THONG GUAN INDUSTRIES BERHAD
Significant accounting policies (Cont’d)
Investments in debt and equity securities (Cont’d)
the recognition of an asset on the day it is received by the entity, and
the derecognition on an asset and recognition of any gain or loss on disposal on the date it is
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability.The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
Operating lease Other leases are operating leases and the leased assets are not recognised on the Group’s balance sheet.
Leasehold land that normally has an indefinite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as an operating lease.The payment made on entering into or acquiring a leasehold land is accounted for as prepaid lease payments.
Certain leasehold land were revalued and the Group has retained the unamortised revalued amount as the surrogate carrying amount of prepaid lease payments in accordance with the transitional provision in FRS 117.67A when it first adopted FRS 117, Leases in 2006.
Payments made under operating leases are recognised in the income statements on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Receivables are initially recognised at their cost when the contractual right to receive cash or another financial asset from another entity is established.
Subsequent to initial recognition, receivables are stated at cost less allowance for doubtful debts.
Receivables are not held for the purpose of trading.
Inventories are measured at the lower of cost and net realisable value.The cost of inventories is based on the weighted average cost and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of work-in-progress and manufactured inventories, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.