78
GHL Systems Berhad
(293040-D)
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (continued)
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
4.9 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the first-in, first-out formula. The cost comprises all costs of purchase, cost of
conversion plus other costs incurred in bringing the inventories to their present location and condition.
The cost of work-in-progress and finished goods includes the cost of raw materials and other direct
cost.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
costs of completion and the estimated costs necessary to make the sale.
4.10 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one enterprise and a
financial liability or equity instrument of another enterprise.
A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual
right to receive cash or another financial asset from another enterprise, or a contractual right to
exchange financial assets or financial liabilities with another enterprise under conditions that are
potentially favourable to the Group.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial
asset to another enterprise, or a contractual obligation to exchange financial assets or financial
liabilities with another enterprise under conditions that are potentially unfavourable to the Group.
Financial instruments are recognised on the statement of financial position when the Group has
become a party to the contractual provisions of the instrument. At initial recognition, a financial
instrument is recognised at fair value plus, in the case of a financial instrument not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of
the financial instrument.
An embedded derivative is separated from the host contract and accounted for as a derivative if,
and only if the economic characteristics and risks of the embedded derivative is not closely related
to the economic characteristics and risks of the host contract, a separate instrument with the same
terms as the embedded derivative meets the definition of a derivative, and the hybrid instrument is
not measured at fair value through profit or loss.
(a) Financial assets
A financial asset is classified into the following four (4) categories after initial recognition for the
purpose of subsequent measurement:
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss comprise financial assets that are held for
trading (i.e. financial assets acquired principally for the purpose of resale in the near term),
derivatives (both, freestanding and embedded) and financial assets that were specifically
designated into this classification upon initial recognition.
