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Frontken Corporation Berhad (651020-T)
ANNUAL REPORT
2016
3.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Finance Leases (Cont’d)
Minimum lease payments made under finance leases are apportioned between the finance costs and the reduction
of the outstanding liability. The finance costs, which represent the difference between the total leasing commitments
and the fair value of the assets acquired, are recognised in the profit or loss and allocated over the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each accounting period.
Leasehold land which in substance is a finance lease is classified as property, plant and equipment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in-first-out basis
and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and
condition.
Net realisable value represents the estimated selling price less the estimated costs of completion and the estimated
costs necessary to make the sale.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, bank balances, demand deposit and short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value with original maturities period three months or less.
The Group excluded deposits pledged to financial institutions from cash and cash equivalents for the purpose of the
statements of cash flows.
Provisions
Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result
of a past event, and it is probable that the Group will be required to settle that obligation, and when a reliable estimate of
the amount can be made. Provisions are measured at the directors’ best estimate of the expenditure required to settle
the obligation at the end of the reporting period, and are discounted to present value where the effect is material.
At end of each reporting period, the provisions are reviewed by the directors and adjusted to reflect the current best
estimate. The provisions are reversed if it is no longer probable that the Group and the Company will be required to
settle the obligation. The unwinding of the discount is recognised as interest expense in profit or loss.
Contingent Liabilities
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed
by the occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a
present obligation arising from past events that is not recognised because it is not probable that an outflow of economic
resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the
probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.
Fair Value Measurements
Fair value is 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, regardless of whether that price is directly observable or estimated using
a valuation technique. The measurement assumes that the transaction takes place either in the principal market or in the
absence of a principal market, in the most advantageous market. For 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.
Notes To The Financial Statements
(cont’d)