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TEHO INTERNATIONAL INC LTD Annual Report 2012 34
Notes to the
Financial Statements
30 June 2012
2. Summary of Signifcant Accounting Policies (Continued)
Foreign Currency Transactions
The functional currency is the Singapore dollar as it reflects the primary economic
environment in which the entity operates. Transactions in foreign currencies are recorded
in the functional currency at the rates ruling at the dates of the transactions. At each end of
the reporting year, recorded monetary balances and balances measured at fair value that
are denominated in non-functional currencies are reported at the rates ruling at the end of
the reporting year and fair value dates respectively. All realised and unrealised exchange
adjustment gains and losses are dealt with in profit or loss except when recognised in
other comprehensive income and if applicable deferred in equity such as for qualifying
cash flow hedges. The presentation is in the functional currency.
Translation of Financial Statements of Foreign Entities
Each entity in the group determines the appropriate functional currency as it reflects
the primary economic environment in which the relevant reporting entity operates. In
translating the financial statements of such an entity for incorporation in the consolidated
financial statements in the presentation currency the assets and liabilities denominated
in other currencies are translated at end of the reporting year rates of exchange and
the income and expense items for each statement presenting profit or loss and other
comprehensive income are translated at average rates of exchange for the reporting
year. The resulting translation adjustments (if any) are recognised in other comprehensive
income and accumulated in a separate component of equity until the disposal of that
relevant entity.
Segment Reporting
The group discloses financial and descriptive information about its reportable segments.
Reportable segments are operating segments or aggregations of operating segments
that meet specified criteria. Operating segments are components about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance. Generally,
financial information is reported on the same basis as is used internally for evaluating
operating segment performance and deciding how to allocate resources to operating
segments.
2. Summary of Signifcant Accounting Policies (Continued)
Borrowing Costs
All borrowing costs that are interest and other costs incurred in connection with the
borrowing of funds that are directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily take a substantial period of time to get
ready for their intended use or sale are capitalised as part of the cost of that asset until
substantially all the activities necessary to prepare the qualifying asset for its intended use
or sale are complete. Other borrowing costs are recognised as an expense in the period
in which they are incurred. The interest expense is calculated using the effective interest
rate method.
Property, Plant and Equipment
Depreciation is provided on a straight-line basis to allocate the gross carrying amounts
of the assets less their residual values over their estimated useful lives of each part of an
item of these assets. The annual rates of depreciation are as follows:
Leasehold buildings – Over the terms of lease that are 17 to 30 years
Plant and machinery – 5 to 10 years
Motor vehicles – 5 years
An asset is depreciated when it is available for use until it is derecognised even if during
that period the item is idle. Fully depreciated assets still in use are retained in the financial
statements.
Property, plant and equipment are carried at cost on initial recognition and after initial
recognition at cost less any accumulated depreciation and any accumulated impairment
losses. The gain or loss arising from the derecognition of an item of property, plant and
equipment is determined as the difference between the net disposal proceeds, if any,
and the carrying amount of the item and is recognised in profit or loss. The residual value
and the useful life of an asset is reviewed at least at each end of the reporting year and,
if expectations differ significantly from previous estimates, the changes are accounted
for as a change in an accounting estimate, and the depreciation charge for the current
and future periods are adjusted.
Cost also includes acquisition cost, borrowing cost capitalised and any cost directly
attributable to bringing the asset or component to the location and condition necessary
for it to be capable of operating in the manner intended by management. Subsequent
costs are recognised as an asset only when it is probable that future economic benefits
associated with the item will flow to the entity and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit or loss when they are
incurred.