Eng - IOI Group

notestothefinancialstatements cont’d3 SIGNIFICANT ACCOUNTING POLICIES cont’d3.14 InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined on a first in first outor weighted average basis. Cost comprises the original cost of purchase plus the cost of bringing theinventories to their intended location and condition. The cost of produce and finished goods includes thecost of raw materials, direct labour and a proportion of production overheads. Inventories of completeddevelopment properties comprise cost of land and the relevant development expenditure.Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs ofcompletion and selling expenses.3.15 Retirement BenefitsCertain subsidiaries of the Group operate defined benefit schemes. The schemes of the subsidiaries inMalaysia are operated on an unfunded basis whilst certain foreign subsidiaries are operating funded definedbenefit schemes. The benefits payable on retirement are generally based on the length of service and lastdrawn salary of the eligible employees.In respect of the unfunded schemes, full provisions are made based on a triennial actuary valuation usingthe accrued benefit method. The last valuation was on 30 June 2003.For the funded schemes, contributions to the scheme are charged to the income statement so as to spreadthe cost of the scheme over the employees’ working lives. The contributions are determined based on annualactuary valuation using the accrued benefit method. The last valuation was on 30 June 2003.3.16 Income TaxIncome 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 andis measured using the tax rates that have been enacted at the balance sheet date.Deferred tax is provided for under the liability method in respect of temporary differences between thecarrying amounts of assets and liabilities at the balance sheet date and their related tax bases.IOI Corporation BerhadAnnual Report 2003144Deferred tax asset is recognised only to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences, unabsorbed tax losses and unutilised capital allowancescan be utilised.