70 EXCEL FORCE MSC BERHAD Notes to the Financial Statements (cont’d) 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (g) Financial liabilities (cont’d) Financial liability categories and subsequent measurement The Group and the Company classify their financial liabilities as follows: (i) Financial liabilities at fair value through profit or loss The Group and the Company have not designated any financial liabilities at FVTPL. (ii) Financial liabilities at amortised cost Financial liabilities not categorised as fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains or losses on derecognition are also recognised in the profit or loss. The Group and the Company’s financial liabilities designated as amortised cost comprise trade and other payables and lease liabilities. Derecognition A financial liability or part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expired. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. (h) Offsetting of financial instruments Financial asset and financial liability are offset and the net amount is reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (i) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of inventories comprise cost of purchase and other costs incurred in bringing it to their present location and condition are determined on a first-in-first-out basis. 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. ( j) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, bank overdrafts and shortterm highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
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