2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Inventories Inventories are stated at the lower of cost and net realisable value. 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. Cost of raw materials, work in progress, manufactured inventories and consumables are calculated using on the weighted average cost method, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of work in progress and finished goods, cost includes an appropriate share of production overheads based on normal operating capacity. Petroleum products of spares, other than crude oil, are stated at the lower of cost and net realisable value. Crude oil are stated at fair value less cost to sell. Cost of trading merchandise is determined on the first-in-first-out cost method and includes the purchase price, production or conversion costs and incidentals incurred in bringing the inventories to their present location and condition. (h) Contract asset/Contract liability A contract asset is recognised when the Group’s right to consideration is conditional on something other than the passage of time. A contract asset is subject to impairment in accordance to MFRS 9 Financial Instruments (see Note (2)(j)(i)). A contract liability is stated at cost and represents the obligation of the Group to transfer goods or services to a customer for which consideration has been received (or the amount is due) from the customers. (i) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments that are readily convertible to known amounts of cash and which have an insignificant risk of changes in fair value with original maturities of three months or less. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts, pledged deposits and restricted cash. Restricted cash comprises amounts held on deposit for specific purposes under contractual agreements and which are not available to the Group to service short term liquidity needs. (j) Impairment (i) Financial assets The Group and the Company recognise loss allowances for expected credit losses on financial assets measured at amortised cost and contract assets. Expected credit losses are a probability–weighted estimate of credit losses. The Group and the Company measure loss allowances at an amount equal to lifetime expected credit losses, except for debt securities that are determined to have low credit risk at the reporting date, cash and bank balances and other debt securities for which credit risk has not increased significantly since initial recognition, which are measured at 12–month expected credit losses. Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime expected credit losses. Financial Statements DAGANG NeXCHANGE BERHAD 216 NOTES TO THE FINANCIAL STATEMENTS
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