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Frontken Corporation Berhad (651020-T)
ANNUAL REPORT
2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Financial Instruments (Cont’d)
(v) Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specific debtor fails to make payment when due in accordance with the
original or modified terms of a debt instrument.
The Company designates corporate guarantees given to financial institutions for credit facilities granted to
subsidiaries as insurance contracts as defined in MFRS 4 Insurance Contracts. The Company recognises these
corporate guarantees as liabilities when there is a present obligation, legal or constructive, as a result of a past
event, when 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.
Property, Plant and Equipment
Property, plant and equipment other than freehold land are stated at cost less accumulated depreciation and
accumulated impairment losses, if any.
Freehold land is stated at cost less impairment losses, if any and is not depreciated.
Depreciation is charged to profit or loss (unless it is included in the carrying amount of another asset) on the straight-line
method to write off the depreciable amount of the assets over their estimated useful lives. Depreciation of an asset does
not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. The principal
annual rates used for this purpose are:-
Freehold buildings
25 - 50 years
Long-term leasehold buildings
50 years
Long-term leasehold land
47 - 60 years
Factory and office renovation
5% - 10%
Plant and machinery
10% - 20%
Workshop tools
10% - 20%
Office equipment
33.3% - 80%
Furniture and fittings
10% - 33.3%
Motor vehicles
10% - 20%
Computers
33.3% - 85.7%
Capital work-in-progress is stated at cost. Cost comprises the direct expenditure incurred on the construction and
commissioning of the capital asset. Capital work-in-progress is not depreciated until its completion and availability for
commercial use.
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each
reporting period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates
and the expected pattern of consumption of the future economic benefits embodied in the items of the property, plant
and equipment.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Notes To The Financial Statements
(cont’d)