Annual Report (Complete) - MYCRON Steel Berhad

Notes to the Financial Statements
30 June 2010
(continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(e)
Financial assets (continued)
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair
value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest
method.
Gain or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are
presented in the income statement in the year in which they arise. Dividend income from financial assets at fair value
through profit or loss is recognised in the income statement as part of other operating income when the Group’s right to
receive payments is established.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustment recognised in
equity are included in the income statement as gains and losses from investment securities.
Interest on available-for-sales securities calculated using the effective interest method is recognised in the income statement
as part of other income. Dividends on available-forsales equity instruments are recognised in the income statement as part
of other operating income when the Group’s right to receive payments are established.
Valuation principles
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and
for unlisted securities), the Group establishes the fair value by using valuation techniques. These include the use of recent
arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis.
Impairment of financial instruments
The Group assesses at each balance sheet date whether there is objective evidence that financial asset or a group
of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged
decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any
such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and current fair value, less any impairment loss on the financial asset previously recognised in profit or loss
– is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement
on equity instruments are not reversed through the income statement.
(f)
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
(g)
Borrowings
Borrowings are recognised initially at fair value, net of transaction cost incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction cost) and the redemption value is recognised in
the income statement over the period of the borrowings using the effective interest method.
Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost
of the assets during the period of time that is required to complete and prepare the assets for its intended use. Other
borrowings cost are expensed off when incurred.
Borrowings are classified as current liabilities unless the Group has on unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
(h)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average cost basis.
Finished goods and work-in-progress comprises cost of materials, direct labour, other direct charges and an appropriate
proportion of factory overheads.
Net realisable value is the estimated selling price in the ordinary course of business, less costs of completion and applicable
variable selling expenses.
(i)
Share capital
Ordinary shares 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. Cost incurred directly
attributable to the issuance of the shares is accounted for as a deduction from equity.
pg 58 | Mycron Steel Berhad