Annual Report (Complete) - MYCRON Steel Berhad

Notes to the Financial Statements
30 June 2010
(continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(q)
Income tax (continued)
Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed
to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction, affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised to the extent that is probable that taxable profit will be available against which the
deductible temporary differences or unused tax losses can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantially enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
(r)
Segment reporting
Segment reporting is presented for enhanced assessment of the Group’s risks and returns. A business segment is a group
of assets and operations engaged in providing products or services that are subject to risks and returns that are different
from other business segments. A geographical segment is engaged in providing products or services, within a particular
economic environment, that are subject to risks and return that are different from those of segments operating in other
economic environments.
Segment revenue, expenses, assets and liabilities are those amounts resulting from the operating activities of a segment
that are directly attributable to the segment and the relevant portion that can be allocated on a reasonable basis to the
segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group
transactions are eliminated as part of the consolidation process, except to the extent that each intra-group balances and
transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those
available to other external parties.
(s)
Derivative financial instruments
Derivatives are initially recognised in the balance sheet at fair value on the date a derivative contract is entered into and
are subsequently remeasured at their fair value.
Derivative financial instruments that do not qualify for hedge accounting are accounted for at fair value through profit
or loss. Changes in the fair value of these derivative instruments that do not qualify for hedge accounting are recognised
immediately in the income statement.
(t)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more than 120 days overdue) are considered indicators that
the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of
the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income
statement within selling and distribution costs. When a trade receivable is uncollectible, it is written off against the allowance
account for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling and
distribution costs in the income statement.
(u)
Investments
Investments in subsidiaries and associates are shown at cost. Where an indication of impairment exists, the carrying amount
of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 2(k) on
impairment of assets.
On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged/credited
to the income statement.
pg 61 | Mycron Steel Berhad