2. Significant accounting policies (cont’d.) 2.3 Summary of significant accounting policies (cont’d.) (g) Impairment of non-financial assets (cont’d.) An asset’s recoverable amount is the higher of the asset’s or CGU’s fair value less costs of disposal and its value-in-use. 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are firstly allocated to reduce the carrying amount of any associated goodwill to those units or groups of units. Any excess losses thereof, will result in a reduction to the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. An impairment loss is recognised in the income statement in the period in which it arises. If the asset is carried at a revalued amount, the impairment loss is accounted for as a revaluation loss, to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve of the same asset. Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset, other than goodwill, is reversed if, and only if, there has been a change in the estimates, used to determine the asset’s recoverable amount, since the last impairment loss was recognised. The carrying amount of an asset, other than goodwill, is increased to its revised recoverable amount, provided that this amount does not exceed the asset’s carrying amount had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset, other than goodwill, is recognised in the income statement. If the asset is carried at revalued amount, such a reversal is treated as a revaluation gain. (h) Inventories Inventories which comprise bunkers, lubricants, spares, raw materials and consumable stores are held for own consumption and are stated at lower of cost and net realisable value. Cost is arrived at on the weighted average basis and comprises the purchase price and other direct charges. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to complete the sale. (i) Financial assets Initial recognition: Financial assets within the scope of MFRS 139 are classified as “financial assets at fair value through profit or loss”, “loans and receivables”, “held-to-maturity investments”, “available-for-sale financial assets”, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition. MISC BERHAD • Annual Report 2016 182 notes to the financial statements - 31 december 2016
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