QL Resources Berhad (428915-X)
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2. Significant accounting policies (Cont’d)
(i) Inventories
Inventories comprise raw materials, manufactured inventories and trading inventories which are measured at the
lower of cost and net realisable value. The cost of inventories is measured based on first-in-first-out principle.
The cost of raw materials and trading inventories comprises the original purchase price plus incidentals in bringing
these inventories to their present location and condition. For manufactured inventories, cost consists of raw
materials, direct labour, an appropriate portion of fixed and variable production overheads based on normal
operating capacity and other incidental costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of
completion and the estimated costs necessary to make the sale.
The fair value of inventories acquired in a business combination is determined based on the estimated selling price
in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin
based on the effort required to complete and sell the inventories.
(j) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments
which have an insignificant risk of changes in fair value with original maturities of three months or less, and are
used by the Company in the management for their short-term commitments. For the purpose of the statement of
cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.
Cash and cash equivalents (other than bank overdrafts) are categorised and measured as loans and receivables
in accordance with Note 2(c).
(k) Impairment
(i) Financial assets
All financial assets (except for financial assets categorised as fair value through profit or loss, investment in
subsidiaries and investment in associates) are assessed at each reporting date whether there is any objective
evidence of impairment as a result of one or more events having an impact on the estimated future cash flows
of the asset. Losses expected as a result of future events, no matter how likely, are not recognised. For an
investment in an equity instrument, a significant or prolonged decline in the fair value below its cost is an
objective evidence of impairment. If any such objective evidence exists, then the impairment loss of the financial
asset is estimated.
An impairment loss in respect of loans and receivables is recognised in profit or loss and is measured as the
difference between the asset’s carrying amount and the present value of estimated future cash flows discounted
at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of
an allowance account.
An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is
measured as the difference between the asset’s acquisition cost (net of any principal repayment and
amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a
decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive
income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.
Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available
for sale is not reversed through profit or loss.
Notes to the Financial Statements
(Cont’d.)
