Bradken Limited Annual Report 2015 - page 71

BRADKEN LIMITED ANNUAL REPORT 2015 l 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
30 June 2015
(continued)
2 Summary of significant accounting policies (continued)
(l) Inventories
(i)
Raw materials and stores, work in progress and finished goods
(ii) Construction and service contract work in progress
(iii) Stock Obsolescence
(m) Investments and other financial assets
Classification
(i)
Financial assets at fair value through profit or loss
(ii) Loans and receivables
(iii) Held-to-maturity investments
Recognition and derecognition
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the
receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet
date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet (note
10).
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless
they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled within
12 months; otherwise they are classified as non-current.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A
provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s
carrying amount and the value of estimated future cash flows. The amount of the provision is recognised in the income
statement.
Construction and service contract work in progress is carried at cost plus profit recognised to date based on the value of work
completed, less progress billings and less provision for foreseeable losses. If there are contracts where progress billings
exceed the aggregate costs incurred plus profits less losses, the net amounts are presented under other liabilities.
Cost includes variable and fixed costs directly related to specific contracts, those costs related to contract activity in general
which can be allocated to specific contracts on a reasonable basis and other costs specifically chargeable under the contract.
Costs expected to be incurred under penalty clauses and rectification provisions are also included.
All inventory items are reviewed on a regular basis during the year and a provision raised for products which have not been sold
for one year unless the review indicates that a sale is likely.
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at initial recognition and, in
the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
Regular way purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to
purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other
comprehensive income are reclassified to profit or loss as gains and losses from investment securities.
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate portion of variable and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity. Costs are assigned to inventory on hand by the method most appropriate
to each particular class of inventory, with the majority being valued on either standard or weighted average basis. Costs of
purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price
in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale
such as expenses of marketing, selling and distribution to customers.
1...,61,62,63,64,65,66,67,68,69,70 72,73,74,75,76,77,78,79,80,81,...131
Powered by FlippingBook