FGV Annual Report 2013

Felda Global Ventures Holdings Berhad 206 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 3 SIGNIFICANT ACCOUNTING POLICIES (CONT’D.) The principal accounting policies applied in the preparation of financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (Cont’d.) (t) Revenue recognition (Cont’d.) The following specific recognition criteria must also be met before revenue is recognised: (Cont’d.) (iii) Subsidy from Government Subsidy received from the Government of Malaysia for certain products sold relates to the difference between estimatedmarket price and the controlled price determined by the Government for sale of the product in the domestic market limited to the amount agreed with the Government on an annual basis. This subsidy is credited to profit or loss and recognised as part of revenue in the accounting period in which the corresponding sales of goods are recognised. (iv) Revenue from rendering of services Revenue from rendering of services, includingmanagement fees and tolling arrangements, are recognised when the related services are performed, by reference to completion of the specific services. (v) Finance income Finance income is recognised using the effective finance method. When a loan or a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective finance rate of the instrument, and continues unwinding the discount as finance income. Finance income on impaired loan and receivables are recognised using the original effective finance rate. (vi) Rental income Rental income related to rental of properties and plants are recognised over the period of tenancy or usage, as appropriate. (vii) Dividend income Dividend income is recognised when the right to receive is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence. (viii) Compensation receivable Compensation receivable is estimated based on areas reclaimed by FELDA, recognised at the earlier of the contractual notice period or date taken over by FELDA, if earlier. (u) Dividend distribution Dividends on ordinary shares are recognised as liabilities when proposed or declared before the statement of financial position date. A dividend proposed or declared after the statement of financial position date, but before the financial statements are authorised for issue, is not recognised as a liability at the statement of financial position date. (v) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposit held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. (w) Leases (i) Classification A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.