notes to the financial statements
for the financial year ended 31 December 2014 (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.13 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first in, first out basis. In the case of finished goods and work in
progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion of factory overheads.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to completion and selling expenses.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net
realisable value.
2.14 Cash and cash equivalents
Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant
risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and exclude fixed
deposits pledged to secure banking facilities.
2.15 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation or depreciation and are tested annually for impairment. Assets that are subject
to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.
2.16 Provision for warranties
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources
will be required to settle the obligation; and a reliable estimate of the amount can be made. Provisions are not recognised for future operating losses.
The Group recognises the estimated liability to repair or replace products when the underlying products or services are sold. The provision is calculated based
on historical warranty data and specific circumstances related to products or services sold, after considering the various possible outcomes against their
associated probabilities.
2.17 Share capital
(a)
Issue of shares
Ordinary shares are recorded at nominal value and proceeds received in excess of the nominal value of shares issued, if any, are accounted for as share
premium. Both ordinary shares and share premium are classified as equity. Costs incurred that are directly attributable to the issuance of the shares are
accounted for as a deduction from share premium, if any, otherwise it is charged to profit or loss. Other shares are classified as equity and/or liability
according to the economic substance of the particular instrument.
76
Wah Seong Corporation Berhad • Annual Report 2014
