BAKERTECHNOLOGYLIMITED
ANNUALREPORT2013
94
Notes to the
Financial Statements
for the financial year ended 31December 2013
2.
Summaryof significantaccounting policies (cont’d)
2.11
Impairment of financial assets (cont’d)
(c)
Available-for-salefinancial assets (cont’d)
If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any
principal payment andamortisation) and its current fair value, less any impairment losspreviously recognised in theprofit
or loss, is transferred from other comprehensive income and recognised in profit or loss. Reversals of impairment losses
in respect of equity instruments are not recognised in the profit or loss; increase in fair value after their impairment are
recognised directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as
financial assets carriedat amortised cost. However, theamount recorded for impairment is the cumulative lossmeasured
as the difference between the amortised cost and the current fair value, less any impairment loss on that investment
previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying
amount of the asset, using the rate of interest used to discount the future cash flows for the purpose ofmeasuring the
impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a
debt instrument increases and the increases can be objectively related to an event occurring after the impairment loss
was recognised in profit or loss, the impairment loss is reversed in profit or loss.
2.12
Cash and cashequivalents
Cashand cashequivalents comprise cashonhand, demanddeposits, and short-term, highly liquid investments that are readily
convertible to known amounts of cash andwhich are subject to an insignificant risk of changes in value. These also
include
bank overdrafts that form an integral part of theGroup’s cashmanagement.
2.13
Inventories
Inventories, which aremade upmainlymaterials, components and spares, are valued at the lower of cost and net realisable
value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:
-
Rawmaterials: purchase costs on aweighted averagemethod.
-
Finishedgoods andwork-in-progress: costs of directmaterials and labour and aproportionofmanufacturingoverheads
based on normal operating capacity. These costs are assigned on aweighted averagemethod.
Wherenecessary, allowance isprovided fordamaged,obsoleteand slowmoving items toadjust thecarryingvalueof inventories
to the lower of cost andnet realisable value.
Net realisable value is the estimated sellingprice in theordinary courseof business, less estimated costs of completion and the
estimated costs necessary tomake the sale.
2.14
Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition,
construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the
asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are
capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed
in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
