FINANCIAL STATEMENTS - Mewah Group

MEWAH INTERNATIONAL INC.NOTES TOTHE FINANCIAL STATEMENTSFor the financial year ended 31 December 20122. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)2.10 Financial guarantees (continued)Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s statement of financial position.Financial guarantees are subsequently amortised to profit or loss over the period of the subsidiaries’ borrowings, unless it is probablethat the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the financial guaranteesshall be carried at the expected amount payable to the bank in the Company’s statement of financial position.Intra-group transactions are eliminated on consolidation.2.11 BorrowingsBorrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 monthsafter the statement of financial position date, in which case they are presented as non-current liabilities.Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any differencebetween the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of theborrowings using the effective interest method.2.12 Trade and other payablesTrade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year whichare unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of thebusiness if longer). If not, they are presented as non-current liabilities.Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interestmethod.2.13 Derivative financial instrumentsDerivative financial instruments comprise mainly of crude palm oil and palm oil products forward contracts, futures contracts andcurrency forward contracts.A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is subsequentlycarried at its fair value. Fair value changes on derivatives that are not designated or do not qualify for hedge accounting arerecognised in profit or loss within “cost of sales” when the changes arise.Derivative financial instruments are reported in the financial statements on a net basis where legal right of setoff exists. Derivativefinancial instruments are carried as assets when fair value is positive and as liabilities when fair value is negative.2.14 Fair value estimation of financial assets and liabilitiesThe fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives)are based on quoted market prices at the statement of financial position date. The quoted market prices used for financial assets are thecurrent bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices.60