February 2010, the Company did not provide for such guarantees unless it was more likely than not that the guarantees would be called upon. The guarantees were disclosed as contingent liabilities. Upon the adoption of FRS 139, all unexpired financial guarantees issued by the Company are recognised as financial liabilities and are measured at their initial fair value less accumulated amortisation as at 1 February 2010.
The value of financial guarantees provided by the Company to its subsidiaries is determined by reference to the difference in the interest rates, by comparing the actual rates charged by the bank with these guarantees made available, with the estimated rates that the bank would have charged had these guarantees not been available.
The Directors have assessed the fair value of these financial guarantees to have no material financial impact on the results and the retained profits of the Company.
(iii) Amount owing to a minority shareholder of a subsidiary
Prior to 1 February 2010, this amount is recorded at cost in the Group's financial statements. Upon the adoption of FRS 139, the interest-free amount is recorded initially at a fair value that is lower than cost. The difference between the fair value and cost of the amount is recognised as income to the Group. Subsequent to initial recognition, the amount is measured at amortised cost. As at 1 February 2010, the Group has remeasured such amount at its amortised cost of RM4,145,750 and the adjustments to their previous carrying amounts are recognised as adjustments to the opening balance of retained earnings and minority interests as at that date.
The following are effects arising from the above change in accounting policy:
Increase/(decrease)
As at As at
31 January 1 February
2011 2010
Consolidated statement of financial position RM RM
Other payables under non-current liabilities
- Amount owing to a minority shareholder of a subsidiary (722,495) (1,004,250)
Minority interests 174,180 264,342
Retained profits 548,315 739,908
Increase 2011
2. Summary of significant accounting policies (cont'd) 2.2 Changes in accounting policies (cont'd)
FRS 139 Financial Instruments: Recognition and Measurement (cont'd) (iii) Amount owing to a minority shareholder of a subsidiary (cont'd)
Group Decrease 2011 Sen per share Earnings per share :
Basic 0.09
Diluted 0.09
(iv) Derivatives
Prior to 1 February 2010, all interest rate swap contracts and commodity swap contracts were recognised in the financial statements only upon settlement.
Upon the adoption of FRS 139, those derivatives held by the Group and the Company have not been designated or do not qualify for hedge accounting are recognised at their fair values and are classified as financial assets at fair value through profit or loss.
Those derivatives that meet the criteria for hedging are accounted for by using the cash flow hedge. Under the cash flow hedge, the effective portion of the gain or loss on the derivative is recognised directly in other comprehensive income into the hedging reserve, while any ineffective portion is recognised immediately in profit or loss as other expenses.
Amounts recognised in other comprehensive income previously are reclassified from equity to profit or loss when the hedged transaction affects profit or loss.
The following are effects arising from the adoption of FRS 139:
Increase/(decrease)
As at As at
31 January 1 February
2011 2010
RM RM
Consolidated statement of financial position
Derivative liabilities 6,959,775 -
Deferred tax liabilities (1,739,945) -
Hedging reserve (3,883,553) -
Minority interests (1,336,277) -
Increase/(decrease) 2011
Consolidated statement of comprehensive income RM
Interest expense
- Arising from interest rate swap contract 62,336
Other comprehensive income for the year, net of tax
- Arising from commodity swap contract (5,219,830)
2. Summary of significant accounting policies (cont'd) 2.2 Changes in accounting policies (cont'd)
FRS 139 Financial Instruments: Recognition and Measurement (cont'd) (iv) Derivatives (cont'd)
Increase/(decrease)
As at As at
31 January 1 February
2011 2010
RM RM
Company statement of financial position
Derivative liabilities 1,391,955 -
Deferred tax liabilities (347,989) -
Hedging reserve (1,043,966) -
Company statement of comprehensive income
Decrease 2011 RM Other comprehensive income for the year, net of tax
- Arising from commodity swap contract 1,043,966
2.3 Standards issued but not yet effective
The Group and the Company have not elected for early adoption of the following new and amended FRSs and IC Interpretation relevant to current operations of the Group and the Company, which were issued but not yet effective for the financial year ended 31 January 2011:
Effective for annual periods
Description beginning on or after
FRS 1 First-time Adoption of Financial Reporting Standards 1 July 2010
FRS 3 Business Combinations (Revised) 1 July 2010
Amendments to FRS 2 Share-based Payment 1 July 2010
Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations 1 July 2010
Amendments to FRS 127 Consolidated and Separate Financial Statements 1 July 2010
Amendments to FRS 138 Intangible Assets 1 July 2010
Amendments to IC Interpretation 9 Reassessment of Embedded Derivatives 1 July 2010
Amendments to FRS 132: Classification of Rights Issues 1 March 2010
Amendments to FRS 1: Limited Exemption from Comparative
FRS 7 Disclosures for First-time Adopters 1 January 2011
Amendments to FRS 7: Improving Disclosures about Financial Instruments 1 January 2011
Improvements of FRSs (2010) 1 January 2011
Additional Exemptions for First-Time Adopters (Amendments to FRS 1) 1 January 2011
Group Cash-settled Share-based Payment Transactions (Amendments to FRS 2) 1 January 2011
FRS 124: Related Party Disclosures 1 January 2012
The Directors do not expect any material impact on the financial statements arising from the adoption of the above standards
2. Summary of significant accounting policies (cont'd)