inter roller fa final

Notes to the Financial StatementsSubsidiary companiesA subsidiary company is defined as a company in which the investing company has a long-term equity interestof more than 50% or over whose financial and operating policy decisions the Group controls.Shares in subsidiary companies are stated at cost less impairment in value on an individual subsidiary companybasis.Membership rightsMembership rights are stated at cost and represent transferable corporate memberships in recreational clubs.Provision for any impairment losses, on an individual basis, is taken to the income statement.InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted averagebasis, and includes all costs in bringing the inventories to their present location and condition. In the case ofmanufactured products, cost includes all direct expenditure and production overheads based on the normallevel of activity.Provision is made for obsolete, slow-moving and defective inventories in arriving at the net realisable value.Net realisable value is the estimated selling price in the ordinary course of business less the estimated costsnecessary to make the sale.Contract work-in-progressContract work-in-progress is stated at cost and comprises direct materials, direct labour, direct expenditureand the relevant production overheads plus attributable profit and less progress billings received and receivable.Profits are recognised in the financial statements on the percentage of completion method based on workdone. Provision is made for all losses expected to arise on completion of contracts entered into at the balancesheet date, whether or not work on these contracts has commenced.Specific costs incurred during the year for major projects are capitalised as contract work-in-progress andtaken to income statement in the same manner as other contract costs, provided that such costs incurredrelate to contracts already secured and can be separately identified and reliably measured. Otherwise, thecosts are expensed when incurred.ReceivablesReceivables are carried at cost which is the original invoiced amount less provision for doubtful debts. Thecarrying value approximates the fair value of receivables.Specific provision for doubtful debts is provided based on estimated possible losses in respect of certainoutstanding debtors’ accounts. Bad debts are written off as soon as it is established that they are irrecoverable.Receivables include trade and non-trade balances with third parties.inter-roller engineering limited annual report2004 47