Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts and
derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their
classification as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value
through profit or loss.
Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term. This
category also includes derivative financial instruments entered
into by the Group that are not designated as hedging instruments in
hedge relationships as defined by IAS 39. Separated embedded
derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised
in the statement of profit or loss.
Financial liabilities designated upon initial recognition at
fair value through profit or loss are designated at the initial
date of recognition, and only if the criteria in IAS 39 are
satisfied. The Group has not designated any financial liability as
at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the Group. After initial
recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses
are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss.
This category generally applies to interest-bearing loans and
borrowings. For more information refer Note 32.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the statement of
profit or loss.
iv) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle on a net
basis, to realise the assets and settle the liabilities
simultaneously.
i) Inventories
Inventories are valued at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
Inventories of crude palm oil ("CPO") and palm kernel ("PK")
The cost of CPO and PK includes cost of raw materials, direct
labour and an appropriate proportion of fixed and variable
production overheads incurred on a normal operating capacity
Other inventories
The cost of consumable supplies, chemicals and fertilisers is
determined using the weighted average method and includes expenses
incurred in bringing them into store. 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.
j) Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an
indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the
Group estimates the asset's recoverable amount. An asset's
recoverable amount is the higher of an asset's or cash-generating
unit's ("CGU") fair value less costs of disposal and its value in
use. Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less
costs of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by
valuation multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets
and forecast calculations, which are prepared separately for each
of the Group's CGUs to which the individual assets are allocated.
These budgets and forecast calculations generally cover a period of
five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth
year.
Impairment losses of continuing operations, including impairment
of inventories, are recognised in the statement of profit or loss
in expense categories consistent with the function of the impaired
asset.
For assets excluding goodwill, an assessment is made at each
reporting date to determine whether there is an indication that
previously recognised impairment losses no longer exist or have
decreased. If such indication exists, the Group estimates the
asset's or CGUs recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable amount since
the last impairment loss was recognised. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in the statement of profit or loss.
The following asset has specific characteristics for impairment
testing:
Goodwill
Goodwill is tested for impairment annually as at 31 December and
when circumstances indicate that the carrying value may be
impaired.
Impairment is determined for goodwill by assessing the
recoverable amount of each CGU (or group of CGUs) to which the
goodwill relates. When the recoverable amount of the CGU is less
than its carrying amount, an impairment loss is recognised.
Impairment losses relating to goodwill cannot be reversed in future
periods.
k) Cash and short-term deposits
Cash and short-term deposits in the statement of financial
position comprise cash at banks and on hand and short-term deposits
with a maturity of three months or less.
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents consist of cash and short-term deposits
as defined above, net of outstanding bank overdrafts.
l) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. When the
Group expects some or all of a provision to be reimbursed, for
example, under an insurance contract, the reimbursement is
recognised as a separate asset, but only when the reimbursement is
virtually certain. The expense relating to a provision is presented
in the statement of profit or loss net of any reimbursement.
m) Employee benefits
i) Defined contribution plans
The Group participates in the national pension schemes as
defined by the laws of the countries in which it has operations. In
particular, the Singapore company in the Group makes contribution
to the Central Provident Fund scheme in Singapore, a defined
contribution scheme. Subsidiary companies in Malaysia make
contribution to the Employees Provident Fund. Such contributions to
defined contribution pension schemes are recognised as an expense
in the period in which the related service is performed.
ii) Employee leave entitlement
Employee entitlements to annual leave are recognised as a
liability when they accrue to the employees. The estimated
liability for leave is recognised for services rendered by
employees up to each reporting date.
iii) Bonus plans
The expected cost of bonus plans is recognised as a liability
when the Group has a present legal or constructive obligation as a
result of services rendered by the employees and a reliable
estimate of the obligation can be made. Liabilities for bonus plans
are expected to be settled within 12 months of each reporting date
and are measured at the amounts expected to be paid when they are
settled.
n) Share-based payment
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