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FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT
2015
3.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Assets Under Finance Leases and Hire Purchase (Cont’d)
Each lease and hire purchase payment is allocated between the liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The corresponding outstanding obligations due under the finance lease and
hire purchase after deducting finance charges are included as liabilities in the financial statements.
Finance charges are recognised in profit or loss over the period of the respective lease and hire purchase agreements.
Plant and equipment acquired under finance leases and hire purchase are depreciated over the useful lives of the
assets. If there is no reasonable certainty that the ownership will be transferred to the Group, the assets are depreciated
over the shorter of the lease terms and their useful lives.
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.
NOTES TO THE FINANCIAL STATEMENTS
(cont’d)