MISC Annual Report 2018

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS HIGHLIGHTS OF THE YEAR OUR BUSINESS OUR LEADERSHIP OUR PERFORMANCE OUR COMMITMENT TO SUSTAINABILITY OUR GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 50 TH ANNUAL GENERAL MEETING 249 MISC BERHAD ANNUAL REPORT 2018 248 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont'd.) (s) Revenue and other income recognition (cont'd.) (iii) Finance income on lease receivables Finance income on lease receivables is recognised according to the effective interest rate method so as to provide constant periodic rate of return on the net investment. (iv) Interest income Interest income is recognised on an accrual basis using the effective interest method. (v) Dividend income Dividend income is recognised when the Group's right to receive payment is established. (t) Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition, subject only to terms that are usual and customary. Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable MFRS. Then, on initial classification as held for sale, non-current assets are measured in accordance with MFRS 5: Non- Current Assets Held for Sale and Discontinued Operations that is, at the lower of carrying amount and fair value less costs to sell. Any differences are included in the income statement. (u) Repairs and maintanance Repairs and maintenance costs are recognised in the income statement in the period they are incurred. (v) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short- term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, being within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows. (w) Equity instruments Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared. The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont'd.) (x) Fair value measurements Fair value of an asset or a liability, except for lease transactions, is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market. (i) Financial instruments The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the end of reporting date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include: - using recent arm’s length market transactions; - reference to the current fair value of another instrument that is substantially the same; and - discounted cash flow analysis or other valuation models. Where fair value cannot be reliably estimated, assets are carried at cost less impairment losses, if any. (ii) Non-financial assets For a non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows: • Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities. • Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable input). The fair value of an asset to be transferred between levels is determined as of the date of the event or change in circumstances that caused the transfer. (y) Financial assets (MFRS 139) 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.