FGV Annual Report 2012

31 F i n a n c i a l S t a t e m e n t s 2 0 1 2 P e n y a t a K e w a n g a n 3 SIGNIFICANT ACCOUNTING POLICIES (continued) (m) Inventories Inventories which consist of soybeans and canola seed, tallow, coconut oil, canola and soybean oil, meal products, other fatty acid products, raw sugar, refined sugar, molasses, fertilisers, pesticides and other consumables are stated at lower of cost and net realisable value. Cost is determined using the first in, first out method. The cost of raw materials comprises direct costs of purchase. The costs of finished goods and work-in-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. (n) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or when events or circumstances occur indicating that impairment may exist. Property, plant and equipment and other non-current non-financial assets, including intangible assets with definite useful lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The impairment loss is charged to profit or loss. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Impaired assets are reviewed for possible reversal of impairment at each reporting date. (o) Zakat The Group recognises its obligations towards the payment of zakat on business. Zakat for the current period is recognised as and when the Group has a current zakat obligation as a result of a zakat assessment. The amount of zakat expense shall be assessed when a company within the Group has been in operation for at least 12 months, i.e. for the period known as“haul (eligible period)”. Zakat rates enacted or substantively enacted by the statement of financial position date are used to determine the zakat expense. The rate of zakat on business, as determined by National Fatwa Council for 2012 is 2.5% of the zakat base of the applicable entity. The zakat base is determined using working capital method calculated based on net current assets, adjusted for items that do not meet the conditions for zakat assets and liabilities and if the entity has been profitable in the previous financial year. Zakat on business is calculated by multiplying the zakat rate with zakat base. The amount of zakat assessed is recognised as an expense in the financial year in which it is incurred. (p) Income taxes Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been enacted at the statement of financial position date. Deferred tax is provided for on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilised. Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the statement of financial position date. Deferred tax is recognised in profit or loss, except when it arises from a transaction which is recognised directly in reserve, in which case the deferred tax is also recognised directly in reserve. Deferred tax is not recognised for temporary differences that arise from initial recognition of assets and liabilities, at initial recognition or upon subsequent measurement, that at the time of transaction, affect neither accounting profit not taxable profit. Tax benefits arising from reinvestment allowance and investment tax allowance is recognised when the tax credit is utilised.