KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
ANNUAL REPORT 2014
65
NOTES
TO THE FINANCIAL STATEMENTS
3
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
3.5 Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership
are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount
equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent
to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to
that asset.
Other leases are operating leases and are not recognised in the Group’s statement of financial
position.
3.6 Inventories and work-in-progress
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is
based on the first-in, first-out principle, and includes expenditure incurred in acquiring the inventories,
conversion costs and other costs incurred in bringing them to their existing location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and estimated costs necessary to make the sale. Allowance is made
for all deteriorated, damaged and slow-moving inventories.
Work-in-progress represents the gross unbilled amount expected to be collected from customers for
contract work performed to date on uncompleted shipbuilding, repair and fabrication contracts. It is
measured at cost plus profit recognised to date less progress billings and recognised losses. Cost
includes all expenditure related directly to specific projects incurred in the Group’s contract activities
based on normal operating capacity.
Work-in-progress is presented as part of inventories in the statement of financial position for all
contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings
exceed costs incurred plus recognised profits, then the difference is presented as part of trade and
other payables in the statement of financial position.
3.7 Financial instruments
(i)
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are
originated. All other financial assets (including assets designated at fair value through profit
or loss) are recognised initially on the trade date, which is the date that the Group becomes a
party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from
the asset expire, or it transfers the rights to receive the contractual cash flows on the financial
asset in a transaction in which substantially all the risks and rewards of ownership of the
financial asset are transferred, or it neither transfers nor retains substantially all of the risks and
rewards of ownership and does not retain control over the transferred asset. Any interest in
transferred financial assets that is created or retained by the Group is recognised as a separate
asset or liability.
