Notes to the Financial Statements
(Cont’d)
For the financial year ended 30 April 2016
(In Singapore Dollar)
STAMFORD TYRES CORPORATION LIMITED
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DRIVING IT UP
2.
Summary of significant accounting policies (cont’d)
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.
2.15
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a
past event, it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and the amount of the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best
estimate. If it is no longer probable that an outflow of economic resources will be required to settle the
obligation, the provision is reversed. If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
2.16
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant
will be received and all attaching conditions will be complied with. Grants in respect of specific expenses
are taken to profit or loss in the same year as the relevant expenses.
2.17
Financial guarantees
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in
accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that
are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial
guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable
that the liability will be higher than the amount initially recognised less amortisation, the liability is
recorded at the higher amount with the difference charged to profit or loss.
