Page 56 - ar2011

NATURAL COOL HOLDINGS LIMITED
Annual Report 2011 54
Notes to the Financial Statement
For the year ended 31st December 2011
3 Signifcant accounting policies (Continued)
3.3 Financial instruments (Continued)
(iv) Intra-group financial guarantees
Financial guarantees are fnancial instruments issued by the Group that require the issuer to
make specifed payments to reimburse the holder for the loss it incurs because a specifed
debtor fails to meet payment when due in accordance with the original or modifed terms of a
debt instrument.
Financial guarantee contracts are accounted for as insurance contracts. A provision is
recognised based on the Company’s estimate of the ultimate cost of settling all claims
incurred but unpaid at the balance sheet date. The provision is assessed by reviewing
individual claims and tested for adequacy by comparing the amount recognised and the
amount that would be required to settle the guarantee contracts.
3.4 Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation
and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost
of self-constructed assets includes the cost of materials and direct labour, any other costs
directly attributable to bringing the assets to a working condition for their intended use, when
the Group has an obligation to remove the asset or restore the site, an estimate of the costs
of dismantling and removing the items and restoring the site on which they are located, and
capitalised borrowing costs.
Purchased software that is integral to the functionality of the related equipment is capitalised
as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined
by comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and is recognised net within other income/other expenses in proft or loss.
(ii) Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised
in the carrying amount of the item if it is probable that the future economic benefts embodied
within the component will fow to the Group, and its cost can be measured reliably. The
carrying amount of the replaced component is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in proft or loss as incurred.