Notes to the Financial Statements
(Cont’d)
For the year ended 30 April 2015
(In Singapore Dollars)
53
STAMFORD TYRES CORPORATION LIMITED
BUILDING ON OUR EXTENSIVE NETWORK
2.
Summary of significant accounting policies (cont’d)
2.12
Impairment of financial assets (cont’d)
(c)
Available-for-sale financial assets
In the case of equity investments classified as available-for-sale, objective evidence of impairment
include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant
changes with an adverse effect that have taken place in the technological, market, economic
or legal environment in which the issuer operates, and indicates that the cost of the investment
in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair
value of the investment below its costs.‘Significant’ is to be evaluated against the original cost of the
investment and ‘prolonged’ against the period in which the fair value has been below its original
cost.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its
acquisition cost (net of any principal repayment and amortisation) and its current fair value, less
any impairment loss previously recognised in profit or loss, is transferred from other comprehensive
income and recognised in profit or loss. Reversals of impairment losses in respect of equity
instruments are not recognised in profit or loss; increase in their fair value after impairment are
recognised directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on
the same criteria as financial assets carried at amortised cost. However, the amount recorded for
impairment is the cumulative loss measured as the difference between the amortised cost and
the current fair value, less any impairment loss on that investment previously recognised in profit or
loss. Future interest income continues to be accrued based on the reduced carrying amount of the
asset, using the rate of interest used to discount the future cash flows for the purpose of measuring
the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent
year, the fair value of a debt instrument increases and the increases can be objectively related to
an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is
reversed in profit or loss.
2.13
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term,
highly liquid investments that are readily convertible to known amount of cash and which are subject to
an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of
the Group’s cash management.
2.14
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted
average cost method and includes all costs in bringing the inventories to their present location and
condition. In the case of manufactured and retread products, and work-in-progress, cost includes all direct
expenditure and production overheads based on normal operating capacity. Net realisable value is the
price at which the inventories can be realised in the normal course of business after allowing for the costs
of realisation and, where appropriate, the cost of conversion from the existing state to a finished condition.
An allowance is made where necessary for obsolete, slow moving and defective inventories.
