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Notes to the Financial Statements
For the fnancial year ended 31 December 2012
3. Summary of significant accounting policies (cont’d)
3.18 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using weighted-average method.
Cost incurred in bringing each product to its present locattion and condition is accounted for as follows:
Raw materials, goods in transit, spare parts and factory supplies – purchase cost; and
Finished goods and work in progress – cost of direct materials and labour and a proportion
of manufacturing overheads based on normal
operating capacity but excluding borrowing costs.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories
to the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
3.19 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is
probable that an outfow of resources embodying economic benefts will be required to settle the obligation and the amount of the
obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to refect the current best estimate. If it is no longer
probable that an outfow of resources embodying economic benefts will be required to settle the obligation, the provision is
reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that refects,
where appropriate, the risks specifc to the liability. When discounting is used, the increase in the provision due to the passage of
time is recognised as a fnance cost.
3.20 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the fnancial
instrument. The Group determines the classifcation of its fnancial liabilities at initial recognition.
All fnancial liabilities are recognised initially at fair value plus in the case of fnancial liabilities not at fair value through proft or
loss, directly attributable transaction costs.
Subsequent measurement
The measurement of fnancial liabilities depends on their classifcation as follows:
(a) Financial liabilities at fair value through proft or loss
Financial liabilities at fair value through proft or loss includes fnancial liabilities held for trading and fnancial liabilities
designated upon initial recognition at fair value through proft or loss. Financial liabilities are classifed as held for trading if
they are acquired for the purpose of selling in the near term. This category includes derivative fnancial instruments entered
into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives
are also classifed as held for trading unless they are designated as effective hedging instruments.
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