Annual Report 2014 | S P SETIA BERHAD GROUP | 127
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 October 2014
V. FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis. In the case
of finished goods and work-in-progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion
of factory overheads.
In the case of completed houses held for sale, cost is determined based on specific identification method.
Net realisable value represents the estimated selling price in the ordinary course of business, less selling and distribution costs and
all other estimated cost to completion.
(p) Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity
instrument of another enterprise.
(i) Initial recognition and measurement
A financial instrument is recognised in the financial statements when the Company or any of its subsidiaries becomes a party
to the contractual provisions of the instrument.
A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.
(ii) Financial instrument categories and subsequent measurement
Financial assets are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-
maturity investments or available-for-sale financial assets, as appropriate. Management determines the classification of the
financial assets upon initial recognition as set out below. The Group and the Company only have financial assets categorised as
loans and receivables.
Loans and receivables
This category comprises debt instruments that are not quoted in an active market, trade and other receivables and cash and
cash equivalents. They are included in current assets, except for maturities longer than 12 months after the reporting period,
which are classified as non-current assets.
The subsequent measurement of financial assets in this category is at amortised cost using the effective interest method, less
allowance for impairment losses. Any gains or losses arising from derecognition or impairment, and through the amortisation
process of loans and receivables are recognised in profit or loss.
Known bad debts are written off and allowance is made for any receivables considered to be doubtful of collection.
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities at amortised
The Group and the Company only have financial liabilities categorised as financial liabilities at amortised cost which are measured
using the effective interest method and are recognised in profit or loss.