Notestothefinancialstatements
For the financial year ended31December 2015
2.
Summaryof significant accountingpolicies (cont’d)
2.12
Inventories
Inventories, whicharemadeupofmainlymaterials, componentsand spares, are statedat the lower of cost andnet realisable value. Costs incurred inbringing
the inventories to their present locationand conditionareaccounted for as follows:
– Rawmaterials: purchase costsonaweightedaveragemethod.
– Work-in-progress: costsof directmaterialsand labour andaproportionofmanufacturingoverheadsbasedonnormal operating capacity.
Where necessary, allowance is provided for damaged, obsolete and slowmoving 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.
2.13
Borrowingcosts
Borrowingcostsarecapitalisedaspart of thecost of aqualifyingasset if theyaredirectlyattributable to theacquisition, constructionorproductionof 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
costsareexpensed in theperiod they occur. Borrowing costs consist of interest andother costs that anentity incurs in connectionwith theborrowingof funds.
2.14
Provisions
General
Provisions are recognisedwhen theGrouphas apresent obligation (legal or constructive) as a result of apast event, it is probable that an outflow of economic
resourcesembodyingeconomicbenefitswill be required to settle theobligationand theamount of theobligation canbeestimated reliably.
Provisions are reviewed at each reporting period date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic
resourceswill be required tosettle theobligation, theprovision is reversed. If theeffect of the time valueofmoney ismaterial, provisionsarediscountedusinga
current pre-tax rate that reflects,whereappropriate, the risksspecific to the liability.Whendiscounting isused, the increase in theprovisiondue to thepassage
of time is recognisedasa finance cost.
2.
Summaryof significant accountingpolicies (cont’d)
2.14
Provisions (cont’d)
Warrantyprovision
Provisions forwarranty-relatedcostsare recognisedwhen theproduct issoldorserviceprovided. Initial recognition isbasedonhistorical experience. The initial
estimateofwarranty-related cost is revisedannually.
2.15
Financial guarantee
A financial guarantee contract isa contract that requires the issuer tomake specifiedpayments to reimburse theholder for a loss it incursbecausea specified
debtor fails tomakepaymentwhendue inaccordancewith the termsof adebt instrument.
Financialguaranteesarerecognised initiallyat fairvalue,adjusted for transactioncosts thataredirectlyattributable to the issuanceof theguarantee.Subsequent
to initial recognition, financial guarantees are recognised as income in the profit or loss over the period of the guarantee. If it is probable that the liabilitywill
behigher than theamount initially recognised lessamortisation, the liability is recordedat thehigher amountwith thedifference charged to theprofit or loss.
2.16
Employeebenefits
(a)
Definedcontributionplan
The Group participates in the national pension schemes as defined by the laws of the countries inwhich it has operations. In particular, the Singapore
companies in theGroupmakecontributions to theCentral Provident Fundscheme inSingapore, adefinedcontributionpensionscheme. Contributions to
adefined contributionpension schemeare recognisedasanexpense in theperiod inwhich the related service isperformed.
(b)
Employee leaveentitlement
Employeeentitlements toannual leaveare recognisedasa liabilitywhen theyareaccrued to theemployees. Theestimated liability for leave is recognised
for services renderedby employeesup to theendof the reportingperiod.
2.17
Leases
Thedeterminationofwhether anarrangement is, or containsa lease isbasedon the substanceof thearrangement at inceptiondate:whether fulfilment of the
arrangement isdependenton theuseof aspecificassetorassets, or thearrangement conveysa right touse theasset, even if that right isnotexplicitlyspecified
inanarrangement.
As lessee
Operating leasepaymentsare recognisedasanexpense in theprofitor lossonastraight-linebasisover lease term.Theaggregatebenefitof incentivesprovided
by the lessor is recognisedasa reductionof rental expenseover the lease termona straight-linebasis.
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BAKERTECHNOLOGYlimited
ANNUAL REPORT 2015
