Powering growth - Aztech Group Ltd - Investor Relations

54a z t e c h a n n u a l r e p o r t 2 0 0 9F i n a n c i a l S t a t e m e n t s2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)Treasury sharesWhen the Company purchases its ordinary shares (treasury shares), the consideration paid, including any directly attributable incremental costs,net of income taxes, is deducted from equity attributable to the Company’s owners and presented as “treasury shares” within equity, until theyare cancelled, sold or reissued.When treasury shares are subsequently sold or reissued, the cost of the treasury shares is reversed from the treasury shares account and therealised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is recognised in theshare capital of the Company.WarrantsProceeds from the issuance of warrants are credited to the warrant reserve. When the warrants are exercised, the value of such warrantsexercised standing to the credit of the warrant reserve account will be transferred to the share capital account. At the expiry of the warrants, thebalance in the warrant reserve will be transferred to the share capital reserve.Financial liabilitiesTrade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, usingthe effective interest method, with interest expense recognised on an effective yield basis.Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using theeffective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings isrecognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).Derivative financial instrumentsThe Group enters into foreign currency forward contracts and interest rate swaps to manage its exposure to foreign exchange and interest raterisk, respectively. Further details of derivative financial instruments are disclosed in Note 10.Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair valueat the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately.INVENTORIES - Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, directlabour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculatedusing the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and coststo be incurred in marketing, selling and distribution.PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost, less accumulated depreciation and any impairmentloss where the recoverable amount of the asset is estimated to be lower than its carrying amount.The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carryingamount of the asset and is recognised in profit or loss.