XYZ Holdings (Singapore) Limited -2013

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XYZ Holdings (Singapore) Limited

Preface

About this publication


This publication includes the following components:

§ XYZ Holdings (Singapore) Limited – Illustrative report on directors’ report, statement by directors and financial statements

§ Appendix A – Additional illustrative disclosures § Appendix B – Comparison between Singapore Financial Reporting Standards and

International Financial Reporting Standards

The illustrative financial statements are an illustration of the annual financial statements of a Singapore-incorporated listed company, XYZ Holdings (Singapore) Limited, prepared in accordance with:

§ Singapore Financial Reporting Standards § The Singapore Companies Act, Cap. 50.

The illustrative financial statements serve to provide illustration of annual consolidated financial statements of a group of companies whose activities include manufacturing, property development and investment holding. The disclosures contained in these illustrative financial statements are made based on a hypothetical group of entities and certain assumptions have been made about the applicability of the disclosures required by Singapore Financial Reporting Standards. In addition to the aforementioned standards and regulation, certain disclosure requirements of the Singapore Exchange Securities Trading Limited’s (SGX-ST) Listing Manual have also been included in these illustrative financial statements. Readers should note that the disclosure requirements of the SGX-ST may be included in other parts of the entity’s annual report instead.

This 2013 edition includes illustrative disclosures for the amendments to FRS 1 Presentation of Other Comprehensive Income, Revised FRS 19 Employee Benefits, FRS 113 Fair Value Measurement, amendments to FRS 107 Disclosures – Offsetting Financial Assets and Financial Liabilities and Improvements to FRSs 2012. Also included are additional illustrative disclosures for the early adoption of FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of Interests in Other Entities.

To provide the user with insight of changes in this publication as compared to the 2012 edition, we have sidelined the new illustrations, disclosure requirements and other editorial changes in this manner.

Important notices

· This publication is intended as an illustrative guide rather than a definitive statement.

· While the illustrative financial statements contain most of the usual disclosures typically found in the financial statements of a group of companies whose activities include manufacturing, property development and investment holding, the disclosures and commentaries in this publication are not meant to be exhaustive. Reference should be made to the relevant standards and regulations for specific disclosure requirements.

· This publication should not be relied upon as a substitute for seeking professional advice concerning the appropriate accounting treatment for specific individual situations or ensuring compliance with the Singapore Financial Reporting Standards and/or Singapore Companies Act, Cap. 50.


Preface

Singapore Financial Reporting Standards (FRS)

For financial periods beginning on or after 1 January 2013, a number of new and revised FRSs apply.

A list of the FRSs and INT FRS is provided in Appendix B, which also provides a brief summary of the major differences with International Financial Reporting Standards (IFRS).

This publication reflects the requirements of the FRSs as at 31 August 2013. No new accounting standards that would be applicable to financial statements covering periods beginning on 1 January 2013 are expected. Nevertheless, the situation needs to be monitored for any developments that may affect 2013 financial statements.

The following FRSs have not been dealt with in this publication:

· FRS 26 Accounting and Reporting by Retirement Benefit Plans · FRS 29 Financial Reporting in Hyperinflationary Economies · FRS 34 Interim Financial Reporting · FRS 41 Agriculture · FRS 101 First-time Adoption of Financial Reporting Standards · FRS 104 Insurance Contracts · FRS 106 Exploration for and Evaluation of Mineral Resources · INT FRS 112 Service Concession Arrangements · INT FRS 113 Customer Loyalty Programmes · INT FRS 117 Distributions of Non-Cash Assets to Owners · INT FRS 118 Transfer of Assets from Customers · INT FRS 120 Stripping Costs in the Production of a Surface Mine · INT FRS 121 Levies


Preface

Singapore Financial Reporting Standards (FRS) (continued)

Abbreviations

The following abbreviations are used in this publication:

BC Basis for Conclusions CA Singapore Companies Act, Cap. 50 FRS Singapore Financial Reporting Standards

– INT FRS Interpretations of FRSs – FRS AG FRS Application Guidance – FRS IG FRS Implementation Guidance

IAS International Accounting Standards IFRS International Financial Reporting Standards SSA Singapore Standards on Auditing SGX Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing Manual


Contents Page

General information ................................................................................................................ 1

Directors’ report...................................................................................................................... 2

Statement by directors ............................................................................................................ 7

Independent auditor’s report ................................................................................................. . 8

Consolidated income statement ............................................................................................. 10

Consolidated statement of comprehensive income .............................................................. ....11

Balance sheets…………………... .................................................................................................. 16

Statement of changes in equity .............................................................................................. 18

Consolidated cash flow statement .......................................................................................... 26

Notes to the financial statements

1. Corporate information ................................................................................................... 29

2. Summary of significant accounting policies ..................................................................... 29

2.1 Basis of preparation ............................................................................................. 29

2.2 Changes in accounting policies ............................................................................. 31

2.3 Standards issued but not yet effective ................................................................. 34

2.4 Basis of consolidation and business combinations .................................................. 37

2.5 Transactions with non-controlling interests ........................................................... 41

2.6 Foreign currency .................................................................................................. 41

2.7 Property, plant and equipment ............................................................................. 42

2.8 Investment properties .......................................................................................... 43

2.9 Intangible assets .................................................................................................. 45

2.10 Land use rights .................................................................................................... 47

2.11 Impairment of non-financial assets ........................................................................ 48

2.12 Subsidiaries ......................................................................................................... 49

2.13 Associates ........................................................................................................... 49

2.14 Joint venture ....................................................................................................... 51

2.15 Financial instruments ........................................................................................... 52

2.16 Impairment of financial assets .............................................................................. 57

2.17 Cash and cash equivalents .................................................................................... 59

2.18 Construction contracts ......................................................................................... 59

2.19 Development properties ....................................................................................... 60

2.20 Inventories .......................................................................................................... 60

2.21 Provisions ............................................................................................................ 61

2.22 Government grants .............................................................................................. 63

2.23 Transfers between levels of the fair value hierarchy .............................................. 63

2.24 Financial guarantee .............................................................................................. 64

2.25 Borrowing costs ................................................................................................... 64

2.26 Convertible redeemable preference shares ............................................................ 65


Contents Page

Notes to the financial statements (continued)

2.27 Employee benefits ................................................................................................ 66

2.28 Leases ................................................................................................................. 69

2.29 Non-current assets held for sale and discontinued operations ................................ 70

2.30 Revenue .............................................................................................................. 70

2.31 Taxes .................................................................................................................. 71

2.32 Share capital and share issuance expenses ............................................................ 73

2.33 Treasury shares ................................................................................................... 73

2.34 Contingencies .............................................................................................. ........73

2.35 Related parties..................................................................................................... 74

3. Significant accounting judgments and estimates .............................................................. 75

3.1 Judgments made in applying accounting policies ................................................... 75

3.2 Key sources of estimation uncertainty .................................................................. 76

4. Revenue ............ ........................................................................................................... 80

5. Interest income .............................................................................................................. 80

6. Other income ................................................................................................................. 80

7. Finance costs ................................................................................................................. 81

8. Other expenses .............................................................................................................. 81

9. Profit before tax from continuing operations ................................................................... 82

10. Income tax expense ....................................................................................................... 84

11. Discontinued operation and disposal group classified as held for sale ............................... 87

12. Earnings per share ......................................................................................................... 89

13. Property, plant and equipment ....................................................................................... 92

14. Investment properties .................................................................................................... 95

15. Intangible assets ............................................................................................................ 97

16. Land use rights ............................................................................................................ 102

17. Investment in subsidiaries ............................................................................................ 102

18. Investment in associates .............................................................................................. 109

19. Investment in joint venture ........................................................................................... 112

20. Deferred tax ................................................................................................................ 113

21. Trade and other receivables ......................................................................................... 115

22. Investment securities ................................................................................................... 121

23. Gross amount due from/(to) customers for contract work-in-progress ............................ 122

24. Development properties ................................................................................................ 123

25. Inventories …………………….... .......................................................................................... 124

26. Derivatives .................................................................................................................. 125

27. Cash and short-term deposits ....................................................................................... 126


Contents Page

Notes to the financial statements (continued)

28. Provisions ................................................................................................................... 127

29. Deferred capital grants ................................................................................................ 128

30. Loans and borrowings .................................................................................................. 129

31. Trade and other payables ............................................................................................. 132

32. Other liabilities ............................................................................................................ 133

33. Share capital and treasury shares ................................................................................. 134

34. Other reserves ............................................................................................................. 135

35. Employee benefits ........................................................................................................ 136

36. Related party transactions ........................................................................................... 139

37. Commitments .............................................................................................................. 142

38. Contingencies .............................................................................................................. 144

39. Fair value of assets and liabilities .................................................................................. 145

40. Financial risk management objectives and policies ......................................................... 160

41. Capital management .................................................................................................... 174

42. Segment information ................................................................................................... 176

43. Dividends .................................................................................................................... 181

44. Events occurring after the reporting period ................................................................... 182

45. Authorisation of financial statements for issue .............................................................. 182

Appendices

Appendix A-1 Consolidated statement of comprehensive income in one statement –

Illustrating the analysis of expense by nature ................................................. 183

Appendix A-2 Hedge accounting ......................................................................................... 185

Appendix A-3 Agreements for the construction of real estate .............................................. 192

Appendix A-4 Defined benefit plans ..................................................................................... 196

Appendix A-5 Consolidated financial statements, joint arrangements and disclosure of

interests in other entities............................................................................. 209

Appendix B Comparison between FRS and IFRS ................................................................ 246

Co. Reg. No 123456789Z

XYZ Holdings (Singapore) Limited and its subsidiaries Illustrative financial statements for the financial year ended 31 December 2013

The names of people and corporations included as illustrations are fictitious. Any resemblance to any person or business is purely coincidental.

XYZ Holdings (Singapore) Limited and its subsidiaries

General information

XYZ Holdings (Singapore) Limited | 1

Gneral information

Directors Ang Beng Choo – Chairman

De Silva Elizabeth Frances – Chief Executive Officer

Goh Hock Inn

Jee Kim Leng

Musa Nasir Osman

Pek Que Ru

See Tong Tong

Company secretary Lee Yiew Hong

Registered office [Address, telephone number, facsimile number and electronic mail address (if any)]

Solicitors Laura & Co. LLP

Bankers Good Bank Limited

South Bank Limited

CPA Bank Limited

Share registrar [Address]

Auditor Ernst & Young LLP

One Raffles Quay

North Tower, Level 18

Singapore 048583

Partner in charge: Alex Yang (Date of appointment: since financial year ended 31 December

2012)

SGX 1207.1 SGX 1207.2 SGX 1207.3 SGX 713.1


Directors’ report


Diectors’ report

The directors are pleased to present their report to the members together with the audited consolidated financial statements of XYZ Holdings (Singapore) Limited (the Company) and its subsidiaries (collectively, the Group) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2013.

1. Directors

The directors of the Company in office at the date of this report are:

Ang Beng Choo

De Silva Elizabeth Frances (appointed on 2 February 2013)

Goh Hock Inn

Jee Kim Leng

Musa Nasir Osman

Pek Que Ru

See Tong Tong

In accordance with Articles 93 and 94 of the Company’s Articles of Association, Jee Kim Leng, Pek Que Ru and See Tong Tong retire and, being eligible, offer themselves for re-election.

2. Arrangements to enable directors to acquire shares and debentures

Except as described in paragraph five below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

3. Directors’ interests in shares and debentures

The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:

Direct interest Deemed interest

Name of director

At the beginning of

financial year or date of

appointment

At the end of financial year

At the beginning of


appointment


Ordinary shares of the Company Goh Hock Inn 340,000 345,000 2,100,000 2,100,000 De Silva Elizabeth Frances 5,000 10,000 – –

Share options of the Company Goh Hock Inn 50,000 60,000 – – De Silva Elizabeth Frances 43,000 60,000 – –

CA 201.6A CA 201.5 CA 201.6A.a CA 201.6.a CA 201.6A.g CA 201.6.f CA 201.6A.h CA 201.6.g


Directors’ report


3. Directors’ interests in shares and debentures (continued)

Direct interest Deemed interest

Name of director

At the beginning of


appointment


At the beginning of


appointment


Ordinary shares of £1 each of the holding company (Good Group (International) Ltd)

Goh Hock Inn 10,000 10,000 – – De Silva Elizabeth Frances 25,000 25,000 – –

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2014. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.

4. Directors’ contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.

5. Options

At an Extraordinary General Meeting held on 23 December 2008, shareholders approved the Senior Executive Option Plan and the General Employee Share Option Plan for the granting of non-transferable options that are settled by physical delivery of the ordinary shares of the Company, to eligible senior executives and employees respectively.

The committee administering the employee share option plans comprise three directors, Musa Nasir Osman, Pek Que Ru and See Tong Tong.

During the financial year:

· The Company has granted 37,000 share options under the Senior Executive Option Plan. These options expire on 30 June 2018 and are exercisable if and when the Group’s earnings per share amount increases by 12% within three years from the date of grant.

· The Company has also granted 163,000 share options under the General Employee Share Option Plan. These options expire on 30 June 2018 and are exercisable if the employee remains in service for three years from the date of grant and that certain market conditions as detailed in Note 35 to the financial statements are met.

· 75,000 treasury shares were reissued at a weighted average exercise price of S$1.08 each, upon the exercise of options granted pursuant to the employee share option plans.

SGX 1207.7 CA 201.8 CA 201.11.b and 11B SGX 853 SGX 852.1.a CA 201.11.b-d CA 201.11.b-d CA 201.12.a


Directors’ report


5. Options (continued)

Details of all the options to subscribe for ordinary shares of the Company pursuant to the employee share option plans as at 31 December 2013 are as follows:

Expiry date Exercise price (S$) Number of options

31 December 2014 1.05 45,000

30 November 2015 1.18 55,000

1 January 2016 1.22 100,000

31 December 2017 1.26 125,000

30 June 2018 1.30 200,000

Total 525,000

Details of the options to subscribe for ordinary shares of the Company granted to directors of the Company pursuant to the Senior Executive Option Plan are as follows:

Name of director

Options granted during

financial year

Aggregate options granted

since commencement of plan to end of

financial year

Aggregate options exercised since

commencement of plan to end of financial year

Aggregate options

outstanding as at end of

financial year

Goh Hock Inn 15,000 105,000 (35,000) 60,000

De Silva Elizabeth Frances 22,000 75,000 (15,000) 60,000

Total 37,0001 180,000 (50,000) 120,000

1 These options are exercisable between the periods from 30 June 2016 to 30 June 2018 at the exercise price of S$1.30 if the vesting conditions are met.

Since the commencement of the employee share option plans till the end of the financial year:

· No options have been granted to the controlling shareholders of the Company and their associates

· No participant other than the two directors mentioned above has received 5% or more of the total options available under the plans

· No options have been granted to directors and employees of the holding company and its subsidiaries

· No options that entitle the holder to participate, by virtue of the options, in any share issue of any other corporation have been granted

· No options have been granted at a discount

CA 201.12.b SGX 852.1.b.i SGX 852.2 SGX 852.1.b.ii SGX 852.1.b.iii SGX 852.c.i SGX 852.1.c. ii CA 201.11 SGX 852.1.d


Directors’ report


6. Audit committee

The audit committee (AC) carried out its functions in accordance with section 201B (5) of the Singapore Companies Act, Cap. 50, including the following: Ê

· Reviewed the audit plans of the internal and external auditors of the Group and the Company, and reviewed the internal auditor’s evaluation of the adequacy of the Company’s system of internal accounting controls and the assistance given by the Group and the Company’s management to the external and internal auditors

· Reviewed the quarterly and annual financial statements and the auditor’s report on the annual financial statements of the Group and the Company before their submission to the board of directors

· Reviewed effectiveness of the Group and the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditor

· Met with the external auditor, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC

· Reviewed legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators

· Reviewed the cost effectiveness and the independence and objectivity of the external auditor

· Reviewed the nature and extent of non-audit services provided by the external auditor

· Recommended to the board of directors the external auditor to be nominated, approved the compensation of the external auditor, and reviewed the scope and results of the audit

· Reported actions and minutes of the AC to the board of directors with such recommendations as the AC considered appropriate

· Reviewed interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited’s Listing Manual

The AC, having reviewed all non-audit services provided by the external auditor to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditor. The AC has also conducted a review of interested person transactions.

The AC convened four meetings during the year with full attendance from all members, except for one where a member was absent. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

Further details regarding the AC are disclosed in the Report on Corporate Governance.

CA 201B.9 SGX 1207.6.b


Directors’ report


7. Auditor

Ernst & Young LLP have expressed their willingness to accept reappointment as auditor.

On behalf of the board of directors:

____________________________ ___________________________

Ang Beng Choo De Silva Elizabeth Frances

Director Director

27 February 2014

Commentary:

Ê Section 201B (5) of the Companies Act requires a description of the nature and extent of the functions performed by the audit committee pursuant to section 201B (5). If the nature and extent of the functions are described in the Report on Corporate Governance and the Directors’ Report makes reference to the Report on Corporate Governance instead, the directors must ensure that the Report on Corporate Governance describes the functions pursuant to section 201B (5) of the Companies Act.

CA 201.5 CA 201B.5


Statement by directors


Statement by directors

We, Ang Beng Choo and De Silva Elizabeth Frances, being two of the directors of XYZ Holdings (Singapore) Limited, do hereby state that, in the opinion of the directors,

(i) the accompanying balance sheets Ê, consolidated income statement ç, consolidated statement of comprehensive income, statements of changes in equity, and consolidated cash flow statement Ê together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company é for the year ended on that date, and

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the board of directors: ___________________________ ___________________________ Ang Beng Choo De Silva Elizabeth Frances Director Director 27 February 2014

Commentary:

å FRS 1 uses the terms statement of financial position and statement of cash flows. However, an entity is not obliged to use these terminologies.

In this illustration, the Group has chosen to use the terms balance sheet and cash flow statement. If an entity has chosen to use the terms introduced by FRS 1, the entity should make reference to the new terms used in its financial statements.

ç In this illustration, the Group has chosen to present its comprehensive income in two linked statements. If an entity has chosen to present its comprehensive income in one single statement, the reference to consolidated income statement should be removed.

é Presentation of the statement of changes in equity for the Company when consolidated financial statements are presented is optional. In this illustration, the Company has chosen to present the statement of changes in equity for the Company together with the consolidated financial statements and balance sheet of the Company. Accordingly, the statement by directors includes the directors’ opinion on whether the statement of changes in equity is drawn up so as to give a true and fair view of the changes in equity of the Company. This applies to the auditor’s opinion expressed in the auditor’s report as well.

CA 201.15.a CA 201.15.b CA 201.15.c FRS 1.10


Independent auditor’s report For the financial year ended 31 December 2013


Independent auditors’ report

Independent Auditor’s Report to the Members of XYZ Holdings (Singapore) Limited

Report on the Financial Statements

We have audited the accompanying financial statements of XYZ Holdings (Singapore) Limited (the “Company”) and its subsidiaries (collectively, the “Group”) set out on pages 10 to 182, which comprise the balance sheets å of the Group and the Company as at 31 December 2013, the statements of changes in equity of the Group and the Company é and the consolidated income statement ç, consolidated statement of comprehensive income and consolidated cash flow statement å of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet å and statement of changes in equity of the Company é are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company é for the year ended on that date.

Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

___________________________

Ernst & Young LLP

Public Accountants and Chartered Accountants Singapore

27 February 2014

SSA 700.22, CA 207.1 SSA 700.39 SSA 700.23 SSA 700.25 SSA 700.26 SSA 700.28 SSA 700.29 and 30 SSA 700.31 SSA 700.33 SSA 700.34 SSA 700.35 CA 207.2.a SSA 700.38 CA 207.2.b SSA 700.40 SSA 700.42 SSA 700.41


Independent auditor’s report For the financial year ended 31 December 2013


Commentary:

å Please refer to commentary no. 1 of the statement by directors.

ç Please refer to commentary no. 2 of the statement by directors.

é Please refer to commentary no. 3 of the statement by directors.


Consolidated income statement åç For the financial year ended 31 December 2013


(Illustrating the analysis of expenses by function)

Note 2013 $’000

2012 $’000 FRS 1.81.b and 103

Continuing operations é Revenue 4 136,720 142,571 FRS 1.82.a and 103

Cost of sales (104,271) (111,820) FRS 1.103

Gross profit 32,449 30,751 FRS 1.103 Other items of income è FRS 1.103

Interest income ê 5 430 327 FRS 18.35.b.iii

Dividend income from investment securities ê 526 406 FRS 18.35.b.v

Other income 6 1,725 1,085 Other items of expense è

Marketing and distribution (4,895) (4,195) FRS 1.103

Research and development ê (320) (327) FRS 1.103, FRS 38.126

Administrative expenses (20,329) (19,023) FRS 1.103

Finance costs 7 (1,715) (1,512) FRS 1.82.b

Other expenses 8 (1,471) (724) FRS 1.103 Share of results of associates ê 657 328 FRS 1.82.c, FRS 28.38

Profit before tax from continuing operations 9 7,057 7,116 FRS 1.85

Income tax expense 10 (1,557) (1,687) FRS 1.82.d, FRS 12.77

Profit from continuing operations, net of tax 5,500 5,429 FRS 1.85 Discontinued operation é Loss from discontinued operation, net of tax 11 (544) (188)

FRS 1.82.e, FRS 105.33.a & 33A

Profit for the year ë 4,956 5,241 FRS 1.82.f Attributable to:

Owners of the Company

Profit from continuing operations, net of tax 5,320 5,029 FRS 105.33.d

Loss from discontinued operation, net of tax (544) (188) FRS 105.33.d

Profit for the year attributable to owners of the Company 4,776 4,841 FRS 1.83.a.ii Non-controlling interests

Profit from continuing operations, net of tax 180 400

Loss from discontinued operation, net of tax – –

Profit for the year attributable to non-controlling interests 180 400 FRS 1.83.a.i

Earnings per share from continuing operations attributable to owners of the Company (cents per share)

Basic 12(a) 22.98 21.81 FRS 33.66 and 67A

Diluted 12(a) 22.73 21.58 FRS 33.66 and 67A

Earnings per share (cents per share)

Basic 12(b) 20.63 21.00 FRS 33.66 and 67A

Diluted 12(b) 20.43 20.78 FRS 33.66 and 67A

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


Consolidated statement of comprehensive income For the financial year ended 31 December 2013


Consolidated statement of comprehensive income

2013 $’000

2012 $’000

Profit for the year 4,956 5,241 FRS 1.82.f Other comprehensive income: ëíì

Items that will not be reclassified to profit or loss

Net surplus on revaluation of freehold land and buildings 1,250 2,404 FRS 1.82.g, FRS 16.77.f

Share of gain on property revaluation of associates î 62 10 FRS 1.82.h, FRS 28.39

1,312 2,414

Items that may be reclassified subsequently to profit or loss

Net gain on fair value changes of available-for-sale financial assets 174 98 FRS 1.82.g

Foreign currency translation (181) (82) FRS 1.82.g, FRS 21.52.b

(7) 16

Other comprehensive income for the year, net of tax 1,305 2,430 Total comprehensive income for the year ë 6,261 7,671 FRS 1.82.i

Attributable to:

Owners of the Company 6,091 7,211 FRS 1.83.b.ii

Non-controlling interests 170 460 FRS 1.83.b.i

Total comprehensive income for the year 6,261 7,671

Attributable to:

Owners of the Company Total comprehensive income from continuing operations,

net of tax 6,585 7,379 FRS 105.33.d Total comprehensive income from discontinued operation,

net of tax (494) (168) FRS 105.33.d

Total comprehensive income for the year attributable to owners of the Company 6,091 7,211





Commentary:

Complete set of financial statements

Ê Under FRS 1, a complete set of financial statements comprises:

(a) A statement of financial position as at the end of the period*

(b) A statement of comprehensive income for the period

(c) A statement of changes in equity for the period

(d) A statement of cash flows for the period*

(e) Notes, comprising a summary of significant accounting policies and other explanatory information

(f) A statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements**

* FRS 1 replaces the term balance sheet with statement of financial position, and cash flow statement with statement of cash flows. However, an entity is not obliged to use these new titles.

** In such cases, a complete set of financial statements will include three statements of financial position.

Presentation of statement of comprehensive income and analysis of expenses

ç FRS 1 requires all items of income and expenses (including those accounted for directly in equity) to be presented in the statement of comprehensive income. This statement can be presented either as one single statement or as two linked statements.

An entity shall present an analysis of expenses using a classification based on either the nature of expenses or their function within the entity, whichever provides information that is reliable and more relevant. The main consideration in choosing an appropriate analysis for disclosure purposes should be the entity’s accounting system and management reporting system.

In this illustration, the format adopted is two linked statements with analysis of expenses by their function within the entity. An illustration of a statement of comprehensive income in a single statement with analysis of expenses by their nature is provided in Appendix A-1 Consolidated statement of comprehensive income in one statement – illustrating the analysis of expenses by nature. Where the former format is adopted (as in the case of this illustration), the entity shall disclose additional information on the nature of expenses, including depreciation and amortisation as well as employee benefits expense in the notes.

In this illustration, the Group presented its comprehensive income in two linked statements. When an entity presents two linked statements, the income statement is part of a complete set of financial statements and shall be displayed immediately before the statement of comprehensive income.

FRS 1.10 FRS 1.10 FRS 1.10 and 39 FRS 1.81 FRS 1.99 FRS 1.104 FRS 1.12




Commentary (continued):

Reporting of continuing and discontinued operations

é The separate reporting of continuing and discontinued operations in the statement of comprehensive income is required only where there are discontinued operations as defined by FRS 105 Non-current Assets Held for Sale and Discontinued Operations.

An entity shall re-present the disclosures required for discontinued operations for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the end of the reporting period for the latest period presented.

On disposal of the disposal group, the gain or loss from discontinued operation presented on the statement of comprehensive income includes the gain or loss on disposal of the disposal group constituting the discontinued operation.

Other additional disclosures

Í Additional line items, heading and subtotals should be presented on the face of the statement of comprehensive income, when such presentation is relevant to the understanding of the entity’s financial performance.

Î Commentary on certain line items illustrated in the statement of comprehensive income

Interest income and dividend income

“Interest income” and “dividend income” exclude interest income and dividends respectively, from financial assets at fair value through profit or loss. As disclosed in Note 2.15(a)(i), XYZ Holdings (Singapore) Limited has made a policy choice to include interest and dividend income in the net gains or net losses on financial assets at fair value through profit or loss, instead of recognising them separately.

Research and development

“Research and development” costs represent the aggregate amount of research and development expenditure recognised as an expense during the period, including amortisation of deferred development cost.

Share of results of associates

“Share of results of associates” is presented net of tax and non-controlling interests in the associates.

Terminology used

ë Although FRS 1 uses the terms “other comprehensive income”, “profit or loss” and “total comprehensive income”, an entity may use other terms to describe the totals as long as the meaning is clear. For example, an entity may use the term “net income” to describe profit or loss.

FRS 105.30 and 33 FRS 105.34 FRS 105.33.b.iii FRS 1.85 FRS 107 AGB5.e FRS 38.126 and 127 FRS 1.IG6 FRS 1.8





Components of other comprehensive income

í Amendments to FRS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income is applicable for annual periods beginning on or after 1 July 2012. The amendments requires the amounts of other comprehensive income in the period, classified by nature (including share of other comprehensive income of associates and joint ventures accounted for using the equity method) to be grouped into those that

(a) will not be reclassified subsequently to profit or loss; and

(b) will be reclassified subsequently to profit or loss when specific conditions are met.

Tax effects related to each component of other comprehensive income

ì An entity may present components of other comprehensive income either:

(a) net of related tax effects, as illustrated in the statement of comprehensive income, or

(b) before related tax effects with one amount shown for the aggregate amount of income tax relating to those components.

Extract of statement of comprehensive income illustrating other comprehensive income presented at gross before related tax effects:

2013 $’000

2012 $’000

Other comprehensive income: Net gain on fair value changes of available-for-sale financial

assets 230 120 Net surplus on revaluation of freehold land and buildings 1,506 2,868 Foreign currency translation (181) (82) Share of gain on property revaluation of associates 75 12 Income tax relating to components of other comprehensive

income (325) (488) Other comprehensive income for the year, net of tax 1,305 2,430

Either way, the amount of income tax relating to each component of other comprehensive income must be disclosed either in the statement of comprehensive income or in the notes. In this illustration, the entity has chosen to disclose the related tax effects in the Note 10 “Income tax expense”.

î In this illustration, the share of other comprehensive income of associates relates to property revaluation attributable to owners of the associates, which is an item that will not be reclassified to profit or loss. If an entity has share of other comprehensive income of associates which relates to items that may be reclassified subsequently to profit or loss, the item shall be presented under the group of items that may be reclassified subsequently to profit or loss.

FRS 1.82A FRS 1.91 FRS 1.90 FRS 12.81.ab


This page has been left blank intentionally.


Balance sheets åç As at 31 December 2013



Balance sheets Group Company 2013 2012 2013 2012 Note $'000 $'000 $'000 $'000 Assets Non-current assets Property, plant and equipment 13 30,718 31,064 1,079 603 FRS 1.54.a Investment properties 14 4,645 3,955 - - FRS 1.54.b Intangible assets 15 2,419 1,333 - - FRS 1.54.c Land use rights 16 5,811 5,733 - - FRS 1.55 Investment in subsidiaries 17 - - 12,147 10,582 FRS 1.55 Investment in associates 18 10,595 10,321 - - FRS 1.54.e Deferred tax assets 20 470 463 21 26 FRS 1.54.o and 56 Other receivables 21 2,793 2,778 16,753 17,401 FRS 1.54.h Investment securities 22 4,608 3,106 - - FRS 1.54.d 62,059 58,753 30,000 28,612 Current assets Gross amount due from customers for

contract work-in-progress 23 651 398 - - FRS 11.42.a Development properties 24 2,900 2,650 - - FRS 1.54.g Inventories 25 24,020 24,400 - - FRS 1.54.g Prepaid operating expenses 122 250 53 122 FRS 1.55 Trade and other receivables 21 24,921 26,936 338 350 FRS 1.54.h Investment securities 22 1,512 1,260 - - FRS 1.54.d Derivatives 26 170 105 - - FRS 1.54.d Cash and short-term deposits 27 6,117 4,858 4,621 4,145 FRS 1.54.i 60,413 60,857 5,012 4,617 Assets of disposal group classified as held for

sale 11 2,270 - 2,300 - FRS 1.54.j, FRS 105.38

62,683 60,857 7,312 4,617 Total assets 124,742 119,610 37,312 33,229

Equity and liabilities Current liabilities Provisions 28 801 295 - - FRS 1.54.l Deferred capital grants 29 300 210 - - FRS 20.24 Income tax payable 2,927 6,734 1,447 2,115 FRS 1.54.n Loans and borrowings 30 1,189 2,290 - - FRS 1.54.m Gross amount due to customers for contract

work-in-progress 23 358 586 - - FRS 11.42.b Trade and other payables 31 17,517 19,140 470 414 FRS 1.54.k Other liabilities 32 3,659 2,579 1,166 446 FRS 1.54.m Derivatives 26 22 - - - FRS 1.54.m 26,773 31,834 3,083 2,975 Liabilities directly associated with disposal

group classified as held for sale 11 2,071 - - - FRS 1.54.p, FRS 105.38

28,844 31,834 3,083 2,975 Net current assets 33,839 29,023 4,229 1,642 Non-current liabilities Provisions 28 1,525 1,841 - - FRS 1.54.l Deferred capital grants 29 3,488 1,754 - - FRS 20.24 Deferred tax liabilities 20 2,273 1,904 226 231 FRS 1.54.o and 56 Loans and borrowings 30 13,660 13,428 5,750 5,628 FRS 1.54.m Other payables 31 200 - - - FRS 1.54.k 21,146 18,927 5,976 5,859 Total liabilities 49,990 50,761 9,059 8,834 Net assets 74,752 68,849 28,253 24,395 Equity attributable to owners of the Company Share capital 33(a) 11,090 9,665 11,090 9,665 FRS 1.54.r Treasury shares 33(b) (159) - (159) - FRS 1.54.r Retained earnings 54,657 51,627 16,700 14,309 FRS 1.54.r Other reserves 7,058 5,657 622 421 FRS 1.54.r Reserve of disposal group classified as held

for sale 11 128 - - - FRS 105.38 72,774 66,949 28,253 24,395 Non-controlling interests 1,978 1,900 - - FRS 1.54.q Total equity 74,752 68,849 28,253 24,395 Total equity and liabilities 124,742 119,610 37,312 33,229


Balance sheets åç As at 31 December 2013


Commentary:

Complete set of financial statements

Ê Please refer to commentary no. 1 of the consolidated statement of comprehensive income.

Ë An entity shall disclose the amount expected to be recovered or settled after more than twelve months for each asset and liability line item that combines amounts expected to be recovered or settled:

(a) no more than twelve months after the reporting period, and

(b) more than twelve months after the reporting period.

Ì An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its balance sheets in accordance with FRS1.66 to FRS 1.67 except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, an entity shall present all assets and liabilities in order of liquidity.

FRS 1.61 FRS 1.60


Statements of changes in equity For the financial year ended 31 December 2013


Statement of changes in equity

Attributable to owners of the Company

2013 Group Note

Equity, total

Equity attributable to owners

of the Company,

total Share capital

Treasury shares

Retained earnings

Other reserves,

total

Fair value adjustment

reserve

Asset revaluation

reserve

Statutory reserve

fund

Foreign currency

translation reserve

Premium paid on

acquisition of non-

controlling interests

Employee share option

reserve

Gain or loss on

reissuance of treasury

shares

Equity component of

convertible redeemable preference

shares

Reserve of disposal group

classified as held for sale

Non-controlling interests

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance at 1 January 2013 2.2 68,827 66,927 9,665 - 51,605 5,657 426 4,414 740 (344) - 341 - 80 - 1,900

Profit for the year 4,956 4,776 – - 4,776 - - - - - - - - - - 180 FRS 1.106.d.i Other comprehensive income å

Net gain on fair value changes of available-for-sale financial assets 174 174 – – – 174 174 – – – – – – – – –

FRS 1.106A, FRS 1.106.d.ii, FRS 1.82,g and FRS 107.20.a.II

Net surplus on revaluation of freehold land and buildings 1,250 1,250 – – – 1,250 – 1,250 – – – – – – – –

FRS 1.106A,FRS 1.106.d.ii, FRS 1.82.g, FRS 16.77.f

Foreign currency translation (181) (171) – – – (171) – – – (171) – – – – – (10)

FRS 1.106A,FRS 1.106.d.ii, FRS 1.82.g, FRS 21.52.b

Share of other comprehensive income of associates 62 62 – – – 62 - 62 – – – – – – – –

FRS 1.106A, FRS 1.106.d.ii, FRS 1.82.h, FRS 28.39

Other comprehensive income for the year, net of tax

1,305 1,315 – – – 1,315 174 1,312 – (171) – – – – – (10) Total comprehensive income for

the year 6,261 6,091 - - 4,776 1,315 174 1,312 - (171) - - - – - 170 FRS 1.106.a





2013 Group Note

Equity, total


of the Company,

total Share capital

Treasury shares

Retained earnings

Other reserves,

total


reserve

Asset revaluation

reserve

Statutory reserve

fund

Foreign currency

translation reserve

Premium paid on

acquisition of non-



reserve

Gain or loss on


shares

Equity component of


shares




Contributions by and

distributions to owners FRS 1.106.d.iii

Shares issued for acquisition of a subsidiary 33(a) 1,475 1,475 1,475 - - - - - - - - - - - - - FRS 1.106.d.iii

Share issuance expense 33(a) (50) (50) (50) - - - - - - - - - - - - - FRS 32.39 Grant of equity-settled share

options to employees 35 245 245 - - - 245 - - - - - 245 - - - - FRS 102.50

Purchase of treasury shares 33(b) (254) (254) - (254) - - - - - - - - - - - - FRS 32.33

Treasury shares reissued pursuant to employee share option plans 33(b) 81 81 - 95 - (14) - - - - - (79) 65 - - -

FRS 102.50, FRS 32.33

Dividends on ordinary shares 43 (1,613) (1,613) - - (1,613) - - - - - - - - - - - FRS 1.106.d.iii

Total contributions by and distributions to owners (116) (116) 1,425 (159) (1,613) 231 - - - - – 166 65 – - - FRS 1.106.d.iii

Changes in ownership interests in subsidiaries FRS 1.106.d.iii

Acquisition of subsidiary 17 558 - - - - - - - - - - - - - - 558 Acquisition of non-controlling

interests without a change in control 17 (800) (150) - - - (150) - - - - (150) - - - - (650)

Total changes in ownership interests in subsidiaries (242) (150) - - - (150) - - - - (150) - - - - (92) FRS 1.106.d.iii

Total transactions with owners in their capacity as owners (358) (266) 1,425 (159) (1,613) 81 - - - - (150) 166 65 - - (92) FRS 1.106.d.iii





2013 Group Note

Equity, total


of the Company,

total Share capital

Treasury shares

Retained earnings

Other reserves,

total


reserve

Asset revaluation

reserve

Statutory reserve

fund

Foreign currency

translation reserve

Premium paid on

acquisition of non-



reserve

Gain or loss on


shares

Equity component of


shares




Others Reserve attributable to disposal

group classified as held for sale 11 - - - - - (128) - (128) - - - - - - 128 - FRS 105.38

Expiry of employee share options - - - - 30 (30) - - - - - (30) - - - - FRS 102.50

Transfer to statutory reserve fund - - - - (163) 163 - - 163 - - - - - - - FRS 1.106.d.iii

Total Others - - - - (133) 5 - (128) 163 - - (30) - - 128 - Closing balance at 31 December

2013 74,752 72,774 11,090 (159) 54,657 7,058 600 5,598 903 (515) (150) 477 65 80 128 1,978






2012 Group Note

Equity, total

Equity attributable to owners of

the Company, total

Share capital

Retained earnings

Other reserves,

total


reserve

Asset revaluation

reserve

Statutory reserve

fund

Foreign currency

translation reserve

Employee share option reserve

Equity component of


shares


$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance at 1 January 2012 2.2 62,457 61,017 9,510 48,476 3,031 328 2,000 613 (202) 292 - 1,440

Profit for the year 5,241 4,841 - 4,841 - - - - - - - 400 FRS 1.106.d.i

Other comprehensive income å

Net gain on fair value changes of available-for-sale financial assets 98 98 - - 98 98 - - - - - -

FRS 1.106A, FRS 1.106.d.ii, FRS 1.82.g and FRS 107.20.a.II

Net surplus on revaluation of freehold land and buildings 2,404 2,404 - - 2,404 - 2,404 - - - - -

FRS 1.106A, FRS 1.106.d.ii,FRS 1.82.g, FRS 16.77.f

Foreign currency translation (82) (142) - - (142) - - - (142) - - 60

FRS 1.106A, FRS 1.106.d.ii, FRS 1.82.g, FRS 21.52.b

Share of other comprehensive income of associates 10 10 - - 10 - 10 - - - - -

FRS 1.106A, FRS 1.106.d.ii, FRS 1.82.h, FRS 28.39

Other comprehensive income for the year, net of tax 2,430 2,370 – – 2,370 98 2,414 – (142) – – 60

Total comprehensive income for the year 7,671 7,211 - 4,841 2,370 98 2,414 - (142) - - 460 FRS 1.106.a





2012 Group Note

Equity, total

Equity attributable to owners of

the Company, total

Share capital

Retained earnings

Other reserves,

total


reserve

Asset revaluation

reserve

Statutory reserve

fund

Foreign currency

translation reserve


Equity component of


shares


$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Contributions by and distributions to owners FRS 1.106.d.iii

Grant of equity-settled share options to employees 35 150 150 - - 150 - - - - 150 - - FRS 102.50

Exercise of employee share options 33(a) 72 72 155 - (83) - - - - (83) - - FRS 102.50

Dividends on ordinary shares 43 (1,582) (1,582) - (1,582) - - - - - - - - FRS 1.106.d.iii

Equity component of redeemable preference shares 80 80 - - 80 - - - - - 80 - FRS 32.28

Total transactions with owners in their capacity as owners (1,280) (1,280) 155 (1,582) 147 - - - - 67 80 - FRS 1.106.d.iii

Others

Expiry of employee share options - - - 18 (18) - - - - (18) - - FRS 102.50

Transfer to statutory reserve fund - - - (127) 127 - - 127 - - - - FRS 1.106.d.iii

Total others - - - (109) 109 - - 127 - (18) - -

Closing balance at 31 December 2012 68,849 66,949 9,665 51,627 5,657 426 4,414 740 (344) 341 80 1,900





2013 Company ç Note Equity, total Share capital Treasury shares Retained earnings

Other reserves, total


Gain or loss on reissuance of

treasury shares

Equity component of convertible redeemable

preference shares

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Opening balance at 1 January 2013 24,395 9,665 - 14,309 421 341 - 80

Profit for the year, representing total comprehensive income for the year 3,974 - - 3,974 - - - -

FRS 1.106.d.i ,FRS 1.106.a


Shares issued for acquisition of a subsidiary 33(a) 1,475 1,475 - - - - - - FRS 1.106.d.iii

Share issuance expense 33(a) (50) (50) - - - - - - FRS 32.39

Grant of equity-settled share options to employees 35 245 - - - 245 245 - - FRS 102.50

Expiry of employee share options - - - 30 (30) (30) - - FRS 102.50

Purchase of treasury shares 33(b) (254) - (254) - - - - - FRS 32.33

Treasury shares reissued pursuant to employee share option plans 81 - 95 - (14) (79) 65 - FRS 102.50, FRS 32.33

Dividends on ordinary shares 43 (1,613) - - (1,613) - - - - FRS 1.106.d.iii

Total transactions with owners in their capacity as owners (116) 1,425 (159) (1,583) 201 136 65 - FRS 1.106.d.iii

Closing balance at 31 December 2013 28,253 11,090 (159) 16,700 622 477 65 80





2012 Company ç Note Equity, total Share capital Treasury shares Retained earnings

Other reserves, total


Gain or loss on reissuance of

treasury shares

Equity component of convertible redeemable

preference shares

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Opening balance at 1 January 2012 23,226 9,510 - 13,424 292 292 - -

Profit for the year, representing total comprehensive income for the year 2,449 - - 2,449 - - - -

FRS 1.106.d.i , FRS 1.106.a


Grant of equity-settled share options to employees 35 150 - - - 150 150 - - FRS 102.50

Exercise of employee share options 33(a) 72 155 - - (83) (83) - - FRS 102.50

Expiry of employee share options - - - 18 (18) (18) - - FRS 102.50

Equity component of redeemable preference shares 80 - - - 80 - - 80 FRS 32.28

Dividends on ordinary shares 43 (1,582) - - (1,582) - - - - FRS 1.106.d.iii

Total transactions with owners in their capacity as owners (1,280) 155 - (1,564) 129 49 - 80 FRS 1.106.d.iii

Closing balance at 31 December 2012 24,395 9,665 - 14,309 421 341 - 80





Commentary:

Analysis of other comprehensive income for each component of equity in the statement of changes in equity

å FRS 1 Presentation of Financial Statements requires an analysis of other comprehensive income for each component of equity to be presented either in the statement of changes in equity or in the notes to the financial statements.

In this illustration, the Group has chosen to present an analysis of other comprehensive income for each component of equity in the statement of changes in equity.

Statement of changes in equity for the company

ç Presentation of the statement of changes in equity for the Company when consolidated financial statements are presented is optional. Information relating to the equity items presented in the Company’s balance sheet may be presented in the notes to the financial statements instead.

FRS 1.106.d.ii FRS 1.106A


Consolidated cash flow statement Êç For the financial year ended 31 December 2013


Consolidated cash flow statement 2013 2012

Note $'000 $'000 FRS 7.18.b

Operating activities

Profit before tax from continuing operations 7,057 7,116

Loss before tax from discontinued operation 11 (551) (193)

Profit before tax, total 6,506 6,923

Adjustments for: FRS 7.20.b and c

Amortisation of deferred capital grant 29 (239) (180)

Amortisation of intangible assets 15 220 252

Amortisation of land use rights 16 132 130

Depreciation of property, plant and equipment 13 3,043 2,838

Grant of equity-settled share options to employees 35 245 150

Net fair value gains on investment properties 14 (489) (129)

Net fair value gains on held for trading investment securities 6 (135) (95)

Net fair value gains on derivatives 6 (43) (56)

Net fair value gains on available-for-sale financial assets (transferred from equity on disposal of investment securities) 6 (120) (15)

Fair value adjustment of contingent consideration for a business combination é 17 235 –

Impairment loss on property, plant and equipment 13 500 –

Impairment loss on intangible assets 15 200 –

Impairment loss on investment securities 22 198 210

Net loss/(gain) on disposal of property, plant and equipment 76 (120)

Finance costs 1,715 1,512

Dividend income from investment securities (526) (406)

Interest income (430) (327)

Loss recognised on re-measurement to fair value less costs to sell 11 450 –

Provisions 476 105

Share of results of associates (657) (328)

Unrealised exchange loss 154 120 FRS 7.28

Total adjustments 5,005 3,661

Operating cash flows before changes in working capital 11,511 10,584

Changes in working capital FRS 7.20.a

Increase in development property (250) (200)

Increase in gross amount due from customer for contract work-in-progress (253) (331)

Decrease in gross amount due to customer for contract work-in-progress (228) (356)

Decrease/(increase) in inventories 1,132 (1,575)

Decrease in trade and other receivables 3,089 781

Decrease in prepaid operating expenses 128 62

Decrease in trade and other payables (2,661) (1,864)

Increase/(decrease) in other liabilities 377 (496)

Total changes in working capital 1,334 (3,979)

Cash flows from operations 12,845 6,605

Interest received 430 327 FRS 7.31

Interest paid (1,742) (1,550) FRS 7.31

Income taxes paid (7,523) (3,641) FRS 7.35

Net cash flows from operating activities 4,010 1,741 FRS 7.10




2013 2012

Note $'000 $'000

Investing activities FRS 7.21

Net cash inflow on acquisition of a subsidiary 17 217 – FRS 7.39

Dividend income from investment securities 526 406 FRS 7.31

Proceeds from disposal of investment securities 328 278 FRS 7.16.d

Proceeds from government grants 29 2,040 1,030 FRS 20.28

Proceeds from disposal of property, plant and equipment 6,867 1,559 FRS 7.16.b

Purchase of investment securities (1,650) (588) FRS 7.16.c

Purchase of property, plant and equipment 13 (7,426) (4,358) FRS 7.16.a

Subsequent expenditure on investment properties 14 (500) – FRS 7.16.a

Additions to intangible assets 15 (200) (200) FRS 7.16.a

Net cash flows generated from/(used in) investing activities 202 (1,873) FRS 7.10

Financing activities FRS 7.21

Acquisition of non-controlling interests 17 (800) – FRS 7.42A

Dividends paid on ordinary shares 43 (1,613) (1,582) FRS 7.31

Purchase of treasury shares 33(b) (254) – FRS 7.17.b

Proceeds from re-issuance of treasury shares 33(b) 81 – FRS 7.17.a

Proceeds from exercise of employee share options – 72 FRS 7.17.a

Proceeds from loans and borrowings 2,259 3,000 FRS 7.17.c

Share issuance expense 17 (50) –

Repayment of loans and borrowings (1,158) – FRS 7.17.d

Repayment of obligations under finance leases (135) (132) FRS 7.17.e

Net cash flows (used in)/from financing activities (1,670) 1,358 FRS 7.10

Net increase in cash and cash equivalents 2,542 1,226

Effect of exchange rate changes on cash and cash equivalents (87) 35 FRS 7.28

Cash and cash equivalents at 1 January 3,414 2,153 FRS 7.45

Cash and cash equivalents at 31 December 27 5,869 3,414 FRS 7.45





Commentary:

Presentation of consolidated cash flow statement using direct method

Ê In this illustration, the consolidated cash flow statement is presented using indirect method whereby profit or loss is adjusted for the effects of non-cash transactions, deferrals, accruals and investing or financing cash flows. FRS 7.18 allows entities to report cash flows from operating activities using either the direct method or indirect method. The cash flow from operating activities prepared using the direct method is illustrated below:

Group

2013 2012 $'000 $'000 Operating activities Receipts from customers XXX XXX Payments to suppliers and employees (XXX) (XXX) Cash generated from operations XXX XXX Interest paid (XXX) (XXX) Income taxes paid (XXX) (XXX) Net cash flows from/(used in) operating activities XXX (XXX)

The cash flow from financing and investing activities under the direct method are identical to that prepared under indirect method.

Disposal of subsidiary

ç In this illustration, there is no disposal of subsidiary or other business units during the financial year. If there is such disposal, an entity should disclose:

- The total disposal consideration; - The portion of the disposal consideration discharged by means of cash and cash equivalents; - The amount of cash and cash equivalents in the subsidiary or business unit disposed of; and - The amount of the assets and liabilities other than cash and cash equivalents in the subsidiary or

business unit disposed of, summarised by each major category.

Illustrative note disclosure:

The company disposed of XXX Limited, a wholly owned subsidiary, on 30 November 2013 at its carrying value. The disposal consideration was fully settled in cash.

The value of assets and liabilities of XXX Limited recorded in the consolidated financial statements as at 30 November 2013, and the cash flow effect of the disposal were:

$’000 Property, plant and equipment XXX Trade and other receivables XXX Inventories XXX Cash and cash equivalents XXX XXX Trade and other payables (XXX) Income tax payable (XXX)

Carrying value of net assets XXX Total consideration XXX Cash and cash equivalents of the subsidiary (XXX)

Net cash inflow on disposal of a subsidiary XXX

Contingent consideration for business combination

é In this illustration, there is no payment of contingent consideration for business combination during the year. For illustrative disclosure of contingent consideration for business combination in the year when the amount is paid and its impact on the presentation in the statement of cash flows, please refer to commentary no.1 of Note 32 Other liabilities.

FRS 7.18 FRS 7.App A FRS 7.40.a-d FRS 7.40.b FRS 7.40.d FRS 7.40.c FRS 7.40.a and b FRS 7.40.c

FRS 7.39


Notes to the financial statements For the financial year ended 31 December 2013


1. Corporate information Êç

XYZ Holdings (Singapore) Limited (the Company) is a limited liability company incorporated and domiciled in Singapore and is listed on the Singapore Exchange Securities Trading Limited (SGX-ST). The immediate and ultimate holding company is Good Group (International) Ltd. Ì

The registered office and principal place of business of the Company is located at [insert address].

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are disclosed in Note 17 to the financial statements.

Commentary:

Disclosures required by FRS 1.138

Ê The following information may be provided in the notes to the financial statements or disclosed elsewhere in information published with the financial statements:

- the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office);

- a description of the nature of the entity’s operations and its principal activities; and

- the name of the parent and ultimate parent of the Group.

ç If the entity changes its name during the financial year, the change shall be disclosed.

Illustrative disclosure where the entity changes its name during the financial year:

With effect from [insert effective date of change], the name of the company was changed from [XXX] to [XXX].

Disclosures of name of the ultimate controlling party

Ì FRS 24 requires an entity to disclose the name of the entity’s parent and, if different, the ultimate controlling party. The ultimate controlling party can be either an entity or a person.

2. Summary of significant accounting policies

2.1 Basis of preparation Ê

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented Ë in Singapore Dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($’000) as indicated.

FRS 1.138.a and c FRS 24.13 CA 201.10

FRS 1.138.a

FRS 1.138.b

FRS 1.138 FRS 1.51.a

FRS 24.13

FRS 1.117 FRS 1.16, FRS 1.51.b and FRS 1.112.a SGX 1207.5.d FRS 1.117.a

FRS 1.51.d and e




2. Summary of significant accounting policies (continued)

2.1 Basis of preparation Ê (continued)

Commentary:

Going concern uncertainty

Ê When preparing financial statements, management shall make an assessment of an entity’s ability to continue as a going concern. Where the effect of the judgment made in relation to the entity’s ability to continue as a going concern has significant effect on the amounts recognised in the financial statements, the judgment made should be disclosed.

Financial statements shall be prepared on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall be disclosed.

Illustrative disclosure where the ability of the company to continue as a going concern is dependent on the holding company undertaking to provide continuing financial support to the company to enable it to continue as a going concern:

The Company incurred a net loss of $XXX (2012: $XXX) during the financial year ended 31 December 2013 and as at that date, the Company’s current and total liabilities exceeded its current and total assets by $XXX (2012: $XXX) and $XXX (2012: $XXX) respectively. These factors indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern depends on the holding company undertaking to provide continuing financial support to enable the Company to continue as a going concern.

If the Company is unable to continue in operational existence for the foreseeable future, the Company may be unable to discharge its liabilities in the normal course of business and adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the balance sheet. In addition, the Company may have to reclassify non-current assets and liabilities as current assets and liabilities. No such adjustments have been made to these financial statements.

Functional and presentation currency

Ë When the presentation currency is different from the functional currency of the Company, that fact shall be stated, together with disclosure of the functional currency and the reasons for using a different presentation currency.

FRS 1.25 FRS 1.122 FRS 1.25

FRS 21.53





2.2 Changes in accounting policies Ê

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards which are effective for annual financial periods beginning on or after 1 January 2013 and early adopted the Amendments to FRS 36 Recoverable Amount Disclosures for Non-financial Assets Ë which are effective for annual periods beginning on or after 1 January 2014. The adoption of these standards did not have any effect on the financial performance or position of the Group and the Company. Accordingly to the transition provisions of FRS 113 Fair Value Measurement, FRS 113 has been applied prospectively by the Group on 1 January 2013.

Commentary:

Ê FRSs effective for annual period beginning on or after 1 January 2013

The following FRS and INT FRS are effective for the annual period beginning on or after 1 January 2013:

· Amendments to FRS 1 Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income

· Revised FRS 19 Employee Benefits Ì · FRS 113 Fair Value Measurement Ì · Amendments to FRS 107 Disclosures – Offsetting Financial Assets and Financial

Liabilities · Improvements to FRSs 2012 Ì

- Amendment to FRS 1 Presentation of Financial Statements - Amendment to FRS 16 Property, Plant and Equipment - Amendment to FRS 32 Financial Instruments: Presentation

· INT FRS 120 Stripping Costs in the Production Phase of a Surface Mine

Ë When FRS 113 Fair Value Measurement was issued, FRS 36 Impairment of Assets was amended to require the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. However, the unintended result of those amendments were that an entity would instead be required to disclose the recoverable amount for each cash-generating unit for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives. The amendments to FRS 36 Recoverable Amount Disclosure for Non-financial Assets remove this unintended result and require additional information about the fair value measurement when the recoverable amount of the impaired assets is based on fair value less costs of disposal.

The amendments to FRS 36 is effective for annual periods beginning on or after 1 January 2014 and earlier application is permitted.

In this illustration, the Group has early adopted the amendments to FRS 36. If an entity does not early adopt the Amendments to FRS 36, the list of standards issued but not yet effective in Note 2.3 should include the amendments to FRS 36.

Ì FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires the disclosure of the amount of the adjustment for the current period and each prior period (to the extent practicable) upon initial application of a Standard or an Interpretation. In this illustration, it is assumed that the adoption of the new and revised standards does not have any impact on the financial statements.

Following are illustrative disclosure of changes in accounting policies on adoption of the new and revised standards.

FRS 8.28.b FRS 8.28.d FRS 8.28





2.2 Changes in accounting policies Ê (continued)


Ì Revised FRS 19 Employee Benefits Í

The revised FRS 19 amended the definition of short-term employee benefits and requires employee benefits to be classified as short-term based on expected timing of settlement rather than the employee’s entitlement to the benefits.

The Group employees are entitled to annual leave every year. If such annual leave are not utilised during the current financial year, they are allowed to be carried forward for a period of up to 2 years. Previously, the Group classified such entitlements as short-term employee benefits as employees are entitled to the benefits during the financial year. Upon adoption of Revised FRS 19, the Group reassessed the classification of its employee entitlements to annual leave based on the amended definition. Î Based on its assessment, the Group expects that most of the unutilised annual leave will be taken more than 12 months after the reporting date and therefore should be classified as long-term employee benefits. The change in accounting policy has been applied retrospectively. Accordingly, long-term employee benefits increased by $XXX (2012: $XXX), short-term employee benefits decreased by $XXX (2012: $XXX) and profit before tax increased by $XXX (2012: $XXX) during the year.

In addition, the revised FRS 19 modifies the timing of recognition for termination benefits. The modification requires the termination benefits to be recognised at the earlier of when the offer cannot be withdrawn or when the related restructuring costs are recognised.

The Group has recognised a restructuring provision under FRS 37 in 2012. As the communication to employees on redundancies due to the restructuring was only communicated in early 2013, the related termination benefits were only recognised in 2013. Upon adoption of Revised FRS 19, the termination benefits which arose as a result of the restructuring shall be recognised in financial year ended 2012 when the restructuring provision were recognised. The change in accounting policy has been applied retrospectively. Accordingly, profit before tax in 2013 increased and profit before tax in 2012 decreased by $XXX respectively.

Amendment to FRS 16 Property, Plant and Equipment

The amendment to FRS 16 provides clarification that major spare parts and servicing equipment that meet the definition of property, plant and equipment are not inventory. The Group previously classified its major spare parts and servicing equipment as inventory. Upon adoption of the amendment, the Group reassessed the classification of its major spare parts and servicing equipment and determined that they meet the definition of property, plant and equipment. The change in accounting policy has been applied retrospectively. Accordingly, Property, Plant and Equipment and Other Operating Expenses increased by $XXX (2012:$XXX) and $XXX (2012: $XXX) respectively while inventory decreased by $XXX (2012:$XXX) during the year.

Amendment to FRS 32 Financial Instruments: Presentation

The amendment to FRS 32 clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with FRS 12 Income Taxes.

The Group previously recognised income taxes relating to distributions to equity holders in equity in accordance with FRS 32. Upon adoption of the amendment to FRS 32, the Group restated the related income taxes from equity to profit or loss and the change has been applied retrospectively. Accordingly, equity increased by $XXX ($XXX) and profit before tax decreased by $XXX ($XXX).





2.2 Changes in accounting policies Ê (continued)


Ì FRS 113 Fair Value Measurement

FRS 113 provides a single source of guidance under FRS for all fair value measurements. FRS 113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted by FRS. The impact to the Group upon adoption of FRS are as follows:

Industrial land

The Group currently owns a piece of land which is developed for industrial use as a site for a factory and has not taken into consideration the alternative use of the land when measuring the fair value of the factory as the Group has no intention to use the piece of land for other purposes.

Nearby sites have recently been developed for residential use as sites for high-rise apartment buildings. On the basis of that development and recent zoning and other changes to facilitate that development, the entity determines that the land currently used as a site for a factory could be redeveloped as a site for residential use because the market participants would take into account the potential to develop the site for residential use when pricing the land.

Upon adoption of FRS 113, the Group determines the highest and best use of the land based on the higher value of the land currently developed for industrial use and the value of the land as a vacant site for residential use, taking into account the costs of demolishing the factory and other costs. As at 31 December 2013, the Group recognised the fair value of the land based on the fair value of the land as a vacant site for residential use of $XXX, which is higher than the fair value of the land for industrial use of $XXX. Accordingly, the Group’s property, plant and equipment and net surplus on revaluation of freehold land and buildings increased by $XXX.

Equity securities

The Group currently holds certain investments in equity securities where such equity securities are listed on multiple stock exchanges and the Group measures the fair values of these equity securities based on prices in the most advantageous active market.

FRS 113 requires an entity to measure the fair values of these investments based on prices in the principal markets for the assets and in the absence of a principal market, the transaction is assumed to take place in the most advantageous market. Upon adoption of FRS 113, the Group measured these equity securities based on prices in the principal markets. Accordingly, the fair value of the investment securities decreased by $XXX, profit before tax and tax expense increased by $XXX and $XXX respectively.

Í In this illustration, the Group does not have any defined benefit plan. For illustration of change in accounting policies for defined benefit plan relating to revised FRS 19, please refer to Appendix A-4 Defined benefit plans.

Î If the change in an entity’s expectations of the timing of settlement is temporary, it would not necessarily trigger a reclassification of short-term employee benefits to long-term employee benefits unless there is a change in the underlying characteristics of the employee benefits.

FRS 19R.10





2.3 Standards issued but not yet effective Êç

The Group has not adopted the following standards that have been issued but not yet effective:

Description Effective for annual periods

beginning on or after Revised FRS 27 Separate Financial Statements é 1 January 2014 è Revised FRS 28 Investments in Associates and Joint

Ventures 1 January 2014 è

FRS 110 Consolidated Financial Statements é 1 January 2014 è FRS 111 Joint Arrangements 1 January 2014 è FRS 112 Disclosure of Interests in Other Entities 1 January 2014 è Amendments to FRS 32 Offsetting Financial Assets and

Financial Liabilities ê 1 January 2014

Except for FRS 111, Revised FRS 28 and FRS 112, the directors expect that the adoption of the other standards above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of FRS 111, Revised FRS 28 and FRS 112 are described below. FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures è

FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures are effective for financial periods beginning on or after 1 January 2014.

FRS 111 classifies joint arrangements either as joint operations or joint ventures. Joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities of the arrangement whereas joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

FRS 111 requires the determination of joint arrangement’s classification to be based on the parties’ rights and obligations under the arrangement, with the existence of a separate legal vehicle no longer being the key factor. FRS 111 disallows proportionate consolidation and requires joint ventures to be accounted for using the equity method. The revised FRS 28 was amended to describe the application of equity method to investments in joint ventures in addition to associates.

The Group currently applies proportionate consolidation for its joint ventures. Upon adoption of FRS 111, the Group expects the change to equity accounting for these joint ventures will result in decrease in total assets and total liabilities.

FRS 8.30, 31





2.3 Standards issued but not yet effective Êç (continued)

FRS 112 Disclosure of Interests in Other Entities è

FRS 112 Disclosure of Interests in Other Entities is effective for financial periods beginning on or after 1 January 2014.

FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. FRS 112 requires an entity to disclose information that helps users of its financial statements to evaluate the nature and risks associated with its interests in other entities and the effects of those interests on its financial statements. As this is a disclosure standard, it will have no impact to the financial position and financial performance of the Group when applied in 2014.

Commentary:

Standards issued but not yet effective

å FRS 8 requires an entity to:

(a) disclose those standards or interpretations that have been issued which are not yet effective; and

(b) provide known or reasonably estimable information to assess the possible impact that the application of such FRSs will have on the entity’s financial statements in the period of initial application.

Therefore, the Group has listed those standards and interpretations that are issued but not yet effective and relevant to the Group. For example, INT FRS 121 Levies is not relevant and has been excluded.

ç The following are IFRSs that have been issued by International Accounting Standards Board (IASB) but have not been adopted as FRS in Singapore:

· IFRS 9 Financial Instruments

· Amendments to IAS 39 Novation of Derivative and Continuation of Hedge Accounting, effective for annual periods beginning on or after 1 January 2014

If any of the above IFRSs are adopted as FRSs before the financial statements for the year ended 31 December 2013 are authorised for issue, Note 2.3 should be updated to:

(a) include the new standards; and (b) provide known or reasonably estimable information to assess the possible impact that

the application of such FRSs will have on the entity’s financial statements in the period of initial application.

FRS 8.30 FRS 8.30





2.3 Standards issued but not yet effective Êç (continued)


Standards issued but not yet effective (continued)

FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements ê

é In this illustration, it is assumed that the adoption of FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements will have no material impact to the financial statement of the Group in the period of initial application.

The following is an illustrative disclosure of the impending changes in accounting policy on adoption of FRS 110 and Revised FRS 27.

FRS 110 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by FRS 110 will require management to exercise significant judgment to determine which entities are controlled, and therefore are required to be consolidated by the Group, compared with the requirements that were in FRS 27. Therefore, FRS 110 may change which entities are consolidated within a group. The Revised FRS 27 was amended to address accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.

Upon application of FRS 110, the Group will reassess its investments in accordance with the new definition of control. The Group expects that it will have control over ABC Ltd which is currently accounted for as an associated company.

FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements, FRS 112 Disclosure of Interests in Other Entities, Revised FRS 27 Separate Financial Statements and Revised FRS 28 Investments in Associates and Joint Ventures

è In this illustration, it is assumed that the Group does not early adopt FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised FRS 28.

The illustrative disclosures of early adoption of FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised FRS 28 at the same time are illustrated in Appendix A-5 Consolidated financial statements, joint arrangements and disclosure of interests in other entities.

Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities

ê In this illustration, it is assumed that the adoption of amendments to FRS 32 will have no material impact on the financial statements of the Group in the period of initial application.

The following is an illustrative disclosure of the impending changes in accounting policy on adoption of amendments to FRS 32.

The amendments to FRS 32 clarify that rights of set-off must not only be legally enforceable in the normal course of business, but must also not contingent on a future event and must be enforceable in the event of bankruptcy or insolvency of all the counterparties to the contract. The Group currently offset certain balances with the same counterparty as the Group has legal rights to set off the amounts and intends to settle on a net basis.

Upon adoption of the amendment FRS 32, the Group expects that a balance amounting to $XXX will not meet the offsetting criteria as the local bankruptcy law in the counterparty jurisdiction overrides netting contracts.





2.4 Basis of consolidation and business combinations

A) Basis of consolidation

Basis of consolidation from 1 January 2010

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. å Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

- de-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost;

- de-recognises the carrying amount of any non-controlling interest;

- de-recognises the cumulative translation differences recorded in equity;

- recognises the fair value of the consideration received;

- recognises the fair value of any investment retained;

- recognises any surplus or deficit in profit or loss;

- re-classifies the Group’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.

Basis of consolidation prior to 1 January 2010

Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

- Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognised in goodwill. ç

- Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocated between non-controlling interest and the owners of the Company.

- Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date control was lost. The carrying value of such investments as at 1 January 2010 have not been restated.

FRS 27.12 FRS 27.22 FRS 27.24 FRS 27.20 FRS 27.26 FRS 27.28 FRS 27.30 FRS 27.34





2.4 Basis of consolidation and business combinations (continued)

B) Business combinations

Business combinations from 1 January 2010

Business combinations are accounted for by applying the acquisition method. é Identifiable assets acquired and liabilities Í assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any), that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation, is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Î Other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by another FRS.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.9(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.

FRS 103.4 FRS 103.10 and 18 FRS 103.53 FRS 103.15 FRS 103.16 FRS 103.39, 40 and 58 FRS 103.42 FRS 103.19 FRS 103.32 FRS 103.34






B) Business combinations (continued)

Business combinations prior to 1 January 2010

In comparison to the above mentioned requirements, the following differences applied:

Business combinations were accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any additional acquired share of interest did not affect previously recognised goodwill.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

Commentary:

Reporting date of subsidiary

å The financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements shall be prepared as of the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial statements as of the same date as the financial statements of the parent, unless it is impracticable to do so.

Where it is impracticable to do so, the parent may use the financial statements of a subsidiary prepared as of a reporting date different from that of the parent, provided adjustments are made for the effects of significant transactions or events that occur between that date and the date of the parent’s financial statements, and the difference between the reporting dates of the subsidiary and parent is no more than three months. In addition, the length of the reporting periods and any difference in the reporting dates shall be the same from period to period.

Changes in the ownership of a subsidiary that do not result in loss of control

ç The paragraph is to be included only if the parent entity extension method was applied prior to 1 January 2010.

FRS 27.22 FRS 27.23







Business combinations involving entities under common control

é In this illustration, there is no business combination involving entities under common control. Where a business combination involves entities or businesses under common control, it is outside the scope of FRS 103 and may be accounted for using the pooling of interest method or the acquisition method (when the transaction has substance from the perspective of the reporting entity).

Illustrative accounting policy where the pooling of interest method is applied:

Business combinations involving entities under common control are accounted for by applying the pooling of interest method which involves the following:

· The assets and liabilities of the combining entities are reflected at their carrying amounts reported in the consolidated financial statements of the controlling holding company.

· No adjustments are made to reflect the fair values on the date of combination, or recognise any new assets or liabilities.

· No additional goodwill is recognised as a result of the combination. · Any difference between the consideration paid/transferred and the equity

‘acquired’ is reflected within the equity as merger reserve. · The statement of comprehensive income reflects the results of the combining

entities for the full year, irrespective of when the combination took place. · Comparatives are restated to reflect the combination as if it had occurred from

the beginning of the earliest period presented in the financial statements or from the date the entities had come under common control, if later.

Contingent liabilities recognised in a business combination

Í In this illustration, there is no contingent liabilities recognised in a business combination.

Illustrative accounting policy where there is contingent liabilities assumed in the business combination:

A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of:

- The amount that would be recognised in accordance with the accounting policy for provisions set out in Note 2.21; or

- The amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with guidance for revenue recognition.

Measurement of non-controlling interest

Î FRS 103 provides acquirers with the option of measuring non-controlling interest arising in a business combination that are present ownership interests and entitle their holders to a proportionate share of net assets of the subsidiary in the event of liquidation at either:

- Fair value; or

- The non-controlling interest’s proportionate interest in the acquiree’s identifiable net assets.

The option is elected for each individual business combination and does not constitute an accounting policy choice for similar transactions. Selecting the option will require management to carefully consider their future intentions regarding transactions with non-controlling interest, since the two options, combined with the revisions to accounting for changes in ownership interest of a subsidiary will potentially result in significantly different amounts of goodwill and equity.

FRS 103.56 FRS 103.19





2.5 Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

2.6 Foreign currency

The financial statements are presented in Singapore Dollars, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

a) Transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

b) Consolidated financial statements

For consolidation purpose, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the end of the reporting period and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For partial disposals of associates or jointly controlled entities that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

FRS 27.4 FRS 27.30 FRS 27.31 FRS 1.51.d FRS 21.21 FRS 21.23 FRS 21.28 and 32, 48 FRS 21.39 FRS 21.48 FRS 21.48C





2.7 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than freehold land and buildings are measured at cost less accumulated depreciation and any accumulated impairment losses. The cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 2.25. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land and buildings are measured at fair value less accumulated depreciation on buildings and impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the freehold land and buildings at the end of the reporting period.

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Ê The revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred directly to retained earnings on retirement or disposal of the asset. Ë

Freehold land has an unlimited useful life and therefore is not depreciated.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

- Buildings: 40 years - Plant and equipment: 3 to 15 years - Furniture and fixtures: 5 to 20 years

Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on de-recognition of the asset is included in profit or loss in the year the asset is derecognised.

FRS 16.15 and 16 FRS 16.30 FRS 16.7 FRS 16.12 and 13 FRS 16.14 FRS 16.31 and 73.a FRS 16.39 FRS 16.40 FRS 16.35.b FRS 16.41 FRS 16.73.b and c FRS 36.9 FRS 16.51 FRS 16.61 FRS 16.67 FRS 16.68





2.7 Property, plant and equipment (continued)

Commentary:

Revaluation of property, plant and equipment

Ê When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation may instead be restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount. This method is often used when an asset is revalued by means of applying an index to its depreciated replacement cost.

Ë Alternatively, the entity may adopt a policy to make an annual transfer of the revaluation surplus to retained earnings as the asset is used. In such a case, the amount of the surplus transferred would be the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost.

2.8 Investment properties Ê

Investment properties are properties that are either owned by the Group or leased under a finance lease that are held to earn rentals or for capital appreciation, or both, rather than for use in the production or supply of goods or services, or for administrative purposes, or in the ordinary course of business. Investment properties comprise completed investment properties and properties that are being constructed or developed for future use as investment properties. Properties held under operating leases are classified as investment properties when the definition of an investment property is met.

Investment properties are initially measured at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment properties are measured at fair value. Ë Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the year in which they arise.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2.7 up to the date of change in use. é

FRS 16.35.a FRS 16.41 FRS 40.5 FRS 40.8.e FRS 40.6 FRS 40.20 FRS 40.33 FRS 40.35 FRS 40.66 FRS 40.69 FRS 40.57 FRS 40.60 FRS 40.61





2.8 Investment properties Ê (continued)

Commentary:

Investment properties

Ê Judgment is needed to determine whether a property qualifies as investment property. When classification is difficult, the entity should disclose the criteria developed by the entity so that it can exercise that judgment consistently in accordance with the definition of investment property.

Ë Alternatively, the entity may adopt the cost model which is to measure investment properties at cost less accumulated depreciation and accumulated impairment losses. In these circumstances, disclosure about the cost basis and depreciation rates would be required. This option is not available if the entity accounts for property interest held under an operating lease as investment property.

In addition, for any investment properties recorded at cost, FRS 40 requires disclosure about the fair value, including disclosures about the methods and significant assumptions used to determine the fair value. Therefore, companies would still need to determine the fair value of the investment properties. In the exceptional cases when an entity cannot measure the fair value of investment properties reliably, it shall disclose:

(a) a description of the investment properties;

(b) an explanation of why fair value cannot be measured reliably; and

(c) if possible, the range of estimate within which fair value is highly likely to lie.


é If an owner-occupied property becomes an investment property that will be carried at fair value, the entity shall treat any difference at that date between the carrying amount of the property in accordance with FRS 16 and its fair value in the same way as a revaluation in accordance with FRS 16.

FRS 40.14 and 75.c FRS 40.30 and 56 FRS 40.34 FRS 40.79.e FRS 40.61





2.9 Intangible assets

a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

The cash-generating units to which goodwill have been allocated is tested for impairment annually Ê and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.6.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.

Commentary:

Goodwill

Ê FRS 36 Impairment of Assets permits annual impairment test for goodwill and intangible assets with indefinite useful lives to be performed at any time during the year provided it is at the same time each year. Different goodwill and intangible assets may be tested at different times.

FRS 103.B63.a FRS 36.80 FRS 36.90 FRS 36.124 FRS 36.86 FRS 21.47 FRS 21.59 FRS 36.96 and 10





2.9 Intangible assets (continued)

b) Other intangible assets

Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Ê Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is reflected in profit or loss in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually Ë, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

i) Brands

The brands were acquired in business combinations. The useful lives of the brands are estimated to be indefinite because based on the current market share of the brands, management believes there is no foreseeable limit to the period over which the brands are expected to generate net cash inflows for the Group.

ii) Research and development costs

Research costs are expensed as incurred. Deferred development costs arising from development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditures during the development.

FRS 38.24 FRS 38.33 FRS 38.74 FRS 38.88 FRS 38.97 and 118.b FRS 36.9 FRS 38.104 FRS 36.10.a FRS 36.9 FRS 38.107

FRS 38.109 FRS 38.113 FRS 38.118.a FRS 38.122.a FRS 38.54 FRS 38.57





2.9 Intangible assets (continued)

b) Other intangible assets (continued)

ii) Research and development costs (continued)

Following initial recognition of the deferred development costs as an intangible asset, it is carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation of the intangible asset begins when development is complete and the asset is available for use. Deferred development costs have a finite useful life and are amortised over the period of expected sales from the related project (ranging from 4 to 8 years) on a straight line basis.

iii) Club membership

Club membership was acquired separately and is amortised on a straight line basis over its finite useful life of 10 years.

Commentary:

Intangible assets

Ê Alternatively, the entity may adopt the revaluation model which is to measure intangible assets at fair value less accumulated amortisation and accumulated impairment losses. This option is only available if the fair value can be determined by reference to an active market.

Ë Please refer to commentary no.1 of Note 2.9(a) Goodwill.

2.10 Land use rights Ê

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation. The land use rights are amortised on a straight-line basis over the lease term of 50 years.

Commentary:

Land use rights

Ê Long-term land-use rights are leases under the definition of FRS 17. In this illustration, it is assumed that the lease does not transfer substantially all the risks and rewards incidental to ownership of the land. Therefore, the lease is an operating lease and the payments made on acquiring the land-use right represent prepaid lease payments.

FRS 38.74 FRS 38.118.a and b FRS 38.118.a and b FRS 38.75 FRS 17.8





2.11 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in profit or loss, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

FRS 36.9 FRS 36.18 and 22 FRS 36.59 FRS 36.30 and 31 FRS 36.33 FRS 36.60 FRS 36.110 FRS 36.114 FRS 36.117 FRS 36.119





2.12 Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. Ê

Commentary:

Subsidiaries

Ê Alternatively, the entity may choose to account for its investment in subsidiary in accordance with FRS 39. The same accounting must be applied for all investments in subsidiaries. When an entity accounts for a subsidiary at fair value in accordance with FRS 39, this treatment continues when the subsidiary is subsequently classified as held for sale.

2.13 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is included as income in the determination of the Group’s share of results of the associate in the period in which the investment is acquired.

The profit or loss reflects the share of the results of operations of the associates. Where there has been a change recognised in other comprehensive income by the associates, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associates.

The Group’s share of the profit or loss of its associates is the profit attributable to equity holders of the associate and, therefore is the profit or loss after tax and non-controlling interests in the subsidiaries of associates.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, Ê the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

FRS 27.4 FRS 27.38 and 43.c FRS 27.38 FRS 28.2 FRS 28.18 FRS 28.13 FRS 28.11 FRS 28.23.a FRS 28.23.b FRS 28.39 FRS 28.22 FRS 28.29 and 30





2.13 Associates (continued)

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.

The financial statements of the associates are prepared as of the same reporting date as the Company. Ë Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss.

Commentary:

Associates

Ê The interest in an associate is the carrying amount of the investment in the associate under the equity method together with any long-term interests that, in substance, form part of the investor’s net investment in the associate. For example, an item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, an extension of the entity’s investment in that associate. Such items may include preference shares and long-term receivables or loans but do not include trade receivables, trade payables or any long-term receivables for which adequate collateral exists, such as secured loans.

Ë The financial statements of the associate are prepared as of the same reporting date as the Company unless it is impracticable to do so. When the financial statements of an associate used in applying the equity method are prepared as of a different reporting date from that of the Company, adjustments are made for the effects of significant transactions or events that occur between that date and the reporting date of the Company. In any case, the difference between the end of the reporting period of the associate and that of the investor shall be no more than three months. The length of the reporting periods and any difference between the ends of the reporting periods shall be the same from period to period.

When the financial statements of an associate used in applying the equity method are as of a reporting date or for a period that is different from that of the Company, the reporting date of the financial statements of the associate and the reason for using a different reporting date or different period shall be disclosed.

FRS 28.31 FRS 28.33 FRS 28.24 and 25 FRS 28.26 FRS 28.18 FRS 28.29 FRS 28.24 and 25 FRS 28.37.e





2.14 Joint venture

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. The Group recognises its interest in the joint venture using the proportionate consolidation method. Ê The Group combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. Ë The joint venture is proportionately consolidated from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.

Adjustments are made in the Group's consolidated financial statements to eliminate the Group's share of intragroup balances, income and expenses and unrealised gains and losses on such transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss.

The financial statements of the joint venture are prepared as of the same reporting date as the Company. é Where necessary, adjustments are made to bring the accounting policies to be in line with those of the Group.

Upon loss of joint control, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the former jointly controlled entity upon loss of joint control and the aggregate of the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

Commentary:

Joint venture

Ê In this illustration, interest in joint venture which is a jointly controlled entity is accounted for using proportionate consolidation. The entity may instead choose to account for its interest in joint venture using the equity method. This accounting policy does not apply to jointly controlled assets and jointly controlled operations.

Ë Alternatively, the entity may include separate line items for its share of the assets, liabilities, income and expenses of the joint venture in its financial statements.

é The financial statements of the joint venture are prepared as of the same reporting date as the Company unless it is impracticable to do so.

Please refer to commentary no. 1 of Note 2.4 when the financial statements of the joint venture used in applying the proportionate consolidation are prepared as of a different reporting date from that of the Company. The same principles apply.

Please refer to commentary no. 2 of Note 2.13 when the financial statements of the joint venture used in applying the equity method are prepared as of a different reporting date from that of the Company. The same principles apply.

FRS 31.3 FRS 31.30 FRS 31.34 FRS 31.36 FRS 31.48 FRS 31.45 FRS 31.38 FRS 31.34 FRS 31.33

FRS 31.40





2.15 Financial instruments

a) Financial assets

Initial recognition and measurement

Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Ê Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

The Group has not designated any financial assets upon initial recognition at fair value through profit or loss.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income. Ë

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.

ii) Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

FRS 107.21 FRS 39.14 FRS 39.43 FRS 39.9 FRS 39.46 FRS 39.55.a FRS 107.AGB5.e FRS 39.11 INT FRS 109.7 FRS 39.9 FRS 39.46.a FRS 39.56 FRS 107.AGB5.e





2.15 Financial instruments (continued)

a) Financial assets (continued)

Subsequent measurement (continued)

iii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

iv) Available-for-sale financial assets

Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is de-recognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

De-recognition

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. Ì On de-recognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchase or sale of a financial asset

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date Í i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

FRS 39.9 FRS 39.46.b FRS 39.56 FRS 107.AGB5.e FRS 107.AGB5.b FRS 39.9 FRS 39.46 FRS 39.55.b FRS 107.AGB5.e FRS 39.46.c FRS 39.17.a FRS 39.26 FRS 107.AGB5.c FRS 39.38 FRS 39.9






b) Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading. Ê Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss.

The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.

ii) Financial liabilities at amortised cost

After initial recognition, financial liabilities that are not carried at fair value through profit or loss are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

De-recognition

A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

FRS 39.14 FRS 39.43 FRS 39.9 FRS 39.47.a FRS 39.47 FRS 39.55.b FRS 107.B5.e FRS 39.56 FRS 107.B5.e FRS 39.39 FRS 39.40 and 41






c) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the balance sheets, when and only when, there is a currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Commentary:

Financial assets or financial liabilities designated as at fair value through profit or loss

Ê In this illustration, no financial instrument has been designated as financial assets or financial liabilities at fair value through profit or loss. The following disclosures of accounting policies apply if there is any financial asset or financial liability designated as at fair value through profit or loss:

- The nature of the financial assets or financial liabilities the entity has designated as at fair value through profit or loss;

- The criteria for so designating such financial assets or financial liabilities on initial recognition; and

- How the entity has satisfied the conditions in paragraph 9, 11A or 12 of FRS 39 for such designation. For instruments designated as at fair value through profit or loss in accordance with FRS 39.9.b.i, that disclosure includes a narrative description of the circumstances underlying the measurement or recognition inconsistency that would otherwise arise. For instruments designated as at fair value through profit or loss in accordance with paragraph FRS 39.9.b.ii, that disclosure includes a narrative description of how designation at fair value through profit or loss is consistent with the entity’s documented risk management or investment strategy.

Net gain or loss on financial assets at fair value through profit or loss

Ë Alternatively, interest and dividend income may be recognised separately.

FRS 32.42

FRS 107.AGB5.a FRS 107.AGB5.e







De-recognition of financial assets

Ì In this illustration, there is no transfer of financial asset.

Illustrative accounting policy when the entity transfers its financial asset:

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial asset) is de-recognised when:

(a) The Group transfers the contractual rights to receive the cash flows of the financial asset; or

(b) The Group retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients in a “past-through” arrangement; or

(c) The Group has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset, is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

If the Group have transfers of financial assets that are not derecognised in their entirety or transfers of financial assets that are derecognised in their entirety but retains continuing involvement, please refer to disclosure requirements of paragraphs 42A to 42H and AGB 29 to AGB 39 of FRS 107.

Regular way purchases and sales

Í Alternatively, regular way purchases and sales can be accounted for on settlement dates.

FRS 39.18.a FRS 39.18.b and 19 FRS 39.20 FRS 39.20.c.ii FRS 39.30.a FRS 39.30.b and c FRS 107.42A – 42H FRS 107.AGB 29 – AGB 39 FRS 39.38





2.16 Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. Ê

a) Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. Ë The impairment loss is recognised in profit or loss.

When the asset becomes uncollectible, the carrying amount of impaired financial asset is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

b) Financial assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost had been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

FRS 107.21 FRS 39.58 FRS 39.64 FRS 39.63 FRS 39.AG84 FRS 107.AGB5.d FRS 107.AGB5.f FRS 39.65 FRS 39.66 FRS 107.AGB5.f





2.16 Impairment of financial assets (continued)

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. Ì 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.

Commentary:

Financial assets that are the subject of renegotiated terms

Ê When the terms of financial assets that would otherwise be past due or impaired have been renegotiated, the entity shall disclose the accounting policy for financial assets that are the subject of renegotiated terms.

Impairment of financial assets carried at amortised cost

Ë When there is an impairment loss, the carrying amount of the asset may be reduced either directly or through the use of an allowance account.

Determination of “significant” or “prolonged” decline in fair value of financial instruments

Ì The determination of what is “significant” or “prolonged” depends on the circumstances at the end of the reporting period. This requires judgment and so it varies among entities.

FRS 39.59 and 61 FRS 107.AGB5.f FRS 39.67 and 68 FRS 39.69 FRS 39.AG93 FRS 39.70 FRS 107.AGB5.g FRS 39.63 FRS 39.59 and 61





2.17 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.

2.18 Construction contracts

The Group principally operates fixed price contracts. Contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period (the percentage of completion method), when the outcome of a construction contract can be estimated reliably.

The outcome of a construction contract can be estimated reliably when: (i) total contract revenue can be measured reliably; (ii) it is probable that the economic benefits associated with the contract will flow to the entity; (iii) the costs to complete the contract and the stage of completion can be measured reliably; and (iv) the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates.

When the outcome of a construction contract cannot be estimated reliably (principally during early stages of a contract), contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable and contract costs are recognised as expense in the period in which they are incurred.

An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total contract revenue.

In applying the percentage of completion method, revenue recognised corresponds to the total contract revenue (as defined below) multiplied by the actual completion rate based on the proportion of total contract costs (as defined below) incurred to date to the estimated costs to complete. Ê

Contract revenue – Contract revenue corresponds to the initial amount of revenue agreed in the contract and any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue; and they can be reliably measured.

Contract costs – Contract costs include costs that relate directly to the specific contract and costs that are attributable to contract activity in general and can be allocated to the contract.

Commentary:

Stage of completion

Ê The stage of completion of a contract may be determined in a variety of ways. The entity uses the method that measures reliably the work performed. Depending on the nature of the contract, other acceptable methods include surveys of work performed and completion of a physical proportion of the contract work.

FRS 7.46 FRS 7.6 FRS 7.8 FRS 11.22 FRS 11.25 FRS 11.23 FRS 11.32 FRS 11.36 FRS 11.22 FRS 11.32 FRS 11.30.a FRS 11.11 FRS 11.16 FRS 11.17 FRS 11.9





2.19 Development properties Ê

Development properties are properties acquired or being constructed for sale in the ordinary course of business, rather than to be held for the Group’s own use, rental or capital appreciation.

Development properties are held as inventories and are measured at the lower of cost and net realisable value.

Non-refundable commissions paid to sales or marketing agents on the sale of real estate units are expensed when incurred.

Net realisable value of development properties is the estimated selling price in the ordinary course of business, based on market prices at the reporting date and discounted for the time value of money if material, less the estimated costs of completion and the estimated costs necessary to make the sale.

The costs of development properties recognised in profit or loss on disposal are determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold.

Commentary:

Sale of completed development property and pre-completion contracts for sale of development property

Ê In this illustration, the Group does not have any sale of completed development property and pre-completion contracts for sale of development property.

For illustration of accounting policies relating to sale of completed development property and pre-completion contracts for sale of development property, please refer to Appendix A-3 Agreements for the construction of real estate.

2.20 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:

- Raw materials: purchase costs on a first-in first-out basis. Ê

- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. These costs are assigned on a first-in first-out basis.

Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

FRS 2.6.a and b FRS 2.9 FRS 2.6 and 36.a FRS 2.9, 10 and 36.a FRS 2.25 FRS 2.12 and 13 FRS 2.6 and 36.a





2.20 Inventories (continued)

Commentary:

Cost formulas

Ê Alternatively, the costs may be assigned by using the weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified.

2.21 Provisions Ê

General

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.

Warranty provisions

Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.

Commentary:

Ê In this illustration, the Group does not have any decommissioning liability, waste electric and electronic equipment liability or restructuring provision.

Provision for de-commissioning costs

Illustrative accounting policy for de-commissioning liability when the related asset is measured using the cost model:

The provision for de-commissioning costs arose on construction of a manufacturing facility for the production of fire retardant materials. De-commissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of that particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the de-commissioning liability. The unwinding of the discount is expensed as incurred and recognised in profit or loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.

FRS 2.25 FRS 37.14 FRS 37.59 FRS 37.45-47 FRS 37.60 FRS 16.16.c FRS 37.45 FRS 37.47 INT FRS 101.8

FRS 37.59 INT FRS 101.5





2.21 Provisions Ê (continued)


Ê Provision for waste electric and electronic equipment:

Illustrative accounting policy for provision for waste electric and electronic equipment:

The Group is a provider of electrical equipment that falls under the EU Directive on Waste Electrical and Electronic Equipment. The directive distinguishes between waste management of equipment sold to private households prior to a date as determined by each Member State (historical waste) and waste management of equipment sold to private households after that date (new waste). A provision for the expected costs of management of historical waste is recognised when the Group participates in the market during the measurement period as determined by each Member State, and the costs can be reliably measured. These costs are recognised as other operating costs in profit or loss.

With respect to new waste, a provision for the expected costs is recognised when products that fall within the directive are sold and the disposal costs can be reliably measured. De-recognition takes place when the obligation expires, is settled or is transferred. These costs are recognised as part of costs of sales.

With respect to equipment sold to entities other than private households, a provision is recognised when the Group becomes responsible for the costs of this waste management, with the costs recognised as other operating costs or cost of sales as appropriate.

Restructuring provision

Illustrative accounting policy for restructuring provisions:

Restructuring provisions are only recognised when general recognition criteria for provisions are fulfilled. Additionally, the Group needs to follow a detailed formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and appropriate time-line. The people affected have a valid expectation that the restructuring is being carried out or the implementation has been initiated already.

INT FRS 106 FRS 37.71 FRS 37.72





2.22 Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual instalments. ÊË

Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional government grant.

Commentary:

Government grants related to an asset

Ê Alternatively, government grants related to an asset may be presented in the balance sheet by deducting the grant in arriving at the carrying amount of the asset.

In this illustration, it is assumed that the Group did not receive non-monetary government grants. If an entity receives non-monetary government grant, the asset and the grant may be accounted for either at fair value or at nominal amount.

Government grants related to income

Ë Government grant shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate. Grants related to income may be presented as a credit in profit or loss, either separately or under a general heading such as “Other income”. Alternatively, they are deducted in reporting the related expenses.

2.23 Transfers between levels of the fair value hierarchy

Transfers between levels of the fair value hierarchy are deemed to have occurred on the date of the event or change in circumstances that caused the transfers. å

Commentary:

å An entity shall disclose and consistently follow its policy for determining when transfers between levels of the fair value hierarchy are deemed to have occurred. The policy about the timing of recognising transfers shall be the same for transfers into levels as for transfers out of the levels.

In this illustration, the Group’s policy for determining the occurrence of transfers between levels of the fair value is on the date of the event or change in circumstances that caused the transfers. Alternative policies for determining the timing of transfers include the following:

- the beginning of the reporting period

- the end of the reporting period

FRS 20.39.a FRS 20.7 FRS 20.23 and 24 FRS 20.26 FRS 20.10A FRS 20.24 FRS 20.23 FRS 20.12 FRS 20.29 FRS 113.95 FRS 113.95





2.24 Financial guarantee

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.

2.25 Borrowing costs Ê

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Commentary:

Borrowing costs

Ê If the entity’s policy prior to 1 January 2009 is to expense off the borrowing costs, the following is an illustrative accounting policy for borrowing costs:

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

The Group capitalises borrowing costs for all eligible assets where construction was commenced on or after 1 January 2009. The Group continues to expense borrowing costs relating to construction projects that commence prior to 1 January 2009.

All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

FRS 107.21 FRS 39.9 FRS 39.43 FRS 39.47.c FRS 23.8 FRS 23.17 FRS 23.22 FRS 23.8 FRS 23.5 FRS 23.27





2.26 Convertible redeemable preference shares Ê

Convertible redeemable preference shares are separated into liability and equity components based on the terms of the contract.

On issuance of the convertible redeemable preference shares, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption in accordance with the accounting policy set out in Note 2.15(b).

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity. Transaction costs are deducted from equity, net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years.

Transaction costs are apportioned between the liability and equity components of the convertible redeemable preference shares based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised.

Commentary:

Convertible instruments with embedded derivative

Ê In this illustration, the convertible preference shares are classified as compound financial instruments with liability and equity components based on the terms of the contract.

Illustrative accounting policy if the convertible instruments are classified as hybrid instruments with embedded derivative:

Convertible loan with conversion option are accounted for as financial liability with an embedded equity conversion derivative based on the terms of the contract.

On issuance of convertible loans, the embedded option is recognised at its fair value as derivative liability with subsequent changes in fair value recognised in profit or loss.

The remainder of the proceeds is allocated to the liability component that is carried at amortised cost until the liability is extinguished on conversion or redemption.

When an equity conversion option is exercised, the carrying amounts of the liability component and the equity conversion option are derecognised with a corresponding recognition of share capital.

FRS 107.21 FRS 32.28 FRS 32.32 FRS 32.31 FRS 32.38 FRS 39.AG28





2.27 Employee benefits ÊËÌ

a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

b) Employee share option plans èêë

Employees of the Group receive remuneration in the form of share options as consideration for services rendered. The cost of these equity-settled share based payment transactions with employees is measured by reference to the fair value of the options at the date on which the options are granted which takes into account market conditions and non-vesting conditions. í This cost is recognised in profit or loss, with a corresponding increase in the employee share option reserve, over the vesting period. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market or non-vesting condition, which are treated as vested irrespective of whether or not the market condition or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. In the case where the option does not vest as the result of a failure to meet a non-vesting condition that is within the control of the Group or the employee, it is accounted for as a cancellation. In such case, the amount of the compensation cost that otherwise would be recognised over the remainder of the vesting period is recognised immediately in profit or loss upon cancellation. The employee share option reserve is transferred to retained earnings upon expiry of the share option. ì

Commentary:

Employee leave entitlement

Ê In this illustration, it is assumed that employee leave entitlement is not significant and is not included in the list of significant accounting policies.

Illustrative accounting policy for employee leave entitlement (if significant):

Employee entitlements to annual leave are recognised as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly before twelve months after the end of the reporting period is recognised for services rendered by employees up to the end of the reporting period. The liability for leave expected to be settled beyond twelve months from the end of the reporting period is determined using the projected unit credit method. The net total of service costs, net interest on the liability and remeasurement of the liability are recognised in profit or loss.

FRS 19.51

FRS 102.16 FRS 102.21A FRS 102.10 FRS 102.19-21 FRS 102.19 and 21 FRS 102.21A FRS 102.28A FRS 19.13 FRS 19.155 FRS 19.156





2.27 Employee benefits ÊËÌ (continued)


Termination benefit

Ë In this illustration, the Group does not provide any termination benefit to its employees.

Illustrative accounting policy for termination benefit:

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment as a result of either an entity’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment.

A liability and expense for a termination benefits is recognised at the earlier of when the entity can no longer withdraw the offer of those benefits and when the entity recognises related restructuring costs. Initial recognition and subsequent changes to termination benefits are measured in accordance with the nature of the employment benefits, short-term employee benefits, or other long-term employee benefits.

Defined benefit plan

Ì In this illustration, the Group does not have any defined benefit plans. For illustration of change in accounting policies relating to Revised FRS 19 Employee Benefits for defined benefit plan, please refer to Appendix A-4 Defined benefit plans.

Modification or cancellation of employee share option plan

è In this illustration, there is no modification or cancellation of employee share option plan.

Illustrative accounting policy for modification or cancellation of employee share option plan:

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where the employee share option plan is cancelled, it is treated as if it vested on the date of cancellation, and any expense that otherwise would have been recognised for services received over the remaining vesting period is recognised immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. All cancellations of equity-settled transaction awards are treated equally.

Cash-settled share-based payment transactions

ê In this illustration, the employee share option plans are equity-settled share-based payment transactions. Cash-settled share-based payment transactions are not illustrated.

Illustrative accounting policy for cash-settled share-based payment transactions:

The cost of a cash-settled share-based payment transaction is measured initially at fair value at the grant date. This fair value is recognised in profit or loss over the vesting period with recognition of a corresponding liability. Until the liability is settled, it is remeasured at each reporting date with changes in fair value recognised in profit or loss.

FRS 19.8 FRS 19.165 FRS 19.169 FRS 102.28, B42-44 FRS 102.28 FRS 102.30 FRS 102.32 FRS 102.33





2.27 Employee benefits ÊËÌ (continued)


Measurement of unidentifiable goods or services

ë In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share-based payment transaction and the fair value of any identifiable goods or services received at the grant date. This is then capitalised or expensed as appropriate.

Vesting and non-vesting conditions

í Vesting condition are conditions that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity under a share-based payment arrangement.

Vesting conditions are limited to two types:

- Service condition (e.g., requires counterparty to complete a specified period of service); and

- Performance condition (e.g., require the counterparty to complete a specified period of service and specified performance target to be met, for example, a target profit or EPS of the entity, or a target share price of the entity’s equity instruments).

Any condition that is neither a service condition nor a performance condition would be regarded as a non-vesting condition. Examples of non-vesting conditions are:

- A requirement to make monthly savings during the vesting period

- A requirement for a commodity index to reach a minimum level

- Restrictions on the transfer of vested equity instruments

- An agreement not to work for a competitor after the award has vested

Non-vesting conditions are to be taken into account when estimating the fair value of the equity instruments granted.

Transfer of share option reserve

ì The transfer of the employee share option reserve to retained earnings upon expiry of the option is not mandatory. Alternatively, the employee share option reserve may be kept as a separate reserve upon expiry of the option.

FRS 102.13A FRS 102.App A FRS 102.App A FRS 102.IG24 and BC171B FRS 102.21





2.28 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.

a) As lessee

Finance leases which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

b) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.30(e). Contingent rents are recognised as revenue in the period in which they are earned.

INT FRS 104.6 INT FRS 104.17 FRS 17.8 FRS 17.20 FRS 17.25 FRS 17.27

FRS 17.33 INT FRS 15.5 FRS 17.8 FRS 17.52





2.29 Non-current assets held for sale and discontinued operations

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. A component of the Group is classified as a ‘discontinued operation’ when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations.

In profit or loss of the current reporting period, and of the comparative period of the previous year, all income and expenses from discontinued operations are reported separately from income and expenses from continuing operations, down to the level of profit after taxes, even when the Group retains a non-controlling interest in the subsidiary after the sale. The resulting profit or loss (after taxes) is reported separately in profit or loss.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

2.30 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The following specific recognition criteria must also be met before revenue is recognised:

a) Sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

b) Rendering of services

Revenue from the installation of fire prevention equipment is recognised by reference to the stage of completion at the end of the reporting period. Stage of completion is determined by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

FRS 105.15 FRS 105.6 FRS 105.7 FRS 105.8 FRS 105.32 FRS 105.33 and 34 FRS 105.25 FRS 18.14, 20 and 29 FRS 18.35.a FRS 18.9

FRS 18.14 FRS 18.20 FRS 18.26





2.30 Revenue (continued)

c) Interest income

Interest income is recognised using the effective interest method.

d) Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

e) Rental income

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

2.31 Taxes

a) Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting period, in the countries where the Group operates and generates taxable income.

Current income taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

b) Deferred tax

Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

- Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

FRS 18.30.a FRS 18.30.c

FRS 17.50 INT FRS 15.5 FRS 12.46

FRS 12.58 and 61A FRS 12.22.c FRS 12.39





2.31 Taxes (continued)

b) Deferred tax

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

- Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it is incurred during the measurement period or in profit or loss.

FRS 12.34

FRS 12.24

FRS 12.44 FRS 12.56

FRS 12.37 FRS 12.47 FRS 12.58, 61A and 66

FRS 12.71 FRS 12.68





2.31 Taxes (continued)

c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

- Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

- Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.32 Share capital and share issuance expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

2.33 Treasury shares

The Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them respectively.

2.34 Contingencies

A contingent liability is:

a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or

b) a present obligation that arises from past events but is not recognised because:

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.

FRS 18.8 FRS 32.37 FRS 32.33

FRS 37.10 FRS 37.27 and 31 FRS 103.23





2.35 Related parties

A related party is defined as follows:

a) A person or a close member of that person’s family is related to the Group and Company if that person:

(i) has control or joint control over the Company;

(ii) has significant influence over the Company; or (iii) is a member of the key management personnel of the Group or

Company or of a parent of the Company.

b) An entity is related to the Group and the Company if any of the following conditions applies :

(i) the entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) both entities are joint ventures of the same third party. (iv) one entity is a joint venture of a third entity and the other entity is an

associate of the third entity.

(v) the entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company;

(vi) the entity is controlled or jointly controlled by a person identified in (a);

(vii) a person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

FRS 24.9




3. Significant accounting judgments and estimates

The preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting period. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

3.1 Judgments made in applying accounting policies Ê

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the consolidated financial statements:

a) Impairment of available-for-sale equity investments The Group records impairment charges on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making this judgment, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost. For the financial year ended 31 December 2013, the amount of impairment loss recognised for available-for-sale financial assets was $198,000 (2012: $210,000). The carrying amount of available-for-sale equity investments as at 31 December 2013 was $3,897,000 (2012: $2,736,000). If a decline in fair value below cost was considered significant or prolonged, the Group would have recognised an additional loss of $66,000 (2012: 78,000).

Commentary:

Judgments made in applying accounting policies

Ê In this illustration, it is assumed that these are the judgments made in applying accounting policies that has the most significant effect on the amounts recognised in the financial statements.

Illustrative disclosures of other judgments made in applying accounting policies:

Determination of lease classification

The Group has entered into commercial property leases on its investment properties. The Group has determined, based on an evaluation of the terms and conditions of the arrangements such as the lease term not constituting a substantial portion of the economic life of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the contracts as operating leases.

Determination of functional currency

The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiaries. In determining the functional currencies of the entities in the Group, judgment is required to determine the currency that mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the Group are determined based on management’s assessment of the economic environment in which the entities operate and the entities’ process of determining sales prices.

FRS 1.122




3. Significant accounting judgments and estimates (continued)

3.1 Judgments made in applying accounting policies (continued)


Judgments made in applying accounting policies

Consolidation of special purpose entities

In February 2013, the Group and a third party partner formed an entity to acquire land and construct and operate a fire equipment safety facility. The Group holds a 20% equity interest in this entity. However, the Group has majority representation on the entity’s board of directors and is required to approve all major operational decisions. The operations, once they commence, will be solely used by the Group. Based on these facts and circumstances, management concluded that the Group controls this entity and, therefore, consolidates the entity in its financial statements. Additionally, the Group is effectively guaranteeing the returns to the third party. The shares of the third party partner are recorded as a long term loan and return on investment is recorded as interest expense.

3.2 Key sources of estimation uncertainty Ê

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period are discussed below. The Group based its assumptions and estimates on parameters available when the financial statements was prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

a) Fair value of financial instruments Where the fair values of financial instruments recorded on the balance sheet cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flow model. The inputs to these models are derived from observable market data where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of liquidity and model inputs regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The valuation of financial instruments is described in more detail in Note 39.

FRS 1.125





3.2 Key sources of estimation uncertainty Ê (continued)

b) Impairment of intangible assets

As disclosed in Note 15 to the financial statements, the recoverable amounts of the cash generating units which goodwill and brands have been allocated to have been determined based on value in use calculations. The value in use calculations are based on a discounted cash flow models. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The key assumptions applied in the determination of the value in use including a sensitivity analysis, are disclosed and further explained in Note 15 to the financial statements.

c) Revaluation of investment properties and property, plant and equipment

The Group carries its investment properties and property, plant and equipment at fair value, with changes in fair values being recognised in profit or loss and other comprehensive income respectively.

The fair values of investment properties and property, plant and equipment are determined by independent real estate valuation experts using recognised valuation techniques. These techniques comprise both the Yield Method and the Discounted Cash Flow Method.

The determination of the fair values of the investment properties and property, plant and equipment require the use of estimates such as future cash flows from assets (such as lettings, tenants’ profiles, future revenue streams, capital values of fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount rates applicable to those assets. These estimates are based on local market conditions existing at the end of each reporting date.

The carrying amount and key assumptions used to determine the fair value of the investment properties and property, plant and equipment are further explained in Note 39. If the discount rates used in the valuation had been 1% higher than management’s estimate, the carrying amount of the investment properties and property, plant and equipment would have been $125,000 (2012: $105,000) and $205,000 (2012: $190,000) lower respectively.

Commentary:

Key sources of estimation uncertainty

Ê In this illustration, it is assumed that these are the key assumptions and estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year.

Illustrative disclosures of other key sources of estimation uncertainty:

Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax provisions already recorded.

FRS 1.125







Key sources of estimation uncertainty (continued)

Taxes (continued)

The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the relevant tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company’s domicile.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The Group has tax losses carried forward amounting to $XXX (2012: $XXX). These losses relate to subsidiaries that have a history of losses, do not expire and may not be used to offset taxable income elsewhere in the Group. The subsidiary has neither temporary taxable differences nor any tax planning opportunities available that could support the recognition of any of these losses as deferred tax assets.

If the Group was able to recognise all unrecognised deferred tax assets, profit would increase by $XXX (2012:$XXX).

The carrying value of recognised tax losses at 31 December 2013 was $XXX (2012: $XXX) and the unrecognised tax losses at 31 December 2013 was $XXX (2012: $XXX).

Construction contracts

The Group recognises contract revenue by reference to the stage of completion of the contract activity at the end of each reporting period, when the outcome of a construction contract can be estimated reliably. The stage of completion is measured by reference to the proportion that contract costs incurred for work performed to date to the estimated total contract costs. Significant assumptions are required to estimate the total contract costs and the recoverable variation works that affect the stage of completion. In making these estimates, management has relied on past experience and knowledge of the project engineers. The carrying amounts of assets and liabilities arising from construction contracts at the end of each reporting period are disclosed in Note X to the financial statements. If the estimated total contract cost had been 5% higher than management estimate, the carrying amount of the assets and liabilities arising from construction contracts would have been $XXX (2012: $XXX) lower and $XXX (2012: $XXX) higher respectively.

Provision for decommissioning

As part of the identification and measurement of assets and liabilities for the acquisition of XXX Limited in 2013, the Group has recognised a provision for decommissioning obligations associated with a factory owned by XXX Limited. In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove plant from the site and the expected timing of those costs. The carrying amount of the provision as at 31 December was $XXX (2012: $XXX). If the estimated pre-tax discount rate used in the calculation had been XX% higher than management’s estimate, the carrying amount of the provision would have been $XXX (2012: $XXX) lower.







Key sources of estimation uncertainty (continued)

Development costs

Development costs are capitalised in accordance with the accounting policy in Note X. Initial capitalisation of costs is based on management’s judgement that technological and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits. As at 31 December 2013, the carrying amount of development costs capitalised at the end of the reporting period was $XXX (2012: $XXX). If the expected future cash generation of the project had been 20% lower than management’s estimate, the carrying amount of development costs would have been $XXX (2012: $XXX) lower.

Impairment of loans and receivables

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the end of the reporting period is disclosed in Note 21 to the financial statements. If the present value of estimated future cash flows decrease by 10% from management’s estimates, the Group’s allowance for impairment will increase by $XXX (2012: increase by $XXX).

Fair value measurement of contingent consideration on business combination

Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the consideration transferred for business combination. Where the contingent consideration meets the definition of a derivative and thus financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on discounted cash flows. The key assumptions take into consideration the probability of meeting each performance target and the discount factor. As part of the purchase price allocation for its acquisition of MSAX, the Group identified an element of contingent consideration. The carrying amount of the contingent consideration on business combination at the end of the reporting period is disclosed in Note X to the financial statements. If the probability of meeting the performance target decrease by 10% from management’s estimates, the carrying amount of he contingent consideration would decrease by $XXX (2012:$XXX).

Estimation of net realisable value for development property

Inventory property is stated at the lower of cost and net realisable value (NRV).

NRV in respect of development property under contruction is assessed with reference to market prices at the reporting date for similar completed property less estimated costs to complete construction and less an estimate of the time value of money to the date of completion. The carrying amount of the development property stated at net realisable value as at 31 December 2013 was $XXX (2012: $XXX). If the estimated costs to complete construction increase by 20% from management’s estimate, the carrying amount of development property stated would reduce by $XXX (2012: $XXX).




4. Revenue

Group

2013 $’000

2012 $’000

Sale of goods 105,827 104,455 FRS 18.35.b.i

Construction revenue 30,893 38,116 FRS 11.39.a

136,720 142,571

5. Interest income åç

Group

2013

$’000

2012

$’000

Interest income from:

- Loans and receivables 355 255 FRS 107.20.a.iv

- Available-for-sale financial assets 48 47 FRS 107.20.a.ii

- Held-to-maturity investment 27 25 FRS 107.20.a.iii

430 327 FRS 107.20.a.b

Included in interest income from loans and receivables is interest of $98,000 (2012: $92,000) from an impaired loan to a fellow subsidiary (Note 21).

6. Other income çÌ

Group

2013 $’000

2012 $’000

Amortisation of deferred capital grants (Note 29) 239 180 FRS 20.39

Rental income from investment properties (Note 14) 559 490 FRS 40.75.f.i

Net gain from fair value adjustment of investment properties (Note 14) 489 129 FRS 40.76.d

Net gain on disposal of property, plant and equipment – 120 FRS 1.98.c

Net fair value gains on financial instruments:

- Held for trading investment securities 135 95 FRS 107.20.a.i

- Derivatives 43 56 FRS 107.20.a.i

- Available-for-sale financial assets (transferred from equity on disposal of investment securities) ë 120 15 FRS 107.20.a.ii

Gain on remeasurement of investment in associate to fair value upon business combination achieved in stages (Note 17)

140 – FRS 103.B64.p.ii

1,725 1,085

FRS 107.20.d




7. Finance costs

Group

2013 $’000

2012 $’000

Interest expense on:

- Bank loans, bonds and bank overdrafts 1,640 1,506 FRS 107.20.a.v

- Obligations under finance leases 75 30

- Convertible redeemable preference shares 62 59 FRS 107.20.a.v

1,777 1,595 FRS 107.20.b

Provisions discount adjustment (Note 28) 30 10

Less: interest expense capitalised in:

- Plant and equipment (Note 13) (57) (60)

- Development property (Note 24) (35) (33)

Total finance costs 1,715 1,512

8. Other expenses çÌ

The following items have been included in arriving at other expenses:

Group

2013 $’000

2012 $’000

Net loss on disposal of property, plant and equipment 76 – FRS 1.98.c

Impairment loss on property, plant and equipment (Note 13) 500 – FRS 1.98.a

Direct operating expenses arising from investment properties (Note 14) 72 65

Fair value adjustment of contingent consideration of business combination (Note 17) ê 235 - FRS 1.97

Net foreign exchange loss 136 145 FRS 21.52.a

Impairment loss on financial assets Í: FRS 107.20.e

- Trade receivables (Note 21) 135 115 FRS 107.20.a.iv

- Loan to a fellow subsidiary (Note 21) – 100 FRS 107.20.a.iv FRS 24.18.d

- Available-for-sale investment securities (Note 22) 198 210 FRS 107.20.e




9. Profit before tax from continuing operations ç

The following items have been included in arriving at profit before tax from continuing operations:

Group

2013 $’000

2012 $’000

Audit fees:

- Auditors of the Company 400 400

- Other auditors 50 50

Non-audit fees:

- Auditors of the Company 250 250

- Other auditors 30 30

Depreciation of property, plant and equipment 2,893 2,713

Amortisation of intangible assets (Note 15) 220 252

Transactions costs incurred in a business combination ê 300 –

Employee benefits expense (Note 35) 20,502 19,024

Inventories recognised as an expense in cost of sales (Note 25) 80,567 82,122

Operating lease expense (Note 37(b)) 484 387

Utility charges ê 1,428 1,486

Transportation charges ê 2,450 2,584

Legal and other professional fees ê 325 228

Commentary: Separate disclosure of income and expenses

Ê FRS 107.20.b only requires total income (calculated using the effective interest method) for financial assets that are not at fair value through profit or loss to be disclosed.

In this illustration, we have illustrated interest income aggregated by categories of financial asset. Although this level of aggregation is optional, when items of income and expense are material, their nature and amount should be disclosed separately.

Ë When items of income and expense are material, their nature and amount should be disclosed separately. Circumstances that would give rise to the separate disclosure of items of income and expense include:

(a) Write-downs of inventories to net realisable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs;

(b) Restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring;

(c) Disposals of items of property, plant and equipment; (d) Disposals of investments; (e) Discontinued operations; (f) Litigation settlements; and

(g) Other reversals of provisions.

FRS 1.97 and 104 SGX 1207.6a SGX 1207.6a FRS 1.104 FRS 1.104 FRS 1.97 FRS 1.104 FRS 2.36.d FRS 17.35.c FRS 1.97 and 104 FRS 1.97 and 104 FRS 1.97 and 104 FRS 107.20.b FRS 1.97 FRS 1.97 and 98




9. Profit before tax from continuing operations ç (continued)


Ì An entity shall disclose the fee income and expense (other than amounts included in determining the effective interest rate) arising from financial assets or financial liabilities that are not at fair value through profit or loss and trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and other institutions, either on the face of the financial statements or in the notes.

ê These expense items have been disclosed separately as they are considered to be material in the assumed scenario due to their size or nature.

Reclassification adjustments

ë In this illustration, the entity has chosen to disclose the reclassification adjustments and current year gain or loss in the notes. An entity may choose to present this information in the statement of comprehensive income itself.

Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Such amounts must be separately disclosed. For example, when an available-for-sale financial asset is sold, accumulated amounts previously recognised in fair value adjustment reserve will be reclassified into profit or loss for the period.

FRS 107.20.c FRS 107.20.e FRS 107.16 FRS 107.36 FRS 107.25 FRS 107.28 FRS 107.42D FRS 107.6 FRS 107.B1 FRS 107.B2 FRS 107.6 FRS 1.97 FRS 1.94 FRS 1.7 FRS 1.92 FRS 1.93

Classes of financial instruments

Í FRS 107 specifies a number of disclosure requirements on the following topics to be provided by ‘class of financial instruments’:

- Impairment losses;

- Reconciliation of change in allowance account for credit losses if an entity chooses under FRS 39 to have a separate allowance account;

- Credit risk;

- Fair value of financial instruments;

- Accounting policy for recognising any difference between fair value at initial recognition and the amount that would be determined at that date using valuation technique and the aggregate difference yet to be recognised in profit or loss; and

- Transfers of financial assets that are not derecognised in their entirety.

FRS 107 requires an entity to group financial instruments into classes that are appropriate to the nature of information disclosed and that take into account the characteristics of those financial instruments. These classes are determined by the reporting entity and are distinct (usually lower in level) from the categories of financial instruments (e.g., available-for-sale financial asset, loans and receivables) specified in FRS 39.

In determining classes of financial instruments, an entity shall, at a minimum:

- Distinguish instruments measured at amortised cost from those measured at fair value

- Treat as a separate class or classes those financial instruments outside the scope of FRS 107

The entity is also required to provide sufficient information to permit reconciliation of the classes of financial instruments to the line items presented in the balance sheet.




10. Income tax expense

Major components of income tax expense

The major components of income tax expense for the years ended 31 December 2013 and 2012 are:

Group

2013 $’000

2012 $’000

Consolidated income statement:

Current income tax – continuing operations:

- Current income taxation 1,422 1,344 FRS12.80.a

- (Over)/under provision in respect of previous years (50) 91 FRS 12.80.b

1,372 1,435

Deferred income tax – continuing operations (Note 20):

- Origination and reversal of temporary differences 191 260 FRS 12.80.c

- Benefits from previously unrecognised tax losses (6) (8) FRS 12.80.f

185 252

Income tax attributable to continuing operations 1,557 1,687

Income tax attributable to discontinued operation (Note 11) (7) (5) FRS 12.80.h

Income tax expense recognised in profit or loss 1,550 1,682

Statement of comprehensive income:

Group Company

2013 $’000

2012 $’000

2013 $’000

2012 $’000

Deferred tax expense related to other comprehensive

income: FRS 12.81.ab

- Net gain on fair value changes of available-for-sale financial assets 56 26 – –

- Net surplus on revaluation of freehold land and buildings 256 460 – – FRS 16.42

- Share of other comprehensive income of associates 13 2 – –

325 488 – –

Statement of changes in equity:

Deferred tax expense charged directly to equity:

- Convertible redeemable preference shares - 16 – 16 FRS 12.81.a




10. Income tax expense (continued)

Relationship between tax expense and accounting profit

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2013 and 2012 is as follows: Ê

Group

2013 $’000

2012 $’000

Profit before tax from continuing operations 7,057 7,116

Loss before tax from discontinued operation (Note 11) (551) (193)

Accounting profit before tax 6,506 6,923

Tax at the domestic rates applicable to profits in the countries where the

Group operates ç 1,322 1,571

Adjustments: Non-deductible expenses è 560 473

Income not subject to taxation è (170) (388)

Effect of partial tax exemption and tax relief (35) (20) Deductions on treasury shares issued pursuant to employee share option

plan é (3) –

Deferred tax on convertible redeemable preference shares (4) (3)

Benefits from previously unrecognised tax losses (6) (8)

Deferred tax assets not recognised 46 21

(Over)/under provision in respect of previous years (50) 91

Share of results of associates (112) (56)

Others 2 1

Income tax expense recognised in profit or loss 1,550 1,682

The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction. ç

FRS 12.81.c.i




10. Income tax expense (continued)

Commentary:

Presentation of tax reconciliation

Ê Alternatively, an entity may present a numerical reconciliation between the average effective tax rate (i.e., tax expense/income divided by the accounting profit) and the applicable tax rate, disclosing also the basis on which the applicable tax rate is computed.

Income tax rate for tax reconciliation

ç In explaining the relationship between tax expense/income and accounting profit, an entity uses an applicable tax rate that provides the most meaningful information to the users of its financial statements. Often, the most meaningful rate is the domestic rate of tax in the country in which the entity is domiciled, aggregating the tax rate applied for national taxes with the rates applied for any local taxes which are computed on a substantially similar level of taxable profit (tax loss). However, for an entity operating in several jurisdictions, it may be more meaningful to aggregate separate reconciliations prepared using the domestic rate in each individual jurisdiction.

Tax deduction for treasury shares transferred under employee share scheme

é A Singapore company is granted a tax deduction for the cost incurred in acquiring treasury shares which are transferred to any person under a stock option scheme or share award scheme by reason of any office or employment held in Singapore by that person.

Disclosure of nature of expenses that are not deductible for income tax purposes

è The nature of :

- expenses that are not deductible for income tax purposes; and - income not subject to taxation

that give rise to a tax effect should be disclosed if the amount was material in accordance with FRS 1.29

Illustrative note disclosure on the nature of expenses that are not deductible for income tax purposes :

The nature of expenses that are not deductible for income tax purposes are as follows:

Group

2013 2012

$’000 $’000 Transaction costs related to acquisition of a

subsidiary XXX -

Exchange loss arising from revaluation of non-trade balances XXX XXX

Private car expenses XXX XXX

Entertainment and transportation expenses incurred for personal purposes XXX XXX

XXX XXX

FRS 12.81.c.ii and 86

FRS 12.85 FRS 1.29




11. Discontinued operation and disposal group classified as held for sale Ê

On 15 May 2013, the Company announced the decision of its board of directors to dispose of one of its wholly-owned subsidiary, Good Fire Prevention Pte Ltd (GFP), which was previously reported in the fire prevention equipment and services segment. The decision is consistent with the Group’s strategy to focus on its core electronics and property businesses and to divest its fire prevention equipment business, which has been under performing for the last five years. As at 31 December 2013, the assets and liabilities related to GFP have been presented in the balance sheet as “Assets of disposal group classified as held for sale” and “Liabilities directly associated with disposal group classified as held for sale”, and its results are presented separately on profit or loss as “Loss from discontinued operation, net of tax”. The disposal of GFP was completed on 15 February 2014 (Note 44).

Balance sheet disclosures

The major classes of assets and liabilities of GFP classified as held for sale and the related asset revaluation reserve as at 31 December are as follows: ËÌ

Group

2013 $’000

2012 $’000

Assets: Property, plant and equipment 1,016 –

Inventories 190 –

Trade and other receivables 814 –

Cash and short-term deposits 250 –

Assets of disposal group classified as held for sale 2,270 –

Liabilities:

Trade and other payables (1,043) –

Deferred tax liabilities (28) –

8.5% p.a. fixed rate SGD bank loan due 1 January 2015 (1,000) –

Liabilities directly associated with disposal group classified as held for sale (2,071) –

Net liabilities directly associated with disposal group classified as held for

sale 199 –

Reserve: Asset revaluation reserve 128 –

FRS 105.41.a, b and d FRS 105.38 and 40




11. Discontinued operation and disposal group classified as held for sale Ê (continued)

Income statement disclosures

The results of GFP for the years ended 31 December are as follows: ËÌÍ

Group

2013 $’000

2012 $’000

Revenue 13,152 14,598 FRS 105.33.b.i

Expenses (12,983) (14,708) FRS 105.33.b.i

Profit/(loss) from operations 169 (110)

Finance costs (70) (83)

Impairment loss on deferred development costs (Note 15) (200) –

Loss recognised on remeasurement to fair value less costs to sell (450) – FRS 105.33.b.iii and 41.c

Loss before tax from discontinued operation (551) (193) FRS 105.33.b.i

Taxation:

- Related to loss from ordinary activities of the discontinued operation 4 5 FRS 105.33.b.ii FRS 12.81.h.ii

- Related to re-measurement to fair value less costs to sell 3 – FRS 105.33.b.iv FRS 12.81.h.i

Loss from discontinued operation, net of tax (544) (188)

Cash flow statement disclosures

The cash flows attributable to GFP are as follows: ËÌÍ

Group

2013 $’000

2012 $’000

Operating (1,025) 483

Investing 268 (189)

Financing (137) (114)

Net cash (outflows)/inflows (894) 180

Loss per share disclosures

Group

2013 $’000

2012 $’000

Loss per share from discontinued operation attributable to owners of

the Company (cents per share) ê

Basic (2.35) (0.82) FRS 33.68

Diluted (2.30) (0.80) FRS 33.68

The basic and diluted loss per share from discontinued operation are calculated by dividing the loss from discontinued operation, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares for basic earnings per share computation and weighted average number of ordinary shares for diluted earnings per share computation respectively. These loss and share data are presented in the tables in Note 12(a).

FRS 105.33.b FRS 105.33.c




11. Discontinued operation and disposal group classified as held for sale Ê (continued)

Immediately before the classification of GFP as a discontinued operation, the recoverable amount was estimated for certain items of property, plant and equipment and no impairment loss was identified. Following the classification, an impairment loss of $450,000 (2012: nil) was recognised to reduce the carrying amount of the assets in the disposal group to the fair value less costs to sell. This amount was included as part of the “Loss from discontinued operation, net of tax“.

Commentary:

å FRS 5.5B clarifies that disclosure requirements in other FRSs do not apply to non-current assets held for sale (or disposal groups) unless those FRSs explicitly refer to those assets and disposals groups. Disclosure requirements continue to apply for assets and liabilities that are not within the scope of the measurement requirements of FRS 105, but within the disposal group.

Discontinued operation and disposal group classified as held for sale

ç These analysis/disclosures are not required for disposal groups that are newly acquired subsidiaries that meet the criteria to be classified as held for sale on acquisition.

Ì Alternatively, these analysis/disclosures may be presented on the face of the financial statements. If so presented for the purposes of the statement of comprehensive income, a separate section identified as relating to discontinued operations is required.

Í An entity should re-present the disclosures in FRS 105.33 for prior periods presented in the statement of comprehensive income and cash flow statement so that the disclosures relate to all operations that have been discontinued by the end of the reporting period for the latest period presented.

Loss per share from discontinued operation

ê In this illustration, loss per share from discontinued operations has been presented in the note. Alternatively, this information may be presented on the face of the statement of comprehensive income.

12. Earnings per share Ê

a) Continuing operations

Basic earnings per share from continuing operations are calculated by dividing profit from continuing operations, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share from continuing operations are calculated by dividing profit from continuing operations, net of tax, attributable to owners of the Company (after adjusting for interest expense on convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following tables reflect the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

FRS 105.5B FRS 105.5B.b FRS 105.33.b and 39 FRS 105.33.b FRS 105.34 FRS 33.68 FRS 33.10 and 12 FRS 33.31 and 33




12. Earnings per share Ê (continued)

a) Continuing operations (continued)

Group

2013 $’000

2012

$’000

Profit for the year attributable to owners of the Company 4,776 4,841 Add back: Loss from discontinued operation, net of tax, attributable

to owners of the Company Ë 544 188

Profit from continuing operations, net of tax, attributable to owners of the Company used in the computation of basic earnings per share from continuing operations 5,320 5,029

Interest expense on convertible redeemable preference shares Ì 62 59 Profit from continuing operations, net of tax, attributable to owners

of the Company used in the computation of diluted earnings per share 5,382 5,088

No. of shares ‘000

No. of shares ‘000

Weighted average number of ordinary shares for basic earnings per share computation * 23,150 23,055

Effects of dilution ÌÍ: - Share options 18 15

- Convertible redeemable preference shares 505 505 Weighted average number of ordinary shares for diluted earnings per

share computation * 23,673

23,575

* The weighted average number of shares takes into account the weighted average effect of changes in treasury shares transactions during the year.

325,000 (2012: 200,000) share options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive.

Since the end of the financial year, senior executives have exercised the options to acquire 2,000 (2012: nil) ordinary shares. There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements. Î

b) Earnings per share computation

The basic and diluted earnings per share are calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of ordinary shares for basic earnings per share computation and dividing the profit for the year attributable to owners of the Company adjusted for interest expense on convertible redeemable shares by the weighted average number of ordinary shares for diluted earnings per share computation respectively. These profit and share data are presented in the tables in Note 12(a) above.

FRS 33.70.a FRS 33.12 FRS 33.70.b FRS 33.70.b FRS 33.70.b FRS 33.70.c FRS 33.70.d

FRS 33.70.a and b




12. Earnings per share Ê (continued)

Commentary:

Earnings per share

Ê If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted retrospectively. If these changes occur after the end of the reporting period but before the financial statements are authorised for issue, the per share calculations for current and prior period presented shall be based on the new number of shares and this fact should be disclosed. In addition, basic and diluted earnings per share of all periods presented shall be adjusted for the effects of errors and adjustments resulting from changes in accounting policies accounted for retrospectively.

Ë In this illustration, it is assumed that the discontinued operation is not attributable to non-controlling interests.

Ì The objective of diluted earnings per share is consistent with that of basic earnings per share which is to provide a measure of the interest of each ordinary share in the performance of an entity while giving effect to all dilutive potential ordinary shares outstanding during the period. As a result:

(a) profit or loss attributable to ordinary equity holders of the parent entity is increased by the after-tax amount of dividends and interest recognised in the period in respect of the dilutive potential ordinary shares and is adjusted for any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; and

(b) the weighted average number of ordinary shares outstanding is increased by the weighted

average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

Í Potential ordinary shares shall be treated as dilutive only when their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations.

Î An entity shall disclose a description of ordinary share transactions or potential ordinary share transactions, other than those resulted from share capitalisation, bonus issue or share split, that occur after the end of the reporting period and that would have changed significantly the number of ordinary shares or potential ordinary shares outstanding at the end of the period if those transactions had occurred before the end of the reporting period.

Example of such transactions include:

- An issue of shares for cash;

- An issue of shares when the proceeds are used to repay debt or preference shares outstanding at the end of the reporting period;

- The redemption of ordinary shares outstanding;

- The conversion or exercise of potential ordinary shares outstanding at the end of the reporting period into ordinary shares;

- An issue of options, warrants, or convertible instruments; and

- The achievement of conditions that would result in the issue of contingently issuable shares.

Earnings per share amounts are not adjusted for such transactions occurring after the end of the reporting period because such transactions do not affect the amount of capital used to produce profit or loss for the period.

FRS 33.64

FRS 33.32

FRS 33.41 FRS 33.70.d FRS 33.71




13. Property, plant and equipment ÊË

Group Freehold

land Buildings Plant and equipment

Furniture and

fixtures Total

$’000 $’000 $’000 $’000 $’000

Cost or valuation: At valuation At cost FRS 16.73.a

At 1 January 2012 7,468 1,075 25,079 2,331 35,953 FRS 16.73.d

Additions 1,160 1,824 1,028 441 4,453 FRS 16.73.e.i

Disposals – – (2,054) – (2,054) FRS 16.73.e.ii

Revaluation surplus 2,128 740 – – 2,868 FRS 16.73.e.iv Elimination of accumulated depreciation on

revaluation – (50) – – (50) FRS 16.35.b

Exchange differences (30) (15) (120) (20) (185) FRS 16.73.e.viii

At 31 December 2012 and 1 January 2013 10,726 3,574 23,933 2,752 40,985 FRS 16.73.d

Additions 4,000 1,194 2,008 1,252 8,454 FRS 16.73.e.i

Transfer from investment properties (Note 14) – 300 – – 300 FRS 16.73.e.ix

Disposals (3,068) (1,710) (3,328) – (8,106) FRS 16.73.e.ii

Acquisition of a subsidiary (Note 17) – – 1,111 158 1,269 FRS 16.73.e.iii

Attributable to discontinued operation (Note 11) (1,010) (310) (377) (150) (1,847) FRS 16.73.e.ii

Revaluation surplus 1,206 300 – – 1,506 FRS 16.73.e.iv Elimination of accumulated depreciation on


Exchange differences 20 10 50 12 92 FRS 16.73.e.viii

At 31 December 2013 11,874 3,291 23,397 4,024 42,586 FRS 16.73.d

Accumulated depreciation and impairment loss:

At 1 January 2012 – – 6,461 1,337 7,798 FRS 16.73.d

Depreciation charge for the year – 50 2,558 230 2,838 FRS 16.73.e.vii

Disposals – – (615) – (615) FRS 16.73.e.ii Elimination of accumulated depreciation on


Exchange differences – – (40) (10) (50) FRS 16.73.e.viii

At 31 December 2012 and 1 January 2013 – – 8,364 1,557 9,921 FRS 16.73.d

Depreciation charge for the year – 115 2,628 300 3,043 FRS 16.73.e.vii

Impairment loss – – 500 – 500 FRS 16.73.e.v

Disposals – (10) (1,153) – (1,163) FRS 16.73.e.ii

Attributable to discontinued operation (Note 11) – (38) (245) (98) (381) FRS 16.73.e.ii

Elimination of accumulated depreciation on revaluation – (67) – – (67) FRS 16.35.b

Exchange differences – – 10 5 15 FRS 16.73.e.viii

At 31 December 2013 – – 10,104 1,764 11,868 FRS 16.73.d

Net carrying amount:

At 31 December 2012 10,726 3,574 15,569 1,195 31,064

At 31 December 2013 11,874 3,291 13,293 2,260 30,718

FRS 1.77 and 78.a




13. Property, plant and equipment ÊË (continued)

Company

Furniture and fixtures

$’000

Cost: FRS 16.73.a

At 1 January 2012 1,166 FRS 16.73.d

Additions 221 FRS 16.73.e.i

At 31 December 2012 and 1 January 2013 1,387 FRS 16.73.d

Additions 626 FRS 16.73.e.i

At 31 December 2013 2,013 FRS 16.73.d

Accumulated depreciation:

At 1 January 2012 669 FRS 16.73.d

Depreciation charge for the year 115 FRS 16.73.e.vii

At 31 December 2012 and 1 January 2013 784 FRS 16.73.d

Depreciation charge for the year 150 FRS 16.73.e.vii

At 31 December 2013 934 FRS 16.73.d Net carrying amount:

At 31 December 2012 603

At 31 December 2013 1,079

Assets under construction

The Group’s plant and equipment included $800,000 (2012: $750,000) which relate to expenditure for a plant in the course of construction.

Capitalisation of borrowing costs

The Group’s plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of a plant and equipment. During the financial year, the borrowing costs capitalised as cost of plant and equipment amounted to $57,000 (2012: $60,000). The rate used to determine the amount of borrowing costs eligible for capitalisation was 4.5% (2012: 5.0%), which is the effective interest rate of the specific borrowing. Ì

Revaluation of freehold land and buildings

The Group engaged Chartered Surveyors Pte Ltd, an independent valuer to determine the fair value of the freehold land and buildings. The date of the revaluation was 31 December 2013 (2012: 31 December 2012). Details of valuation techniques and inputs used are disclosed in Note 39.

If the freehold land and buildings were measured using the cost model, the carrying amounts would be as follows:

Group

2013

$’000

2012

$’000

Freehold land at 31 December:

- Cost and net carrying amount 9,560 8,336

Buildings at 31 December:

- Cost 2,730 3,048

- Accumulated depreciation and impairment (150) (200)

- Net carrying amount 2,580 2,848

FRS 16.74.b FRS 23.26.a FRS 23.26 b FRS 16.77.a-b SGX 1207.11 FRS 16.77.e





Assets held under finance leases

During the financial year, the Group acquired plant and equipment and furniture and fixtures with an aggregate cost of $1,028,000 (2012: $95,000) by means of finance leases. The cash outflow on acquisition of property, plant and equipment amounted to $7,426,000 (2012: $4,358,000).

The carrying amount of plant and equipment and furniture and fixtures held under finance leases at the end of the reporting period were $815,000 (2012: $65,000) and $85,000 (2012: $30,000) respectively.

Leased assets are pledged as security for the related finance lease liabilities.

Assets pledged as security

In addition to assets held under finance leases, the Group’s freehold land and buildings with a carrying amount of $7,822,000 (2012: $6,833,000) are mortgaged to secure the Group’s bank loans (Note 30).

Impairment of assets

During the financial year, a subsidiary of the Group within the electronic components segment, XYZ Vietnam Ltd carried out a review of the recoverable amount of its production equipment because a particular line of specialised electronic component products had been persistently making losses. An impairment loss of $500,000 (2012: nil), representing the write-down of these equipment to the recoverable amount was recognised in “Other expenses” (Note 8) line item of profit or loss for the financial year ended 31 December 2013. The recoverable amount of the production equipment was based on its value in use and the pre-tax discount rate used was 12.4% (2012: 11.2%).

Commentary:

Changes in estimates

Ê In this illustration, there was no change in the useful life of property, plant and equipment of the Group. Where applicable, an entity should disclose the nature and effect of a change in accounting estimate that has an effect in the current or subsequent periods.

Illustrative note disclosure for change in estimated useful life of equipment:

During the financial year, the Group conducted an operational efficiency review on its production lines. The Group revised the estimated useful lives of some automation machines from five to eight years, after refurbishments that will enable these automation machines to remain in production for an additional three years. The revision in estimate has been applied on a prospective basis from 1 January 2013. The effect of the above revision on depreciation charge in current and future periods are as follows:

2013 $’000

2014 $’000

2015 $’000

Later $’000

Decrease in depreciation expense (xxx) (xxx) (xxx) (xxx)

Ë Entities are also encouraged to disclose the following information, which users of financial statements may find relevant to their needs:

- The carrying amount of temporarily idle property, plant and equipment; - The gross carrying amount of any fully depreciated property, plant and equipment that is still

in use; - The carrying amount of property, plant and equipment retired from active use and not

classified as held for sale in accordance with FRS 105; and - When the cost model is used, the fair value of property, plant and equipment when this is

materially different from the carrying amount.

FRS 7.43 FRS 17.31.a FRS 16.74.a FRS 16.74.a FRS 36.126.a, 130.a-c, e and g FRS 8.39 FRS 16.76 FRS 16.79






Ì If the amount of borrowing costs eligible for capitalisation have been determined by applying a capitalisation rate to the expenditures on a qualifying asset because funds used for the purpose of obtaining the qualifying asset are borrowed generally (rather than specifically), the capitalisation rate should be the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period should not exceed the amount of borrowing costs incurred during that period.

14. Investment properties Ê

Group

2013 $’000

2012 $’000

Balance sheet: FRS 40.76

At 1 January 3,955 3,825

Additions (subsequent expenditure) ç 500 – FRS 40.76a

Net gains from fair value adjustments recognised in profit or loss 489 129 FRS 40.76.d

Transfer to property, plant and equipment (Note 13) (300) – FRS 40.76.f

Exchange differences 1 1 FRS 40.76.e

At 31 December 4,645 3,955

Income statement:

Rental income from investment properties:

- Minimum lease payments 538 445

- Contingent rent based on tenant’s turnover 21 45 FRS 17.56.b

559 490 FRS 40.75.f.i

Direct operating expenses (including repairs and maintenance) arising from:

- Rental generating properties (60) (55) FRS 40.75.f.ii

- Non-rental generating properties (12) (10) FRS 40.75.f.iii

(72) (65) The Group has no restrictions on the realisability of its investment properties and no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

Valuation of investment properties

Investment properties are stated at fair value, which has been determined based on valuations é performed as at 31 December 2013 and 31 December 2012. The valuations were performed by Chartered Surveyors Pte Ltd, an independent valuer è with a recognised and relevant professional qualification and with recent experience in the location and category of the properties being valued. Details of valuation techniques and inputs used are disclosed in Note 39.

FRS 23.14 and 26.b

FRS 40.75.g FRS 40.75.h

FRS 40.75.a FRS 40.75.e




14. Investment properties Ê (continued)

Properties pledged as security

Certain investment properties amounting to $2,145,000 (2012: $2,055,000) are mortgaged to secure bank loans (Note 30).

Transfer to property, plant and equipment

On 30 December 2013, the Group transferred one condominium unit that was held as investment property to owner-occupied property. On that date, the Group has commenced using the condominium unit for employee accommodation purposes.

The investment properties held by the Group as at 31 December are as follows: ê

Description and Location Existing Use Tenure Unexpired lease term

8-storey shopping podium, 3 basements and twin 27-storey office towers along South Park, Singapore

Shops Leasehold 983 years

Five condominium units, River Valley, Singapore Residential Leasehold 92 years

18-storey office tower along Xujing Road, Qingpu District, Shanghai

Offices Leasehold 58 years

Commentary

Contractual obligations relating to investment properties

Ê Contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements should be disclosed, if applicable.

Additions to investment properties

ç Additions to investment properties resulting from: i) acquisitions of properties; ii) subsequent expenditure recognised in the carrying amount of an asset; and iii) acquisitions through business combinations should be disclosed separately.

Valuation of investment properties

é When a valuation obtained for investment property is adjusted significantly for the purpose of the financial statements, for example to avoid double-counting of assets or liabilities that are recognised as separate assets and liabilities, the entity should disclose a reconciliation between the valuation obtained and the adjusted valuation included in the financial statements, showing separately the aggregate amount of any recognised lease obligations that have been added back, and any other significant adjustments.

è If there has been no such valuation performed by an independent valuer, that fact should be disclosed.

List of properties held for investment

ê This disclosure is only required for entities listed on the SGX-ST, where the aggregate value for all properties for development, sale or for investment purposes held by the entity represent more than 15% of the value of the consolidated net tangible assets, or contribute more than 15% of the consolidated pre-tax operating profit. This disclosure may be included in other parts of the entity’s annual report instead.

FRS 40.75.g SGX 1207.11.b FRS 40.75.h FRS 40.76.a and b FRS 40.77 FRS 40.75.e SGX 1207.11




15. Intangible assets Ê

Group

Goodwill

Brands

Club

Membership

Deferred Development

Costs

Total FRS 1.77

$’000 $’000

$’000 $’000 $’000

Cost:

At 1 January 2012 245 240 100 984 1,569 FRS 38.118.c

Additions – internal development – – – 200 200 FRS 38.118.e.i

Exchange differences 5 5 – 12 22 FRS 38.118.e.vii

At 31 December 2012 and 1 January 2013 250 245 100 1,196 1,791 FRS 103.75.a FRS 38.118.c

Additions:

- Internal development – – – 200 200 FRS 38.118.e.i

- Acquisition of a subsidiary (Note 17) 772 500 – – 1,272 FRS 103.75.b FRS 38.118.e.i

Attributable to discontinued operation – – – (250) (250) FRS 38.118.e.ii

Exchange differences 15 7 – 14 36 FRS 103.75.f FRS 38.118.e.vii

At 31 December 2013 1,037 752 100 1,160 3,049 FRS 103.75.h FRS 38.118.c

Accumulated amortisation and impairment:

At 1 January 2012 – – 70 131 201 FRS 38.118.c

Amortisation – – 10 242 252 FRS 38.118.e.vi

Exchange differences – – – 5 5 FRS 38.118.e.vii

At 31 December 2012 and 1 January 2013 – – 80 378 458 FRS 38.118.c

Amortisation – – 10 210 220 FRS 38.118.e.vi

Impairment loss – – – 200 200 FRS 36.130.b FRS 38.118.e.iv

Attributable to discontinued operation – – – (250) (250) FRS 38.118.e.ii

Exchange differences – – – 2 2 FRS 38.118.e.vii

At 31 December 2013 – – 90 540 630 FRS 38.118.c


At 31 December 2012 250 245 20 818 1,333

At 31 December 2013 1,037 752 10 620 2,419 FRS 38.122.b

Brands and deferred development costs

Brands relate to the “Gao-Feng”, “You-Yue” and “MSAX-Q” (acquired in 2012) brand names for the Group’s specialised electronic components that were acquired in business combinations. As explained in Note 2.9(b)(i), the useful life of these brands is estimated to be indefinite.

Deferred development costs relate to energy efficiency improvement projects for analogue electronic components and have an average remaining amortisation period of four years (2012: five years).

All research costs and development costs not eligible for capitalisation have been expensed and are recognised in ‘Research and development’ line item in profit or loss.

FRS 38.122.b




15. Intangible assets Ê (continued)

Amortisation expense

The amortisation of deferred development costs and club membership is included in the “Research and development” and “Administrative expenses” line items in profit of loss respectively.

Impairment testing of goodwill and brands

Goodwill acquired through business combinations and brands have been allocated to two cash-generating units (CGU), which are also the reportable operating segments, for impairment testing as follows:

- Electronic components segment

- Property segment

The carrying amounts of goodwill and brands allocated to each CGU are as follows: Ë

Electronic components

segment Property segment Total

2013

$’000

2012

$’000

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Goodwill 782 – 255 250 1,037 250

Brands 752 245 – – 752 245

The recoverable amounts of the CGUs have been determined based on value in use ÌÍ calculations using cash flow projections from financial budgets approved by management covering a five-year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rates used to extrapolate cash flow projections beyond the five-year period are as follows:

Electronic

components segment Property segment

2013

2012

2013

2012

Growth rates Î 5.1% 4.8% 6.1% 5.5%

Pre-tax discount rates 11.3% 11.1% 12.3% 12.8%

Key assumptions used in the value in use calculations

The calculations of value in use for both the CGUs are most sensitive to the following assumptions: Ï

Budgeted gross margins – Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements. An increase of 1.5% per annum was applied for the electronic components segment and 2.2% for the property segment.

Growth rates – The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant to the CGUs.

FRS 38.118.d FRS 36.80.b FRS 36.134.a FRS 36.134.b FRS 36.130.e. 134.c and d.iii FRS 36.134.d.iv FRS 36.134.d.v FRS 36.134.d.i FRS 26.134.d.i and ii FRS 26.134.d.i,ii and iv





Impairment testing of goodwill and brands (continued)

Key assumptions used in the value in use calculations (continued)

Pre-tax discount rates – Discount rates represent the current market assessment of the risks specific to each CGU, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest bearing borrowings the Group is obliged to service. Segment–specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.

Market share assumptions – These assumptions are important because, as well as using industry data for growth rates (as noted above), management assesses how the CGU’s position, relative to its competitors, might change over the budget period. Management expects the Group’s share of the electronics and property markets to be stable over the budget period.

Sensitivity to changes in assumptions Ï

With regards to the assessment of value in use for the property segment, management believes that no reasonably possible changes in any of the above key assumptions would cause the carrying value of the unit to materiality exceed its recoverable amount.

For the electronic components segment, the estimated recoverable amount exceeds its carrying amount by approximately $200,000 (2012: $150,000) and, consequently, any adverse change in a key assumption would result in a further impairment loss. The implication of the key assumption for the recoverable amount is discussed below:

Growth rates – Management recognises that the speed of technological change and the possibility of new entrance can have a significant impact on growth rate assumptions. The effect of new entrance is not expected to have an adverse impact on growth rate assumptions. The effect of new entrants is not expected to have an adverse impact on the forecasts, but could yield a reasonably possible alternative to be estimated long-term growth rate of 5.1% (2012: 4.8%). A reduction of 0.8% (0.9%) in the long-term growth rate would result in a further impairment.

Impairment loss recognised

During the financial year, an impairment loss was recognised to write-down the carrying amount of deferred development costs attributable to the fire prevention equipment segment that has been classified as discontinued operation (Note 11). The impairment loss of $200,000 (2012: nil) has been recognised in profit or loss under the line item “loss from discontinued operation, net of tax”.

FRS 36.134.d.i and ii FRS 36.134.d.i and ii FRS 36.134.f.i FRS 36.134.f.ii FRS 36.134.f.iii FRS 36.126.a, FRS 36.130.a-c





Commentary:

Description of intangible assets

Ê The disclosure of a description, the carrying amount and remaining amortisation period are required for any individual intangible asset that is material to the entity’s financial statements.

Ë If some or all of the carrying amount of goodwill or intangible assets with indefinite useful lives is allocated across multiple CGUs (groups of units), and the amount so allocated to each unit (group of units) is not significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives, that fact shall be disclosed, together with the aggregate carrying amount of goodwill or intangible assets with indefinite useful lives allocated to those CGUs (group of units). In addition, if the recoverable amounts of any of those CGUs (group of units) are based on the same key assumption(s) and the aggregate carrying amount of goodwill or intangible assets with indefinite useful lives allocated to them is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives, an entity shall disclose that fact, together with:

(a) The aggregate carrying amount of goodwill allocated to those units (groups of units)

(b) The aggregate carrying amount of intangible assets with indefinite useful lives allocated to those units (groups of units)

(c) A description of the key assumption(s)

(d) A description of management’s approach to determining the value(s) assigned to the key assumption(s), whether those value(s) reflect past experience or, if appropriate, are consistent with external sources of information, and, if not, how and why they differ from past experience or external sources if information.

(e) If a reasonably possible change in the key assumption(s) would cause the aggregate of the units’ (groups of units’) carrying amounts to exceed the aggregate of their recoverable amounts:

(i) The amount by which the aggregate of the units’ (group of units’) recoverable amounts exceeds the aggregate of their carrying amounts.

(ii) The value(s) assigned to the key assumption(s).

(iii) The amount by which the value(s) assigned to the key assumption(s) must change, after incorporating any consequential effects of the change on the other variables used to measure recoverable amount, in order for the aggregate of the unit’s (groups of units’) recoverable amounts to be equal to the aggregate of their carrying amounts.

Recoverable amount of CGU containing goodwill or intangible assets with indefinite lives determined based on fair value less costs to sell

Ì In this illustration, the recoverable amounts of such CGUs were determined based on value in use calculations. If an entity uses fair value less costs of disposal to measure the recoverable amount of CGU, the entity should disclose the valuation technique used. If fair value less costs of disposal is not determined using a quoted price, the entity should disclose each key assumption and a description of management’s approach to determine the value assigned to each key assumption (whether those values reflect past experience or are consistent with external information, and if not, how and why they differ).


The recoverable amounts of CGU A, CGU B and CGU C are determined based on fair value less costs of disposal of the CGUs. To calculate these values, an appropriate multiple was applied to the maintainable operating earnings of the CGUs. The fair value less costs of disposal of the CGUs are determined by applying an appropriate market multiple to its earnings before interest, tax, depreciation and amortisation (EBITDA), which management believes is sustainable in view of the current and anticipated business conditions.

FRS 38.122.b FRS 36.135 FRS 36.134






Recoverable amount of CGU containing goodwill or intangible assets with indefinite lives determined based on fair value less costs to sell (continued)

Ì Illustrative note disclosure (continued):

The fair value less costs of disposal of CGU A, CGU B and CGU C are estimated based on current EBITDAs and market multiple of X.XX. The market multiples are calculated based on the median of comparable companies’ indications, after adjustments for differences in risks and growth. The control premium of XX% was calculated based on the investment climate, industry dynamic and recent comparable transactions. The discount rate of XX% has been derived based on studies of liquidity discounts and adjusted for the size of the Company.

If fair value less costs to sell is determined using discounted cash flow projections, the following information shall also be disclosed:

- The period over which management has projected cash flows

- The growth rate used to extrapolate cash flow projections

- The discount rate(s) applied to the cash flow projections

Í Provided specified criteria are met, if the most recent detailed calculation made in a preceding period of the recoverable amount of a CGU (group of units) is used in the impairment test for that unit (group of units) in the current period, the disclosures required in the financial statements by paragraphs 134 and 135 relate to the carried forward calculation of recoverable amount.

Forecasted growth rates used to extrapolate cash flow projections beyond the five-year period

Î The entity is required to disclose the justification if the growth rate used to extrapolate cash flows projections beyond the period covered by the most recent budgets/forecasts exceeds the long-term average growth rate for the products, industries, or countries in which the entity operates.


The growth rate used to extrapolate the cash flows of the electronics component segment exceeds the average growth rate for the industry in which the electronics segment operates by three quarters of a percentage point. Management of the electronics component segment believes this growth rate is justified based on the acquisition of XXX Limited that has resulted in the control of an industry patent, preventing other entities from manufacturing a specialised product for a period of 10 years with the option for renewal after the 10 years period have expired.

Sensitivity to changes in assumptions

Ï If a reasonably possible change in any key assumptions used by management would cause the carrying values of CGUs to materially exceed the recoverable amounts, an entity should disclose

- the amount by which the CGU’s recoverable amount exceeds its carrying amount,

- the value assigned to the key assumption,

- the amount by which the value assigned to the key assumption must change, after incorporating any consequential effects of that change on the other variables used to measure recoverable amount, in order for the CGU’s recoverable amount to be equal to its carrying amount.

FRS 36.136

FRS 36.134.d.iv

FRS 36.134.f




16. Land use rights

Group

2013 $’000

2012 $’000

Cost:

At 1 January 6,500 6,360

Exchange differences 220 140

At 31 December 6,720 6,500

Accumulated amortisation:

At 1 January 767 630

Amortisation for the year 132 130



Net carrying amount 5,811 5,733

Amount to be amortised:

- Not later than one year 137 132

- Later than one year but not later than five years 548 528

- Later than five years 5,126 5,073

The Group has land use rights over two plots of state-owned land in People’s Republic of China (PRC) where the Group’s PRC manufacturing and storage facilities reside. The land use rights are not transferable and have a remaining tenure of 43 years (2012: 44 years).

17. Investment in subsidiaries Ê

Company

2013 $’000

2012 $’000

Shares, at cost 11,132 11,042

Discount on loans to subsidiaries 540 540

Issuance of shares for acquisition of subsidiary 1,475 –

Impairment losses ç (1,000) (1,000)

12,147 10,582

FRS 17.35.a FRS 17.35.d FRS 27.38.a




17. Investment in subsidiaries Ê (continued)

Name Country of

incorporation Principal activities Proportion (%) of

ownership interest é

2013 2012

Held by the Company:

XYZ Technologies Pte Ltd i Singapore Manufacture of electronic components

100 100

XYZ Investment Pte Ltd i Singapore Investment holding 100 100

XYZ Land Pte Ltd i Singapore Investment holding 100 100

Good Fire Prevention Pte Ltd (Note 11) i

Singapore Installation of fire prevention equipment and provision of installation services

100 100

Held through XYZ Technologies Pte Ltd:

XYZ China Co. Ltd ii People’s Republic of China

Manufacture of electronic components

75 75

XYZ Vietnam Ltd ii Vietnam Manufacture of electronic components

100 80

MSAX Sdn Bhd ii Malaysia Manufacture of electronic components

80 25

Held through XYZ Land Pte Ltd:

XYZ Developers Pte Ltd i Singapore Property development 100 100

XYZ Constructors Sdn Bhd ii Malaysia Property development 100 100

Lion Land Pte Ltd i Singapore Property investment 100 100

i Audited by Ernst & Young LLP, Singapore ii Audited by member firms of EY Global in the respective countries

Impairment testing of investment in subsidiaries

During the last financial year, management performed an impairment test for the investment in XYZ Vietnam Ltd as this subsidiary had been persistently making losses. An impairment loss of $nil (2012: $1,000,000) was recognised for the year ended 31 December 2012 to write down this subsidiary to its recoverable amount. The recoverable amount of the investment in XYZ Vietnam Ltd has been determined based on a value in use calculation using cash flow projections from financial budgets approved by management covering a five-year period. The pre-tax discount rate applied to the cash flow projection and the forecasted growth rate used to extrapolate cash flow projections beyond the five year period are 12.4% (2012: $11.2%) and 5.1% (2012: 4.8%), respectively.

FRS 27.43.b FRS 24.12

SGX 717 FRS 36.126.a, 130.a-c, e,g FRS 36.134.d.v





Acquisition of subsidiary ÍêÏÐ

On 18 October 2013 (the “acquisition date”), the Group’s subsidiary company, XYZ Technologies Pte Ltd (XYZ Technologies) acquired an additional 55% equity interest in its 25% owned associate, MSAX Sdn Bhd (“MSAX”), a manufacturer of electronic components in Malaysia. Upon the acquisition, MSAX became a subsidiary of the Group.

The Group has acquired MSAX in order to strengthen its position as a leading manufacturer of electronic components in the ASEAN region and to enlarge the range of products it can offer to its clients. The acqusition is also expected to reduce costs through economies of scale.

The Group has elected to measure the non-contolling interest at the non-controlling interest’s proportionate share of MSAX’s net identifiable assets.

The fair value of the identifiable assets and liabilities of MSAX as at the acquisition date were:

Fair value recognised on

acquisition

$’000

Property, plant and equipment 1,269

Brand 500

Trade and other receivables 1,089

Inventories 752

Cash and cash equivalents 417

4,027

Trade and other payables (1,038)

Provision for maintenance warranties (50)

Deferred tax liability (48)

Income tax payable (100)

(1,236)

Total identifiable net assets at fair value 2,791 Non-controlling interest measured at the non-controlling interest’s

proportionate share of MSAX’s net idenfiable assets ì (558)

Goodwill arising from acquisition 772

3,005

Consideration transferred for the acquisition of MSAX

Cash paid 200 Equity instruments issued (1,305,310 ordinary shares of XYZ Holdings

(Singapore) Limited) 1,475

Deferred cash settlement 200

Contingent consideration recognised as at acquisition date 450

Total consideration transferred 2,325 Fair value of equity interest in MSAX held by the Group immediately before

the acquisition 680

3,005

FRS 103.B64.a-c FRS 103.B64.d FRS 103.B64.i FRS 103.B64.o FRS 103.B64.k FRS 103.B64.f.i FRS 103.B64.f.iv FRS 103.B64.f.iii FRS 103.B64.f.iii, FRS 103.B64.g.i FRS 103.B64.f FRS 103.B64.p.i





Acquisition of subsidiary ÍêÏÐ (continued)

$’000

Effect of the acquisition of MSAX on cash flows

Total consideration for 55% equity interest acquired 2,325

Less: non-cash consideration (2,125)

Consideration settled in cash 200

Less: Cash and cash equivalents of subsidiay acquired (417)

Net cash inflow on acquisition 217

Equity instruments issued as part of consideration transferred

In connection with the acquisition of additional 55% equity interest in MSAX, XYZ Holdings (Singapore) Limited issued 1,305,310 ordinary shares with a fair value of $1.13 each. The fair value of these shares is the published price of the shares at the acquisition date.

The attributable cost of the issuance of the shares as consideration of $50,000 have been recognised directly in equity as a deduction from share capital.

Contingent consideration arrangement

As part of the purchase agreement with the previous owner of MSAX, a contingent consideration has been agreed. Additional cash payments shall be payable to the previous owner of MSAX of:

a) $385,000, if the entity generates $1,000,000 profit before tax for a period of 12 months after the acquisition date, or

b) $705,000 if the entity generates $1,500,000 profit before tax for a period of 12 months after the acquisition date.

As at the acquisition date, the fair value of the contingent consideration was estimated at $450,000.

As of 31 December 2013, the key performance indicators of MSAX show clearly that target (a) will be achieved and the achievement of target (b) is probable due to a significant expansion of the business and synergies implemented. Accordingly, the fair value of the contingent consideration has been adjusted to reflect this development and such change has been recognised through profit or loss.

The fair value of the contingent consideration as at 31 December 2013 has been increased by $235,000 to $685,000. The fair value of the contingent consideration was calculated by applying the income approach using the probability-weighted payout approach and at a discount rate of 8%. This fair value adjustment of contingent consideration is recognised in the “Other expenses” line item in the Group’s profit or loss for the year ended 31 December 2013.

Transaction costs

Transaction costs related to the acquisition of $300,000 have been recognised in the “Administrative expenses” line item in the Group’s profit or loss for the year ended 31 December 2013.

FRS 7.40.a FRS 7.43 FRS 7.40.b FRS 7.40.c FRS 103.B64.f.iv FRS 103.B64.l and m FRS 103.B64.g.ii FRS 103.B64.g.iii FRS 103.B64.g.i FRS 103.58 FRS 103.B67.b FRS 103.B64.l and m





Acquisition of subsidiary ÍêÏÐ (continued)

Gain on remeasuring previously held equity interest in MSAX to fair value at acquisition date The Group recognised a gain of $140,000 as a result of measuring at fair value its 25% equity interest in MSAX held before the business combination. The gain is included in the “Other income” line item in the Group’s profit or loss for the year ended 31 December 2013.

Trade and other receivables acquired

Trade and other receivables acquired comprise of trade receivables and bills of exchange and promissory notes with fair values of $600,000 and $489,000, respectively. Their gross amounts are $655,000 and $489,000, respectively. At the acquisition date, $55,000 of the contractual cash flows pertaining to trade receivables are not expected to be collected. It is expected that the full contractual amount of the bills of exchange and promissory notes can be collected.

Goodwill arising from acquisition î

The goodwill of $772,000 comprises the value of strengenthing the Group’s market position in the ASEAN region, improved resilience to sector specific volatilities, and cost reduction syngeries expected to arise from the acquisition. It also includes the value of a customer list, which has not been recognised separately. Goodwill is allocated entirely to the electronic components segment. Due to the contractual terms imposed on the acquisition, the customer list is not separable and therefore does not meet the criteria for recognition as an intangible asset under FRS 38. None of the goodwill recognised is expected to be deductible for income tax purposes.

Impact of the acquisition on profit or loss

From the acquisition date, MSAX has contributed $8,000,000 of revenue and $301,000 to the Group’s profit for the year. If the business combination had taken place at the beginning of the year, the revenue from continuing operations would have been $144,720,000 and the Group’s profit from continuing operations, net of tax would have been $5,801,000.

Provisional accounting of the acquisition of MSAX

A brand has been identified as an intangible asset arising from this acquisition. The Group has engaged an independent valuer to determine the fair value of the brand. As at 31 December 2013, the fair value of the brand amounting to $500,000 has been determined on a provisional basis as the final results of the independent valuation have not been received by the date the financial statements was authorised for issue. Goodwill arising from this acquisition, the carrying amount of the brand, deferred tax liability, and amortisation of the brand will be adjusted accordingly on a retrospective basis when the valuation of the brand is finalised.

FRS 103.B64.p.ii FRS 103.B64.h FRS 103.B64.e FRS 103.B64.k FRS 103.B64.q.i FRS 103.B64.q.ii FRS 103.B67.a





Acquisition of non-controlling interests

On 31 March 2013, the Group’s subsidiary company, XYZ Technologies, acquired an additional 20% equity interest in XYZ Vietnam Ltd (XYZ Vietnam) from its non-controlling interests for a cash consideration of $800,000. As a result of this acquisition, XYZ Vietnam became a wholly-owned subsidiary of XYZ Technologies. The carrying value of the net assets of XYZ Vietnam at 31 March 2013 was $3,250,000 and the carrying value of the additional interest acquired was $650,000. The difference of $150,000 between the consideration and the carrying value of the additonal interest acquired has been recognised as “Premium paid on acquisition of non-controlling interests“ within equity.

The following summarises the effect of the change in the Group’s ownership interest in XYZ Vietnam on the equity attributable to owners of the Company:

$’000 Consideration paid for acqusition of non-controlling interests 800

Decrease in equity attributable to non-controlling interests (650)

Decrease in equity attributable to owners of the Company 150

Commentary:

Investment in subsidiaries

Ê Where applicable, an entity should disclose the following:

- The nature of the relationship between the parent and a subsidiary when the parent does not own, directly or indirectly through subsidiaries, more than half of the voting power;

- The reasons why the ownership, directly or indirectly through subsidiaries, of more than half of the voting or potential voting power of an investee does not constitute control;

- The reporting date of the financial statements of a subsidiary when such financial statements are used to prepare consolidated financial statements and are as of a reporting date or for a period that is different from that of the parent, and the reason for using a different reporting date or period; and

- The nature and extent of any significant restrictions (e.g., resulting from borrowing arrangements or regulatory requirements) on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances.

ç In this illustration, it is assumed that there was no reversal of impairment loss on investment in subsidiaries. Where applicable, an entity should disclose the events and circumstances that led to the reversal of such impairment loss.

é An entity should disclose proportion of voting power held if different from proportion of ownership interest.

FRS 27.41.e FRS 27.41.a FRS 27.41.b FRS 27.40.c FRS 27.40.d FRS 36.130.a FRS 27.42.b






Acquisition of subsidiary

Í An entity shall also make disclosures of business combinations in accordance to FRS 103.B64 even if they were effected after the end of the reporting date but before the financial statements are authorised for issue, unless the initial accounting for the business combination is incomplete at the time the financial statements are authorised for issue. In that situation, the entity shall describe which disclosures cannot be made and the reasons why they cannot be made.

ê For individually immaterial business combinations occurring during the reporting period that are material collectively, an entity shall disclose in aggregate the information required by FRS 103.B64.e-q.

Ï An acquirer shall also disclose information that enables users of its financial statements to evaluate the financial effects of adjustments recognised in the current reporting period that relate to business combinations that occurred in the current period or previous reporting periods.

Illustrative disclosure for adjustments to initial accounting for a business combination that was determined provisionally in the previous reporting period:

The purchase price allocation of the acquisition of Acquiree Group (Acquiree) in the financial year ended 31 December 2012 were provisional as the Group had sought an independent valuation for the land and buildings owned by Acquiree. The results of this valuation had not been received at the date the 2012 financial statements were authorised for issue. The valuation of the land and buildings was received in April 2013 and showed that the fair value at the date of acquisition was $XXX, an increase of $XXX compared to the provisional value.

The 2012 comparative information has been restated to reflect this adjustment. The value of the land and buildings increased by $XXX, there was an increase in the deferred tax liability of $XXX and an increase in non-controlling interest of $XXX. There was also a corresponding reduction in goodwill of $XXX, to give total goodwill arising on the acquisition of $XXX. The depreciation charge on the buildings from the acquisition date to 31 December 2012 increased by $XXX.

í In this illustration, no contingent liabilities are recognised in the business combination.

Illustrative note disclosure where an entity recognised contingent liabilities in a business combination:

A contingent liability at a fair value of $XXX has been determined at the acquisition date resulting from a claim for payment by a supplier whose shipment has been rejected and payment has been refused by the Group due to deviations from the defined technical specifications of the goods. The claim is subject to legal arbitration and is only expected to be finalised in late 2013. As at the reporting date, the contingent liability has been reassessed and is determined to be $XXX, which is based on the expected probable outcome (see Note X on Contingent Liability). The charge has been recognised in profit or loss.

FRS 103.59.b and B66 FRS 103.B65 FRS 103.61 and B67 FRS 103.B67.a FRS 103.B64.j FRS 103.56






ì Please refer to commentary no. 4 of Note 2.4 Basis of consolidation.

In this illustration, the Group has elected to measure non-controlling interest arising from acquisition of MSAX at the non-controlling interest’s proportionate share of MSAX’s identifiable net assets. The following is an illustrative disclosure when an entity chooses to measure non-controlling interest arising in a business combination at fair value:

Fair value of non-controlling interest in Acquiree

The fair value of the non-controlling interest in Acquiree, an unlisted company, was estimated by applying the income approach that is corroborated by market approach. The fair value estimates are based on:

- A discount rate range of XX% to XX%;

- Terminal value, calculated based on the long term sustainable growth rate for the industry ranging from XX% to XX%, which has been used to determine income for the future years; and

- Adjustments because of the lack of control and marketability that market participants would consider when estimating the fair value of the non-controlling interest in Acquiree.

î If the acquisition results in a bargain purchase instead of goodwill recognised, the acquirer shall disclose the amount of the gain recognised and the line item in the consolidated statement of comprehensive income in which the gain is recognised, and a description of the reasons why the transaction resulted in a gain.

18. Investment in associates Ê

Group

2013 $’000

2012 $’000

Shares, at cost 9,060 9,500

Share of post-acquisition reserves 1,363 706

Share of changes recognised directly in associate’s equity 72 10


10,595 10,321 Fair value of investment in an associate for which there is published price

quotation 10,600 10,400

FRS 103.B64.o.ii FRS 103.B64.n FRS 28.37.a




18. Investment in associates Ê (continued)

Name Country of

incorporation Principal activities Proportion (%) of

ownership interest Ë

2013 2012 Held through subsidiaries:

QSpeed Pte Ltd i Singapore Manufacture of electronic components

35 35


– 25

Heart Land Ltd i Singapore Investment properties 45 45

HKI Pte Ltd i Singapore Investment properties 47 47

i Audited by Ernst & Young LLP, Singapore ii Audited by member firm of EY Global in Malaysia

The Group has not recognised losses relating to QSpeed Pte Ltd where its share of losses exceeds the Group’s interest in this associate. The Group’s cumulative share of unrecognised losses at the end of the reporting period was $50,000 (2012: $35,000), of which $15,000 (2012: $5,000) was the share of the current year’s losses. The Group has no obligation in respect of these losses.

The Group has not recognised its share of the current year profit of $8,000 (2012: nil) relating to HKI Pte Ltd as the Group’s cumulative share of unrecognised losses with respect to that associate was $17,000 (2012: $25,000) at the end of the reporting period.

On 18 October 2013, the Group’s subsidiary company, XYZ Technologies Pte Ltd (XYZ Technologies) acquired an additional 55% equity interest in its 25%-owned associate, MSAX Sdn Bhd (MSAX). Upon the acquisition, MSAX became a subsidiary of the Group (Note 17).

The Group’s contingent liabilities in respect of its investment in associates are disclosed in Note 38(a).

The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows: Ì

Group

2013 $’000

2012 $’000

Assets and liabilities:

Total assets 32,867 31,970

Total liabilities (14,647) (15,905) Results:

Revenue 60,807 55,400

Profit for the year 1,643 2,747

FRS 27.43 SGX 717 FRS 28.29 and 37.g FRS 28.30 FRS 28.37.b




18. Investment in associates Ê (continued)

Commentary:

Investment in associates

Ê Where applicable, an entity should disclose the following:

- The reasons why the presumption that an investor does not have significant influence is overcome if the investor holds, directly or indirectly through subsidiaries, less than 20 per cent of the voting or potential voting power of the investee but concludes that it has significant influence.

- The reasons why the presumption that an investor has significant influence is overcome if the investor holds, directly or indirectly through subsidiaries, 20 per cent or more of the voting or potential voting power of the investee but concludes that it does not have significant influence.

- The reporting date of the financial statements of an associate, when such financial statements are used in applying the equity method and are as of a reporting date or for a period that is different from that of the investor, and the reason for using a different reporting date or different period.

Illustrative note disclosure where the reporting date of financial statements of an associate is different from that of the investor:

For the current financial year, the Group recognised its share of the associate’s operating results based on its audited financial statements drawn up to the most recent reporting date, which is 30 November 2013. The associate company, being listed on the SGX-ST, is unable to release information other than those publicly published.

- The nature and extent of any significant restrictions (e.g., resulting from borrowing arrangements or regulatory requirements) on the ability of associates to transfer funds to the investor in the form of cash dividends, or repayment of loans or advances.

Illustrative note disclosure where the significant restrictions on associate apply:

The Group has associates in certain countries which impose foreign exchange controls such that payment of dividends declared or principal repayment in respect of foreign currency denominated obligations are subject to the approval of the relevant government authorities.

- The fact that an associate is not accounted for using the equity method in accordance with FRS 28.13.

- Summarised financial information of associates, either individually or in groups, that are not accounted for using the equity method, including the amounts of total assets, total liabilities, revenues and profit or loss.

Ë An entity should disclose proportion of voting power held if different from proportion of ownership interest.

Ì In this illustration, the summarised financial information of the associates has not been adjusted for the proportion of ownership interest held by the Group. Alternatively, the summarised financial information can be presented based on the Group’s share in the associates. Whichever approach is selected, it must be applied consistently and be clearly disclosed in the financial statements.

FRS 28.37.c

FRS 28.37.d

FRS 28.37.e

FRS 28.37.f FRS 28.37.h FRS 28.37.i FRS 27.43




19. Investment in joint venture

The Group has 50% (2012: 50%) equity interest in a jointly-controlled entity, XYZ–ABC JV Co. Ltd that is held through a subsidiary. This joint venture is incorporated in People’s Republic of China and is in the business of property investment.

The Group’s commitments in respect of its interest in XYZ-ABC JV Co. Ltd are disclosed in Note 37(a).

The Group’s contingent liabilities in respect of its investment in joint venture are disclosed in Note 38(a).

The aggregate amounts of each of current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to the Group’s interests in the jointly-controlled entity are as follows:

Group

2013 $’000

2012 $’000

Assets and liabilities:

Current assets 250 100

Non-current assets 1,880 600

Total assets 2,130 700

Current liabilities (109) (120)

Non-current liabilities (606) (587)

Total liabilities (715) (707)

Income and expenses:

Income 214 199

Expenses (63) (71)

FRS 31.56 FRS 31.56




20. Deferred tax

Deferred tax as at 31 December relates to the following:

Group Company

Consolidated balance

sheet

Consolidated income

statement Ê Balance sheet

2013

$’000

2012

$’000

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Deferred tax liabilities: Differences in depreciation for tax

purposes (601) (633) 146 251 (217) (218) Differences in amortisation of

intangible assets (62) (111) (47) (20) – –

Impairment of intangible assets (60) – 60 – – –

Revaluations to fair value:

- Freehold land and buildings (1,159) (903) – – – – - Available-for-sale financial

assets (150) (94) – – – – Fair value adjustments on

acquisition of subsidiary (48) – – – – – Convertible redeemable

preference shares (9) (13) (4) (3) (9) (13)

Undistributed earnings of associates (176) (145) 31 20 – –

Other items (8) (5) 3 3 – –

(2,273) (1,904) (226) (231)

Deferred tax assets:

Provisions 419 427 8 (5) – –

Unutilised tax losses 23 19 (4) (1) 9 8

Other items 28 17 (8) 7 12 18

470 463 21 26

Deferred tax expense 185 252

Unrecognised tax losses

At the end of the reporting period, the Group has tax losses of approximately $867,000 (2012: $682,000) that are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

FRS 12.81.g.i and ii

FRS 12.81.e




20. Deferred tax (continued)

Unrecognised temporary differences relating to investments in subsidiaries and joint venture

At the end of the reporting period, no deferred tax liability (2012: nil) has been recognised for taxes that would be payable on the undistributed earnings of certain of the Group’s subsidiaries and joint venture as:

- The Group has determined that undistributed earnings of its subsidiaries will not be distributed in the foreseeable future; and

- The joint venture of the Group cannot distribute its earnings until it obtains the consent of both the venturers. At the end of the reporting period, the Group does not foresee giving such consent.

Such temporary differences for which no deferred tax liability has been recognised aggregate to $450,000 (2012: $340,000). The deferred tax liability is estimated to be $81,000 (2012: $68,000).

Tax consequences of proposed dividends

There are no income tax consequences (2012: nil) attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 43).

Commentary:

Deferred tax income or expense recognised in profit or loss

Ê This disclosure is required in situations where the amount of the deferred tax income or expense recognised in profit or loss relating to each type of deferred tax assets/liabilities is not apparent from the changes in the amounts recognised in the balance sheet.

FRS 12.81.f FRS 12.87 FRS 12.81.i

FRS 12.81.g.ii




21. Trade and other receivables ÊËÌ

Group Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Trade and other receivables (current): Trade receivables 23,763 26,160 – –

Bills of exchange and promissory notes 540 507 – –

Amounts due from related companies 361 – 288 300

Staff loans 155 150 50 50

Refundable deposits 102 119 – –

24,921 26,936 338 350

Other receivables (non-current): Amounts due from subsidiaries – – 3,409 2,061

SGD loans to subsidiaries – – 10,563 12,574

SGD loans to associates 1,230 1,230 1,230 1,230

SGD loan to a fellow subsidiary 1,500 1,500 1,500 1,500

Staff loans 63 48 51 36

2,793 2,778 16,753 17,401 Total trade and other receivables (current and

non-current) 27,714 29,714 17,091 17,751

Add: Cash and short-term deposits (Note 27) 6,117 4,858 4,621 4,145

Total loans and receivables Í 33,831 34,572 21,712 21,896

Trade receivables

Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

At the end of the reporting period, trade receivables arising from export sales amounting to $1,560,000 (2012: $1,750,000) are arranged to be settled via letters of credit issued by reputable banks in countries where the customers are based. Trade receivables from first-time customers that are insured by trade credit insurance underwritten by a reputable insurer in Singapore amount to $520,000 (2012: nil) at the end of the reporting period.

Trade receivables denominated in foreign currencies at 31 December are as follows:

Group Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

United States Dollar 4,128 4,525 – –

Renminbi 1,567 2,015 – –

Bills of exchange and promissory notes

These receivables bear interest at market rates and have an average maturity of 30 days (2012: 20 days) from the end of the reporting period.

FRS 1.77-78.b FRS 107.7 and 31 FRS 24.18.b FRS 24.18.b FRS 24.18.b FRS 24.18.b FRS 24.18.b FRS 107.8.c FRS 107.7 and 31 FRS 107.36.b FRS 107.34.a FRS 107.7 and 31




21. Trade and other receivables ÊËÌ (continued)

Related party balances and staff loans

- Amounts due from related companies are non-trade related, unsecured, non-interest bearing, repayable upon demand and are to be settled in cash.

- Amounts due from subsidiaries and loans to subsidiaries are unsecured, non-interest bearing and are to be settled in cash. The former are not expected to be repaid within the next 12 months while the latter are due on 30 June 2016.

- Loans to associates bear interest at SIBOR + 2% p.a. (2012: SIBOR + 2% p.a.), have an average maturity of 1.5 years (2012: 2.5 years), secured by corporate guarantees issued by their respective holding companies and are to be settled in cash.

- Loan to a fellow subsidiary is unsecured, bears interest at SIBOR + 2% p.a. (2012: SIBOR + 2% p.a.), repayable on 30 September 2015 and is to be settled in cash.

- Staff loans are unsecured and non-interest bearing. Non-current amounts have an average maturity of 1.5 years (2012: 1.5 years). The loans are recognised initially at fair value. The difference between the fair value and the absolute loan amount represents payment for services to be rendered during the period of the loan and is recorded as part of prepaid operating expenses.

Receivables that are past due but not impaired

The Group has trade receivables amounting to $5,760,000 (2012: $6,852,000) that are past due at the end of the reporting period but not impaired. These receivables are unsecured and the analysis of their aging at the end of the reporting period is as follows:

Group

2013

$’000

2012

$’000

Trade receivables past due but not impaired: Î Lesser than 30 days 4,105 5,234

30 - 60 days 568 832

61- 90 days 822 524

91-120 days 245 262

More than 120 days 20 –

5,760 6,852

FRS 107.7,31 and 36.b FRS 24.18.b FRS 107.37.a FRS 107.36.b FRS 107.IG28





Receivables that are impaired

The Group’s trade receivables that are impaired at the end of the reporting period and the movement of the allowance accounts Ï used to record the impairment are as follows:

Group

Collectively impaired Individually impaired

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Trade receivables – nominal amounts 1,220 1,350 150 80

Less: Allowance for impairment (350) (410) (100) (50)

870 940 50 30

Movement in allowance accounts: At 1 January 410 510 50 60

Charge for the year 85 95 50 20

Written off (130) (205) – (30)

Exchange differences (15) 10 – –

At 31 December 350 410 100 50

Trade receivables that are individually determined to be impaired at the end of the reporting period relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

Receivables that are impaired At the end of the reporting period, the Group and the Company have provided an allowance of $100,000 (2012: $100,000) for impairment of the unsecured loan to a fellow subsidiary company with a nominal amount of $1,600,000 (2012: $1,600,000). This related party has been suffering significant financial losses for the current and past two financial years.

There has been no movement in this allowance account for the financial year ended 31 December 2013 (2012: charge of $100,000 for impairment loss).

FRS 107 IG29.a FRS 107.37.b FRS 107.IG29.b FRS 107.16 FRS 107.37.b FRS 107.36.b FRS 107.37.b FRS 107.36.b FRS 24.18.c FRS 107.16 and 6 FRS 24.18.d





Receivables subject to offsetting arrangements Ð

The Group regularly purchases electronic raw materials from and sell electronic products to MNO Pte Ltd. Both parties have an arrangement to settle the net amount due to or from each other on a 30-days term basis.

The Group’s trade receivables and trade payables that are off-set are as follows:

31 December 2013 $‘000

Gross carrying amounts

Gross amounts offset in the

balance sheet

Net amounts in the balance sheet

Description Trade receivables 6,100 (2,540) 3,560 Trade payables - (2,540) -

31 December 2012 $‘000

Description Trade receivables 5,450 (1,730) 3,720 Trade payables - (1,730) -

Receivables subject to an enforceable master netting arrangement that are not otherwise set-off Ð

The Group regularly purchases electronic raw materials from and sell electronic products to PQR Pte Ltd. Both parties do not have an arrangement to settle the amount due to or from each other on a net basis but have the right to set off in the case of default and insolvency or bankruptcy.

The Group’s trade receivables and trade payables subject to an enforceable master netting arrangement that are not otherwise set-off are as follows:

31 December 2013 $‘000

Gross carrying amounts

Related amounts not set off in the

balance sheet

Net amount

Description Trade receivables 3,560 (1,493) 2,067 Trade payables 1,493 (1,493) -

31 December 2012

$‘000 Description Trade receivables 4,230 (1,699) 2,531 Trade payables 1,699 (1,699) -

FRS 107.13C.a FRS 107.13C.b FRS 107.13C.c FRS 107.13E FRS 107.13C.d.i FRS 107.13C.e





Commentary:

Collateral and other credit enhancements

Ê When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or repledge the collateral in the absence of default by the owner of the collateral, it shall disclose: (a) the fair value of the collateral held; (b) the fair value of any such collateral sold or repledged, and whether the entity has an obligation to return it; and (c) the terms and conditions associated with its use of the collateral.

ç When an entity obtains financial or non-financial assets during the period by taking possession of collateral it holds as security or calling on other credit enhancements (e.g., guarantees), and such assets meet the recognition criteria under FRS, an entity shall disclose for such assets held at the reporting date:

(a) the nature and carrying amount of the assets; and

(b) when the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations.

The above disclosure required for financial assets obtained by taking possession of collateral or other credit enhancements are only applicable to assets still held at the reporting date.

Ì An entity shall disclose a description of collateral held as security and of other credit enhancements, and their financial effect (e.g. a quantification of the extent to which collateral or other credit enhancements mitigate credit risk) in respect of the amount that best represents the maximum exposure to credit risk.

Categories of financial assets and financial liabilities

Í Please refer to commentary no. 1 of Note 22 Investment securities.

Ageing analysis of financial assets that are past due but not impaired

Î FRS 107 requires the disclosure of an analysis by class of the age of financial assets that are past due but not impaired. Any entity uses its judgment to determine the appropriate time bands to be disclosed.

Allowance account for credit losses

Ï FRS 107 requires disclosure requirements where financial assets are impaired by credit losses and the entity records the impairment in a separate account (e.g., an allowance account used to record individual impairments or a similar account used to record a collective impairment of assets) rather than directly reducing the carrying amount of the asset. In such circumstances, the entity shall disclose a reconciliation of changes in that account (the “reconciliation”) during the period for each class of financial assets.

In this illustration, the entity has presented the reconciliation of changes in the two allowance accounts that it has used to record impairment of trade receivables, i.e., trade receivables that are collectively impaired and those that are individually impaired.

FRS 107.15 FRS 107.38 FRS 107.36.b FRS 107.37.a and IG 28 FRS 107.16






Amendments to FRS 107 Disclosures - Offsetting financial assets and financial liabilities

Ð The amendments to FRS 107 require an entity to disclose information to enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on the entity’s financial position which includes the effect or potential effect of rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A of FRS 107.

These disclosures are required for all recognised financial instruments that are set off in accordance with paragraph 42 of FRS 32 and also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement irrespective of whether they are set off in accordance with paragraph 42 of FRS 32.

To meet the objective above, an entity shall disclose, at the end of the reporting period, the following quantitative information separately for recognised financial assets and recognised financial liabilities that are within the scope of paragraph 13A of FRS 107:

(a) the gross amounts of those recognised financial assets and recognised financial liabilities;

(b) the amounts that are set off in accordance with the criteria in FRS 32.42 when determining the net amounts presented in the balance sheet;

(c) the net amounts presented in the balance sheet;

(d) the amounts subject to an enforceable master netting arrangement or similar arrangement that are not otherwise include in (b), including Ñ

i. amounts related to recognised financial instruments that do not meet some or all of the offsetting criteria of FRS 32.42; and

ii. amounts related to financial collateral (including cash collateral); and

(e) the net amounts after deducting the amounts in (d) from the amounts in (c) above.

The information above shall be presented in a tabular format, separately for financial assets and financial liabilities, unless another format is more appropriate.

Ñ The total amount disclosed for an instrument in accordance with (d) above shall be limited to the net amounts presented in the balance sheet for that instrument.

FRS 107.13B FRS 107.13A

FRS 107.13C

FRS 107.13D




22. Investment securities

Group

2013

$’000

2012

$’000

Current:

Held for trading investments Ê

- Equity securities (quoted) 1,512 1,260 Non-current:

Available-for-sale financial assets Ê

- Other debt securities (unquoted) 1,563 980

- Equity securities (quoted) 1,746 848

- Equity securities (unquoted) 139 28

- Equity securities (unquoted), at cost é 500 600 3,948 2,456 Held-to-maturity investment Ê

- 3% p.a. SGD government bonds due 31 March 2016 (quoted) Ë 660 650

4,608 3,106

Investments pledged as security

The Group’s investment in government bonds amounting to $660,000 (2012:$650,000) has been pledged as security for a bank loan (Note 30). Under the terms and conditions of the loan, the Group is prohibited from disposing of this investment or subjecting it to further charges without furnishing a replacement security of similar value.

Impairment losses

During the financial year, the Group recognised the following impairment losses:

· Impairment loss of $70,000 (2012: $150,000) and $11,000 (2012: $35,000) for quoted and unquoted equity securities respectively as there were “significant” or “prolonged” decline in the fair value of these investments below their costs. The Group treats “significant” generally as X% and “prolonged” as greater than X months. è

· Impairment loss of $100,000 (2012: nil) pertaining to unquoted equity securities carried at cost, reflecting the write-down in the carrying value of this private equity investment in a Singapore company that was placed under receivership.

· Impairment loss of $17,000 (2012: $25,000) for unquoted other debt securities after taking into considerations the probability of default or significant delay in repayments by the debtors.

Commentary:


Ê FRS 107 required disclosure of the carrying amounts of financial instruments under each of the classification in FRS 39, either on the face of the balance sheet or in the notes. The categories of financial instruments include financial assets and financial liabilities that are classified as held for trading, those that are designated upon initial recognition as financial assets or financial liabilities at fair value through profit or loss, held-to-maturity investments, loans and receivables, available-for-sale financial assets, and financial liabilities measured at amortised cost. In this illustration, the disclosure requirement is met in the respective notes to the financial statements (refer to this note, Note 21, 26 and 31). Alternatively, the disclosure of the carrying amounts of financial instruments under each of the classifications in FRS 39 may be presented in a separate centralised note.

FRS 107.7 and 31

FRS 107.8.a.ii FRS 107.8.d FRS 107.31 FRS 107.8.b FRS 107.14 FRS 107.20.e and 37.b FRS 107.8




22. Investment securities (continued)


Nature and extent of risks arising from financial instruments

ç Information such as the interest rates and maturity dates of the debt securities, and countries where the equity securities are listed should be disclosed if material and enables the users of the financial statements to evaluate the nature and extent of the risks arising from financial instruments to which the entity is exposed to at the reporting date. In this illustration, the countries where the equity securities are listed are disclosed in Note 40 (e) Market price risk.

Reclassification of financial assets at cost or amortised cost to fair value

é If an entity has reclassified any financial asset measured at cost or amortised cost to fair value or reclassified any financial asset at fair value, rather than at cost or amortised cost, FRS 107 requires disclosure of the amount and reason for the reclassification.

Illustrative disclosure for reclassification of financial assets at cost to fair value:

On 30 November 2013, the Group reclassified its investment in equity instruments of a private Singapore company (XXX Pte Ltd) that was previously measured at cost of $XXX to available-for-sale investments measured at fair value of $XXX, when a reliable measure of fair value became available upon its listing on the SGX-ST.

Determination of “significant” or “prolonged” decline in fair value of financial instruments

è Please refer to commentary no. 3 of Note 2.16 (c) Impairment of available-for-sale financial assets.

23. Gross amount due from/(to) customers for contract work-in-progress Ê

Group

2013 $’000

2012 $’000

Aggregate amount of costs incurred and recognised profits (less recognised losses) to date 34,089 24,552

Less: Progress billings and advances (33,796) (24,740)

293 (188)

Presented as:

Gross amount due from customers for contract work-in-progress 651 398

Gross amount due to customers for contract work-in-progress (358) (586)

293 (188) Advances received included in gross amount due to customers for

contract work

45 60

Retention sums on construction contract included in trade receivables 65 80

Commentary:

Advances received before the related work is performed

Ê Where applicable, an entity is required to disclose the amount of advances received from customer before the related construction work is performed.

FRS 107.31

FRS 107.12 FRS 11.40.a FRS 11.42.a FRS 11.42.b FRS 11.40.b FRS 11.40.c FRS 11.40.b




24. Development properties ÊË

Group

2013 $’000

2012 $’000

Freehold land 1,800 1,800

Development costs 1,100 850

2,900 2,650

During the financial year, borrowing costs of $35,000 (2012: $33,000), arising from borrowings obtained specifically for the development property were capitalised under “Development costs”. The rate used to determine the amount of borrowing costs eligible for capitalisation was 7.5% (2012: 7.2%), which is the effective interest rate of the specific borrowing. Ì

The freehold land under development has been pledged as security for a bank loan (Note 30).

Commentary:

List of development properties

Ê Where the aggregate value for all properties for development, sale or for investment purposes held by the entity represent more than 15% of the value of the consolidated net tangible assets, or contribute more than 15% of the consolidated pre-tax operating profit, entities listed on the SGX-ST are required to disclose further information regarding development properties.

Illustrative disclosure pursuant to requirements of SGX 1207.11:

Ë In this illustration, the entire amount included in development property is expected to be recovered or settled no more than twelve months after the reporting period.

If the amount includes amounts expected to be recovered more than twelve months after the reporting period, an entity shall disclose the amount expected to be recovered more than twelve months after the reporting period.

Borrowing costs capitalised

Ì Please refer to commentary no. 3 of Note 13 Property plant and equipment.

Description and location % owned

Site area (square metre)

Gross floor area

(square metre)

Stage of completion as at date of annual

report (expected year of completion)

An 8-storey luxurious condominium (Snow

Queen Palace) development along Paterson Road, Singapore

100% 20,500 220,000 60% (2013)

A 35-storey integrated development with residential apartments, offices and retail components along Tian Shan Road, Changning District, Shanghai, People’s Republic of China

100% 98,000 450,000 70% (2013)

A 20-storey luxurious condominium (Link Spring Tower) along HuBei Road, Hanggu District, Tianjin, People’s Republic of China

100% 88,000 300,000 30% (2014)

FRS 23.26.a and b FRS 2.36.h SGX 1207.11 FRS 1.61




25. Inventories

Group

2013 $’000

2012 $’000

Balance sheet:

Raw materials (at cost) 4,994 5,552

Work-in-progress (at cost) 3,823 3,491

Finished goods (at cost or net realisable value) 15,203 15,357

24,020 24,400

Income statement:

Inventories recognised as an expense in cost of sales 80,567 82,122

Inclusive of the following charge/(credit):

- Inventories written-down 352 257

- Reversal of write-down of inventories (190) –

The reversal of write-down of inventories was made when the related inventories were sold above their carrying amounts in 2013.

The Group has subjected finished goods amounting to $1,500,000 (2012: $1,500,000), to a floating charge as security for bank overdraft facilities (Note 30).

FRS 1.77 and 78.c FRS 2.36.b FRS 2.36.d FRS 2.36.e FRS 2.36.f FRS 2.36.g FRS 2.36.h




26. Derivatives

Group

2013

$’000

2012

$’000

Contract/ Notional Amount

Assets

Liabilities

Contract/ Notional Amount

Assets

Liabilities Forward currency contracts 9,850 150 (22) 8,560 60 –

Interest rate swap 2,500 20 – 2,500 45 –

170 (22) 105 – Total derivatives 170 (22) 105 – Add: Held for trading

investments (Note 22) 1,512 – 1,260 – Add: Contingent consideration

for business combination (Note 32) – (685) – –

Total financial assets/(liabilities) at fair value through profit or loss å 1,682 (707) 1,365 –

At the Company level, the carrying amount of financial liability at fair value through profit or loss å is the contingent consideration for business combination amounting to $685,000 as at 31 December 2013 (2012: Nil).

Forward currency contracts are used to hedge foreign currency risk arising from the Group’s sales and purchases denominated in USD for which firm commitments existed at the end of the reporting period, extending to March 2014 (2012: March 2013) (Note 40(d)).

The interest rate swap receives floating interest equal to SIBOR + 3% p.a. (2012: SIBOR + 3% p.a.), pays a fixed rate of interest of 7.5% p.a. (2012: 7.5% p.a.) and matures on 30 November 2014 (2012: 30 November 2013).

Commentary:


å Please refer to commentary no. 1 of Note 22 Investment securities.

FRS 107.7 and 31 FRS 107.8.a and e

FRS 107.8.e




27. Cash and short-term deposits

Group Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Cash at banks and on hand 5,697 4,598 4,256 3,985

Short-term deposits 420 260 365 160

Cash and short-term deposits 6,117 4,858 4,621 4,145

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group and the Company, and earn interests at the respective short-term deposit rates. The weighted average effective interest rates as at 31 December 2013 for the Group and the Company were 2.60% (2012: 2.80%) and 0.15% (2012: 0.20%) respectively.

Cash and short-term deposits denominated in foreign currencies at 31 December are as follows:

Group Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

United States Dollar 442 325 108 120

Renminbi 20 15 8 5

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following at the end of the reporting period:

Group

Cash and short-term deposits:

2013

$’000

2012

$’000

- Continuing operations 6,117 4,858

- Discontinued operation (Note 11) 250 –

6,367 4,858

Bank overdrafts (Note 30) (498) (1,444)

Cash and cash equivalents Ê 5,869 3,414

Commentary:

Ê In this illustration, it is assumed that the Group does not have any cash and cash equivalents that are not available for use by the Group.

Where applicable, disclosure is required, together with a commentary by management, for the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by the group. There are various circumstances in which cash and cash equivalent balances held by an enterprise are not available for use by the group. Examples include cash and cash equivalent balances held by a subsidiary that operates in a country where exchange controls or other legal restrictions apply when the balances are not available for general use by the parent or other subsidiaries.

Cash and cash equivalents which are restricted in its use for more than twelve months shall be classified as non-current assets.

FRS 107.7 and 31 FRS 107.7,31 and 34 FRS 107.34.a FRS 7.45 FRS 7.48 FRS 7.49 FRS 1.66.d




28. Provisions Êç

Group

Maintenance warranties Legal claim Total

$’000 $’000 $’000

At 1 January 2013 2,136 – 2,136

Acquisition of a subsidiary (Note 17) 50 – 50

Arose during the financial year 116 420 536

Utilised (415) – (415)

Unused amounts reversed (60) – (60)

Discount rate adjustment 30 – 30

Exchange differences 45 4 49

At 31 December 2013 1,902 424 2,326 Current 2013 377 424 801

Non-current 2013 1,525 – 1,525

1,902 424 2,326 Current 2012 295 – 295

Non-current 2012 1,841 – 1,841

2,136 – 2,136

Maintenance warranties

A provision is recognised for expected warranty claims on certain specialised electronic components sold during the last two years, based on past experience of the level of repairs and returns. It is expected that most of these costs will be incurred in the next two financial years and all will have been incurred within three years from the end of the reporting period. Assumptions used to calculate the provision for maintenance warranties were based on current sales levels and current information available about returns based on the three-year warranty period for the relevant specialised electronic components sold.

During the financial year, based on the earlier mentioned statistics and warranty claims experience, management concluded that the provision for maintenance warranties exceeded the amount necessary to cover warranty claims on products sold during the last two years. Accordingly, $60,000 (2012: nil) of the warranty provision has been reversed.

Legal claim

On 30 June 2013, a competitor of the Group made a claim against one of the Group’s subsidiaries for infringing its technology licence from 2012 to 2013. At the end of the reporting period, the management is in the process of negotiating a settlement agreement with the plaintiff. The provision made represents the management’s estimate of the settlement consideration, being the account of profit for the periods covered by the licence. The settlement and compensation is expected to be concluded in 2014.

Commentary:

Comparative of movements in provision

Ê FRS 37 does not require comparatives of movements in provision to be presented.

FRS 1.77 and 78.d FRS 37.84.a FRS 37.84.b FRS 37.84.c FRS 37.84.d FRS 37.84.e FRS 37.84.a FRS 37.85 FRS 1.98.g

FRS 37.85 FRS 37.84




28. Provisions Êç (continued)


Contingent liability

ç In this illustration, no contingent liabilities are recognised in the business combination.

For contingent liabilities recognised in a business combination, the acquirer is required to disclose the information required by paragraphs 84 and 85 of FRS 37 Provisions, Contingent Liabilities and Contingent Assets for each class of provision.

29. Deferred capital grants

Group

2013

$’000

2012

$’000

Cost:

At 1 January 2,694 1,644

Received during the financial year 2,040 1,030


At 31 December 4,768 2,694

Accumulated amortisation:

At 1 January 730 540

Amortisation 239 180




Current 300 210

Non-current 3,488 1,754 3,788 1,964

Deferred capital grants relate to government grants received for the acquisition of equipment for research activities undertaken by the Group’s subsidiary in People’s Republic of China to promote technology advancement and transfer. There are no unfulfilled conditions or contingencies attached to these grants.

FRS 103.B67.c FRS 20.39.b FRS 20.39.c




30. Loans and borrowings Ê

Group Company

Maturity

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Current:

Obligations under finance leases (Note 37(d)) 2014 216 16 – –

Bank overdrafts On demand 498 1,444 – –

6% p.a. fixed rate SGD bank loan 2014 475 830 – –

1,189 2,290 – –

Non-current: Obligations under finance leases (Note 37(d)) 2015-2023 720 160 – –

7.5% p.a. fixed rate SGD bonds 2015-2019 3,100 3,000 3,100 3,000

Bank loans:

- 8% p.a. fixed rate USD loan 31 July 2019 1,545 – – –

- SGD loan at LIBOR + 2.0% p.a. 2015-2019 2,200 2,200 2,200 2,200

- SGD loan at SIBOR + 3.0% p.a. 30 November 2017 5,400 5,400 – –

- 8.5% p.a. fixed rate SGD loan – – 2,000 – –

Share of joint venture’s loan 30 June 2015 245 240 – –

Convertible redeemable preference shares 2016-2019 450 428 450 428

13,660 13,428 5,750 5,628

Total loans and borrowings 14,849 15,718 5,750 5,628

Obligations under finance leases

These obligations are secured by a charge over the leased assets (Note 13). The average discount rate implicit in the leases is 8.5% p.a. (2012: 8.8% p.a.). These obligations are denominated in the respective functional currencies of the relevant entities in the Group.

Bank overdrafts

Bank overdrafts are denominated in SGD, bear interest at SIBOR + 3.0% p.a. (2012: SIBOR + 3.0% p.a.) and are secured by a floating charge over certain inventories (Note 25).

6% p.a. fixed rate SGD bank loan

This loan is fully repayable on 30 June 2014 (2012: 30 June 2013) and is secured by a charge over freehold land under development (Note 24).

7.5% p.a. fixed rate SGD bonds

These bonds with a face value of $3,200,000 are unsecured and are repayable in 5 equal annual instalments commencing on 1 January 2015.

8% p.a. fixed rate USD bank loan

This loan has been drawn down under a six-year multi-option facility (MOF). The loan is repayable within 12 months after the reporting date, but has been classified as long-term because the Group expects and has the discretion to exercise its rights under the MOF to refinance this funding. Such immediate replacement funding is available until 31 January 2019. The total amount repayable on maturity is $1,600,000. The facility is secured by a first mortgage over certain freehold land and buildings of the Group (Note 13).

FRS 107.7 and 31

FRS 1.73




30. Loans and borrowings Ê (continued)

SGD bank loan at LIBOR + 2.0% p.a.

This loan is secured by a first mortgage over certain investment properties (Note 14) of the Group and is repayable in two equal instalments due on 31 December 2015 and 31 January 2019. The loan includes a financial covenant which requires the Group to maintain a gearing ratio not exceeding 50%.

SGD bank loan at SIBOR + 3.0% p.a.

This loan is secured by a first mortgage over certain of the Group’s freehold land and buildings (Note 13), a charge over certain investment securities (Note 22) of the Group and corporate guarantee provided by the Company (Note 38(a)). Repayment of this loan is due on 30 November 2017. The loan includes a financial covenant which requires the Group to maintain a net current asset and net asset positions throughout the tenure of the loan.

8.5% p.a. fixed rate SGD loan

As at 31 December 2013, this loan has been presented as part of the liabilities of the disposal group classified as held for sale (Note 11).

Share of joint venture’s loan

This relates to the Group’s 50% share of the joint venture’s unsecured fixed rate RMB 2,500,000 (2012: RMB 2,500,000) bank loan that is due on 30 June 2015. This loan bears interest at 8.5% p.a. (2012: 8.5% p.a.).

Convertible Redeemable Preference Shares Ë

As at 31 December 2013 and 2012, there were 505,000 Convertible Redeemable Preference Shares (CRPS) issued and fully paid. The shares were issued at $1 each and are convertible at the option of the shareholders into ordinary shares of the Company on 1 January 2016 on the basis of one ordinary share for every preference share held. Any preference shares not converted will be redeemed on 31 December 2019 at a price of $1.20 per share. The preference shares carry a dividend of 8% p.a., payable half-yearly in arrears on 30 June and 31 December. The dividend rights are non-cumulative and the shareholders have no voting rights.

The carrying amount of the liability component of CRPS at the end of the reporting period is arrived at as follows:

Group and Company

2013

$’000

2012

$’000

Face value of CRPS 505 505 Equity component (96) (96)

Liability component of CRPS at initial recognition 409 409

Add: Accumulated amortisation of discount

- Opening balance at 1 January 19 –

- Amortisation of discount during the financial year 22 19

- Closing balance at 31 December 41 19

Liability component of CRPS at the end of the reporting period 450 428

FRS 107.7 FRS 32.28 and 31 FRS 32.28 FRS 32.28




30. Loans and borrowings Ê (continued)

Commentary:

Defaults or breaches

Ê If during the period, there were defaults or breaches of loan agreement terms, the entity should disclose:

(a) Details of any defaults during the period of principal, interest, sinking fund, or redemption terms of those loans payable;

(b) The carrying amount of the loans payable in default at the reporting date; and

(c) Whether the default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorised for issue.

These disclosure requirements are also applicable to breaches of loan agreement terms other than those mentioned above whose breaches permitted the lender to demand accelerated repayment (unless the breaches were remedied, or the terms of the loan were renegotiated, on or before the reporting date).

Illustrative note disclosure for default on interest payment:

The Company has defaulted in interest payment of $XXX on bank borrowings carried at $XXX at the end of the reporting period. The Company experienced a temporary shortage of funds due to decrease in market demand in the Company’s products in the first two quarters. The interest payable of $XXX which was overdue since October 2013 remained unpaid as at the date when these financial statements were authorised for issue.

Illustrative note disclosure for breach of loan covenant:

During the current financial year, the Company breached a covenant of a bank loan. The Company did not fulfil the requirement to maintain gearing ratio at X.XX for a credit line of $XXX. The credit line was fully drawn down and presented as current liability at the end of the reporting period. The bank is contractually entitled to request for immediate repayment of the outstanding loan amount in the event of breach of covenant.

The bank had not requested for immediate repayment of the outstanding loan amount as at the date when these financial statements were authorised for issue. Management commenced renegotiation of the loan agreement terms in December 2013. As of the date the financial statements were authorised for issue, the renegotiation was still in progress.

Compound financial instruments with multiple embedded derivatives

Ë If an entity has issued an instrument that contains both a liability and an equity component and the instrument has multiple embedded derivatives whose values are interdependent (such as a callable convertible debt instrument), it shall disclose the existence of those features.

FRS 107.18 FRS 107.19 FRS 107.17




31. Trade and other payables

Group

Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

Trade and other payables (current): Trade payables 15,698 17,426 332 290

Other payables 1,531 1,335 138 124

Amounts due to related companies 288 379 – –

17,517 19,140 470 414

Other payables (non-current):

Deferred cash settlement (Note 17) 200 – – –

Total trade and other payables 17,717 19,140 470 414

Add:

- Other liabilities (Note 32) 2,974 2,579 481 446

- Loans and borrowings (Note 30) 14,849 15,718 5,750 5,628

Total financial liabilities carried at amortised cost Ê 35,540 37,437 6,701 6,488

Trade payables/other payables

These amounts are non-interest bearing. Trade payables are normally settled on 60-day terms while other payables have an average term of six months.

Trade payables denominated in foreign currencies as at 31 December are as follows:

Group

Company

2013

$’000

2012

$’000

2013

$’000

2012

$’000

United States Dollar 3,140 2,962 66 49

Amounts due to related companies

These amounts are trade related, unsecured, non-interest bearing, repayable on demand and are to be settled in cash.

Purchases from related companies are made at terms equivalent to those prevailing in arm’s length transactions with third parties. Ë

Commentary:


Ê Please refer to commentary no. 1 of Note 22 Investment securities.

Ë Disclosures that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions are made only if such terms can be substantiated.

FRS 1.77 FRS 107.7 and 31 FRS 24.18 FRS 107.8.f FRS 107.7 and 31

FRS 107.34.a FRS 107.7 and 31 FRS 24.18 FRS 24.23 FRS 24.23




32. Other liabilities

Group Company

2013 $’000

2012 $’000

2013 $’000

2012 $’000

Accrued operating expenses 2,948 2,571 401 346

Financial guarantees (Note 38(a)) 26 8 80 100

2,974 2,579 481 446 Contingent consideration for business

combination Ê (Note 17) 685 – 685 –

3,659 2,579 1,166 446 Contingent consideration for business combination

As part of the purchase agreement with the previous owner of MSAX, a contingent consideration has been agreed. This consideration is dependent on the profit before tax of MSAX during a 12-month period. The fair value at the acquisition date was $450,000, which has been adjusted as of 31 December 2013 due to a significantly enhanced performance compared to budget to a fair value of $685,000. The consideration is due for final measurement and payment to the former shareholders on 18 October 2014. No further significant change to the consideration is expected.

Commentary:


Ê Illustrative note disclosure for contingent consideration for business combination when the amount is finalised in 2014:

Note X Other liabilities As part of the purchase agreement with the previous owners of MSAX dated 18 October 2013, a portion of the consideration was determined to be contingent on the performance of the acquired entity. At 18 October 2014, a total of $700,000 was paid to the previous owner of MSAX under this arrangement.

As of 31 December 2013 and prior to payment, the fair value of the contingent consideration was reassessed which led to additional cost charged to profit or loss. The initial fair value of the consideration of $450,000 is included in cash flows from investing activities, the remainder, totalling to $250,000, is recognised in cash flows from operating activities.

Group

2014 $’000

Initial fair value of the contingent consideration at acquisition date 450

Fair value adjustment as at 31 December 2013

235

Financial liability for the contingent consideration as of 31 December 2012 685

Fair value adjustment as at 18 October 2014

15

Total consideration paid 700

Extract of Consolidated Cash Flow Statement

Group

2014 $’000

Cash flows from operating activities:

Settlement of contingent consideration for business combination ( 250)

Cash flows from investing activities:

Settlement of contingent consideration for business combination (450)

FRS 1.77 FRS 107.7 and 31 FRS 103.B64.g.i FRS 103.58

FRS 7.16




33. Share capital and treasury shares

a) Share capital

Group and Company FRS 1.79

2013 2012

No. of shares ‘000 $’000


Issued and fully paid ordinary shares FRS 1.79.a.ii

At 1 January 23,080 9,665 22,940 9,510 FRS 1.79.a. iv

Issued for acquisition of a subsidiary (Note 17) 1,305 1,475 – –

Share issuance expense (Note 17) – (50) – – FRS 32.37

Exercise of employee share options (Note 35) – – 140 155 FRS 102.50

At 31 December 24,385 11,090 23,080 9,665 FRS 1.79.a.ii and iv

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.

The Company has two employee share option plans under which options to subscribe for the Company’s ordinary shares have been granted to employees of the Group.

b) Treasury shares

Group and Company

2013 2012



At 1 January – – – –

Acquired during the financial year (200) (254) – – Reissued pursuant to employee share option

plans: - For cash on exercise of employee share

options (Note 35) 75 81 – – - Transferred from employee share option

reserve – 79 – – - Gain transferred to gain or loss on reissuance

of treasury shares – (65) – –

75 95 – –

At 31 December (125) (159) – –

Treasury shares relate to ordinary shares of the Company that is held by the Company.

The Company acquired 200,000 (2012: nil) shares in the Company through purchases on the Singapore Exchange during the financial year. The total amount paid to acquire the shares was $254,000 (2012: nil) and this was presented as a component within shareholders’ equity.

The Company reissued 75,000 (2012: nil) treasury shares pursuant to its employee share option plans at a weighted average exercise price of $1.08 (2012: nil) each.

FRS 1.79.a.v FRS 1.79.a.iii FRS 1.79.a.vii FRS 1.79.a.vi FRS 32.33

FRS 1.77 and 78.e




34. Other reserves

a) Fair value adjustment reserve Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.

b) Asset revaluation reserve

The asset revaluation reserve represents increases in the fair value of freehold land and buildings, net of tax, and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in other comprehensive income.

c) Statutory reserve fund

In accordance with the Foreign Enterprise Law applicable to the subsidiary in the People’s Republic of China (PRC), the subsidiary is required to make appropriation to a Statutory Reserve Fund (SRF). At least 10% of the statutory profits after tax as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiary. The SRF is not available for dividend distribution to shareholders.

d) Foreign currency translation reserve

The foreign currency translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

e) Employee share option reserve

Employee share option reserve represents the equity-settled share options granted to employees (Note 35). The reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options, and is reduced by the expiry or exercise of the share options.

f) Gain or loss on reissuance of treasury shares

This represents the gain or loss arising from purchase, sale, issue or cancellation of treasury shares. No dividend may be paid, and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to members on a winding up) may be made in respect of this reserve.

g) Equity component of convertible redeemable preference shares

This represents the residual amount of convertible redeemable preference shares (CRPS) after deducting the fair value of the liability component. This amount is presented net of transaction costs and deferred tax liability arising from the CRPS.

FRS 1.79.b




35. Employee benefits

Group

2013 $’000

2012 $’000

Employee benefits expense (including directors):

Salaries and bonuses 17,758 16,332

Central Provident Fund contributions 2,107 2,166

Share-based payments (Employee share option plans) 245 150

Other short-term benefits 392 376

20,502 19,024

Employee share option plans Ê

Senior executive option plan

Under the senior executive option plan (SEOP), share options are granted to senior executives with more than 12 months’ service. The exercise price of the options is equal to the market price of the shares on the date of grant. The options vest if and when the Group’s earnings per share amount increases by 12%, within three years from the date of grant. If this increase is not met, the options lapse. The contractual life of each option granted is five years. There are no cash settlement alternatives. The Group does not have a past practice of cash settlement for these share options.

General employee share option plan

All other employees are entitled to a grant of options, under the general employee share option plan (GESP), once they have been in service for two years. The vesting of the options is dependent on the total shareholder return (TSR) of the Group as compared to a group of principal competitors. Employees must remain in service for a period of three years from the date of grant. The exercise price of the options is equal to the market price of the shares on the date of grant. The contractual life of the options is five years. There are no cash settlement alternatives. The Group does not have a past practice of cash settlement for these awards.

There has been no cancellation or modification to the SEOP and GEOP during both 2013 and 2012.

Movement of share options during the financial year

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options during the financial year:

2013 2012

No. WAEP ($) No. WAEP ($) Outstanding at 1 January 425,000 1.22 480,000 1.20 FRS 102.45.b.i

- Granted 200,000 1.30 125,000 1.26 FRS 102.45.b.ii

- Forfeited – – (25,000) 1.05 FRS 102.45.b.iii

- Exercised (75,000) 1.08 (140,000) 1.11 FRS 102.45.b.iv

- Expired (25,000) 1.16 (15,000) 1.15 FRS 102.45.b.v

Outstanding at 31 December 525,000 1.24 425,000 1.22 FRS 102.45.b.vi

Exercisable at 31 December 200,000 1.18 195,000 1.10 FRS 102.45.b.vii

FRS 19.46 FRS 102.51.a FRS 1.104 FRS 102.44 FRS 102.45.a FRS 102.45.a




35. Employee benefits (continued)

Employee share option plans Ê (continued)

Movement of share options during the financial year (continued)

- The weighted average fair value of options granted during the financial year was $1.14 (2012: $1.03).

- The weighted average share price at the date of exercise of the options exercised during the financial year was $1.30 (2012: $1.20). Ë

- The range of exercise prices for options outstanding at the end of the year was $1.05 to $1.30 (2012: $1.05 to $1.26). Ì The weighted average remaining contractual life for these options is 3.90 years (2012: 3.86 years).

Fair value of share options granted

The fair value of the share options granted under the SEOP is estimated at the grant date using a binomial option pricing model, taking into account the terms and conditions upon which the share options were granted.

The fair value of share options granted under the GESP is estimated at the date of the grant using a Monte Carlo simulation model, taking into account the terms and conditions upon which the options were granted. The model simulates the TSR and compares it against the group of principal competitors. It takes into account historic dividends, share price fluctuation covariance of the Company and each entity of the group of competitors to predict the distribution of relative share performance.

The following table lists the inputs to the option pricing models for the years ended 31 December 2013 and 2012:

SEOP (Binomial) GESP (Monte Carlo)

2013

2012

2013

2012

Dividend yield (%) 3.13 3.01 3.13 3.01 Expected volatility (%) 15.00 16.30 16.00 17.50 Risk-free interest rate (% p.a.) 4.10 4.00 4.10 4.00 Expected life of option (years) 4.05 4.25 4.85 4.65 Weighted average share price ($) 1.30 1.20 1.30 1.20

The expected life of the share options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

FRS 102.47.a

FRS 102.45.c

FRS 102.45.d FRS 102.46

FRS 102.47.a.i FRS 102.47.a.i and iii FRS 102.47.a.i FRS 102.47.a.ii




35. Employee benefits (continued)

Commentary:

Cash-settled share-based payment transactions

Ê In this illustration, all the share-based payment transactions are equity-settled. If an entity has share-based payment transactions that are either cash-settled or with cash alternatives (for example, share appreciation rights), the entity should disclose:

- The total expense recognised for the period arising from the share-based payment transactions;

- The total carrying amount of liabilities at the end of the period; and

- The total intrinsic value at the end of the period of liabilities for which the counterparty’s right to cash or other assets had vested by the end of the period (e.g., vested share appreciation rights).

Illustrative note disclosures:

Share Appreciation Rights (SARs) Plan

Business development managers in the electronic components segment are granted share options, which can only be settled in cash. These SARs will vest when a specified target number of new sales contracts are closed. The contractual life of the options is six years.

The expense recognised in profit or loss granted under the Share Appreciation Rights Plan during the financial year is $XXX (2012: $XXX).

The carrying amount of the liability recognised in the Group’s and the Company’s balance sheets relating to such share options at 31 December 2013 is $XXX (2012: $XXX).

No Share Appreciation Rights granted under this plan had vested at the end of the reporting period (2012: nil).

Weighted average share price

Ë If options were exercised on a regular basis throughout the period, an entity may instead disclose the weighted average share price during the period.

Range of exercise prices

Ì If the range of exercise prices is wide, the outstanding options shall be divided into ranges that are meaningful for assessing the number and timing of additional shares that may be issued and the cash that may be received upon exercise of those options.

FRS 102.51.a and b

FRS 102.45.a

FRS 102.51.a

FRS 102.51.b.i FRS 102.51.b.ii

FRS 102.45.c FRS 102.45.d




36. Related party transactions

a) Sale and purchase of goods and services

In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms agreed between the parties during the financial year: ÊËÌ

Group

2013 $’000

2012 $’000

Sale of finished goods to:

- Related companies 700 890

- Associates 50 30

- A company related to a director 225 135

Purchase of raw materials from:

- Related companies 1,058 1,200

- Associates 140 106

Purchase of accounting services from a firm related to a director 25 18

Management fees from joint venture 50 60

Interest income from:

- Associates 80 76

- A fellow subsidiary 98 92

Related companies:

These are subsidiaries and associates of Good Group (International) Ltd and its subsidiaries, excluding entities within the Group.

Company / firm related to a director:

- One of the directors of the Company, through his 25% (2012: 25%) equity interest in Unik-One Pte Ltd (UOPL), had an interest in a contract for the supply of specialised digital components to UOPL. During the financial year, the Group sold specialised digital components of $225,000 (2012: $135,000) to UOPL. No balance with UOPL was outstanding at the end of the reporting period (2012: nil).

- The Group has entered into a contract with LPS Associates LLP, a firm of which the wife of one of the directors of the Company is the managing partner, for the provision of consolidation accounting services to the Company for an amount of $25,000 (2012: $18,000). No balance with the firm was outstanding at the end of the reporting period (2012: nil).

b) Commitments with related parties

On 1 July 2013, XYZ Technologies Pte Ltd entered into a two-year agreement ending 30 June 2015 with XYZ China Co. Ltd to purchase specific electrical and optional cables that XYZ Technologies Pte Ltd uses in its production cycle. XYZ Technologies Pte Ltd expects the potential purchase volume to be $400,000 in 2014 and $300,000 in the first 3 months of 2015. The purchase price is based on XYZ China Co. Ltd’s actual cost plus 5% margin and will be settled in cash within 30 days after receiving the inventory.

FRS 24.18 FRS 24.19

FRS 24.18 CA 201.8 FRS 24.18.b




36. Related party transactions (continued)

c) Compensation of key management personnel Í

Group

2013 $’000

2012 $’000

Short-term employee benefits 4,938 4,352

Central Provident Fund contributions 355 357

Other short-term benefits 25 80

Share-based payments 80 60

5,398 4,849

Comprise amounts paid to:

Directors of the Company 3,470 3,119

Other key management personnel 1,928 1,730

5,398 4,849

Directors’ interests in employee share option plan

During the financial year:

- 37,000 (2012: 25,000) share options were granted to two of the Company's executive directors under the SEOP (Note 35) at an exercise price of $1.30 (2012: $1.26) each.

- These directors exercised options for 10,000 (2012: 5,000) ordinary shares of the Company at a price of $1.05 (2012: $1.05) each, with a total cash consideration of $10,500 (2012: $5,250) paid to the Company.

At the end of the reporting period, the total number of outstanding share options granted by the Company to the abovementioned directors under the SEOP amount to 120,000 (2012: 93,000). No share options have been granted to the Company's non-executive directors.

Commentary:

Related party transactions

Ê An entity should make disclosures for transactions with related parties separately for each of the following categories:

(a) the parent; (b) entities with joint control or significant influence over the entity; (c) subsidiaries; (d) associates; (e) joint ventures in which the entity is a venturer; (f) key management personnel of the entity or its parent; and (g) other related parties.

Such categorisation help provide a more comprehensive analysis of related party balances and transactions.

FRS 24.17 FRS 19.47 and 124.b FRS 24.18 FRS 24.19 and 20




36. Related party transactions (continued)


Related party transactions

Ë The following are examples of transactions that are disclosed if they are with a related party:

(a) purchases or sales of goods (finished or unfinished); (b) purchases or sales of property and other assets; (c) rendering or receiving of services; (d) leases; (e) transfers of research and development; (f) transfers under licence agreements; (g) transfers under finance arrangements (including loans and equity contributions in cash or

in kind); (h) provision of guarantees or collateral; (i) commitments to do something if a particular event occurs or does not occur in the future,

including executor contracts (recognised and unrecognised); and (j) settlement of liabilities on behalf of the entity or by the entity on behalf of that related

party.

Ì Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary for an understanding of the effects of related party transactions on the financial statements of the entity.

Key management personnel Î

Í Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.

Transactions with key management personnel

Î In this illustration, the Group does not have any transactions and outstanding balances, including commitments with key management personnel, close family members of key management personnel and entities which the key management personnel have control or joint control.

Illustrative disclosure when the Group have such transactions are as follows:

The transactions and outstanding balances related to key management personnel, close family members of key management personnel and entities in which the key management personnel have control or joint control were as follows:

Group Transactions during

the year Outstanding

balances as at 31 December

Related parties Transactions 2013 $’000

2012 $’000

2013 $’000

2012 $’000

Mrs. May Lim Legal fees (a) - XXX - XXX Draco Pte. Ltd. Purchase of office

stationeries (b) XXX XXX XXX -

(a) The Group uses the legal services provided by Mrs. May Lim who is a close family member of Mr. Goh Hock Inn, a Director of the Company. The legal fees paid were in relation to purchase of certain non-current assets of the Group. The fees charged were based on normal market rates for such services and were due and payable under normal payment terms.

(b) The Group purchases its office stationeries from Draco Pte. Ltd., a Company controlled by Mr. Goh Hock Inn, a Director of the Company. These purchases are based on normal market rates for such supplies and were due and payable under normal payment terms.

FRS 24.21

FRS 24.24

FRS 24.9

FRS 24.18.a,b FRS 24.18.b




37. Commitments

a) Capital commitments

Capital expenditure contracted for as at the end of the reporting period but not recognised in the financial statements are as follows:

Group Company

2013 $’000

2012 $’000

2013 $’000

2012 $’000

Capital commitments in respect of

property, plant and equipment 1,690 550 90 55

Share of joint venture’s capital commitments in relation to investment properties 63 168 – –

1,753 718 90 55

b) Operating lease commitments – as lessee

In addition to the land use rights disclosed in Note 16, the Group has entered into commercial leases on certain motor vehicles and office equipment. These leases have an average tenure of between three and six years with no renewal option or contingent rent provision included in the contracts. The Group is restricted from subleasing the leased equipment to third parties.

Minimum lease payments, including amortisation of land use rights recognised as an expense in profit or loss for the financial year ended 31 December 2013 amounted to $484,000 (2012: $387,000).

Future minimum rental payable under non-cancellable operating leases (excluding land use rights) at the end of the reporting period are as follows: Ê

Group

2013 $’000

2012 $’000

Not later than one year 370 352

Later than one year but not later than five years 800 926

Later than five years 115 126

1,285 1,404

c) Operating lease commitments – as lessor The Group has entered into commercial property leases on its investment properties. These non-cancellable leases have remaining lease terms of between two and eight years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

Future minimum rental receivable under non-cancellable operating leases at the end of the reporting period are as follows: Ê

Group

2013 $’000

2012 $’000

Not later than one year 492 440

Later than one year but not later than five years 1,968 1,760

Later than five years 1,400 1,110

3,860 3,310

FRS 16.74.c FRS 31.55.b FRS 40.75.h FRS 17.35.d

FRS 17.35.c FRS 17.35.a

FRS 17.56.c FRS 17.56.a




37. Commitments (continued)

Commentary:

Future minimum lease payments under non-cancellable operating leases

Ê The disclosure of future minimum lease payments according to time bands relates only to non-cancellable operating leases. A non-cancellable lease is a lease that is cancellable only:

(a) upon the occurrence of some remote contingency;

(b) with the permission of the lessor;

(c) if the lessee enters into a new lease for the same or an equivalent asset with the same lessor; or

(d) upon payment by the lessee of such an additional amount that, at inception of the lease, continuation of the lease is reasonably certain.

A leasing arrangement where the lessee has the right to terminate lease by providing a written notice to the lessor without incurring losses significant in comparison to the value of remaining lease payments is generally not considered a non-cancellable lease and is not included in such disclosure.

d) Finance lease commitments

The Group has finance leases for certain items of plant and equipment and furniture and fixtures. These leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

Group

2013 $’000

2012 $’000

Minimum lease

payments

Present value of

payments (Note 30)

Minimum lease

payments

Present value of

payments (Note 30)

Not later than one year 251 216 30 16 Later than one year but not later than five

years 392 252 265 120

Later than five years 643 468 117 40

Total minimum lease payments 1,286 936 412 176 Less: Amounts representing finance

charges (350) – (236) –

Present value of minimum lease payments 936 936 176 176

FRS 17.4

FRS 17.31.e

FRS 17.31.b




38. Contingencies

a) Contingent liabilities

Legal claim

On 30 November 2013, a customer has commenced an action against the Group in respect of construction works claimed to be sub-standard. The estimated payout is $250,000 should the action be successful. A trial date has not yet been set and therefore it is not practicable to state the timing of any payment. The Group has been advised by its legal counsel that it is possible, but not probable, that the action will succeed and accordingly no provision for any liability has been made in these financial statements.

Guarantees

The Group has provided the following guarantees at the end of the reporting period:

- It has guaranteed its share of $20,000 (2012: $15,000) of the associate’s contingent liabilities which have been incurred jointly with other investors.

- It has guaranteed part of the bank overdraft of the associate to a maximum amount of $300,000 (2012: nil), which it is severally liable for in the event of default by the associate.

- It has guaranteed its interest in its share of the joint venture’s loan of $245,000 (2012: $240,000) (Note 30).

- It has guaranteed to an unrelated party the performance of a contract for the joint venture. No liability is expected to arise (2012: nil).

The Company has provided a corporate guarantee to a bank for a $5,400,000 (2012: $5,400,000) loan (Note 30) taken by a subsidiary.

b) Contingent asset

i) A legal claim for defamation of $500,000 was lodged against one of the Group’s competitors in October 2012. Based on advice from the legal counsel, the Group is confident that the dispute will be settled in its favour.

ii) The Group is claiming amounts (such as variations and additional works under the construction contracts) and pending proceedings and disputes with clients. It is not possible to reasonably determine the extent and timing of possible inflow of economic benefits. These claims are therefore not recognised in these financial statements.

FRS 37.86

FRS 11.45

FRS 24.20.h FRS 28.40.a

FRS 28.40.b

FRS 31.54.a

FRS 31.54.b

FRS 24.20.h

FRS 37.89 FRS 11.45




39. Fair value of assets and liabilities Ê

a) Fair value hierarchy

The Group categories fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used as follows:

- Level 1 – Quoted prices (unadjusted) in active market for identical assets or liabilities that the Group can access at the measurement date,

- Level 2 – Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and

- Level 3 – Unobservable inputs for the asset or liability.

Fair value measurements that use inputs of different hierarchy levels are categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Commentary:

Ê An entity shall disclose information that helps users of its financial statements assess both of the following:

(a) For assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the balance sheet after initial recognition, the valuation techniques and inputs used to develop those measurements.

(b) For recurring fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income for the period.

To meet the objective above, an entity shall consider all the following:

(a) The level of detail necessary to satisfy the disclosure requirements;

(b) How much emphasis to place on each of the various requirements;

(c) How much aggregation and disaggregation to undertake; and

(d) Whether users of financial statements need additional information to evaluate the quantitative information disclosed.

If the disclosures provided in accordance with FRS 113 and other FRSs are insufficient to meet the objectives above, an entity shall disclose additional information necessary to meet those objectives.

FRS 113.72 FRS 113.76 FRS 113.81 FRS 113.86 FRS 113.73 FRS 113.91 FRS 113.92




39. Fair value of assets and liabilities Ê (continued)

b) Assets and liabilities measured at fair value Ê

The following table shows an analysis of each class of assets and liabilities measured at fair value at the end of the reporting period: Ê

Group

2013 $’000

Fair value measurements at the end of the reporting period using

Quoted prices in active

markets for identical

instruments

Significant observable

inputs other than quoted

prices

Significant unobservable

inputs

Total

(Level 1) (Level 2) (Level 3)

Recurring fair value measurements Assets

Financial assets: Held for trading financial assets (Note 22)

Quoted equity securities 1,512 — — 1,512

Total held for trading financial assets 1,512 - - 1,512

Available-for-sale financial assets (Note 22) Equity securities

Quoted equity securities 1,746 — — 1,746 Unquoted equity securities — — 139 139

Total equity securities 1,746 - 139 1,885

Debt securities Unquoted debt securities - - 1,563 1,563

Total debt securities - - 1,563 1,563

Total available-for-sale financial assets 1,746 - 1,702 3,448

Derivatives Forward currency contracts - 150 - 150 Interest rate swap - 20 - 20

Total derivatives - 170 - 170

Financial assets as at 31 December 2013 3,258 170 1,702 5,130

Non-financial assets: Ë Property, plant and equipment Ì

Freehold land - - 11,874 11,874 Buildings - - 3,291 3,291

Total property, plant and equipment - - 15,165 15,165

Investment properties Ì Commercial - - 2,833 2,833 Residential - 1,812 - 1,812

Total investment properties 1,812 2,833 4,645 Non-financial assets as at 31 December 2013 - 1,812 17,998 19,180

FRS 113.93.a and b





b) Assets and liabilities measured at fair value Ê (continued) Group

2013

$’000


Quoted prices in active

markets for identical

instruments



prices


inputs

Total

(Level 1) (Level 2) (Level 3) Recurring fair value measurements (continued)

Liabilities Í Derivatives

Forward currency contracts - (22) - (22) Contingent consideration for business combination - - (685) (685)

Financial liabilities as at 31 December 2013 - (22) (685) (707) Non-recurring fair value measurements Disposal group classified as held for sale* - - 199 199

*Disposal group classified as held for sale with a carrying amount of $649,000 were written down to their fair value of $219,000, less costs to sell of $20,000 (or $199,000), resulting in a net loss of $450,000, which was included in the profit or loss for the period.

c) Level 2 fair value measurements ÎÏ

The following is a description of the valuation techniques and inputs used in the fair value measurement for assets and liabilities that are categorised within Level 2 of the fair value hierarchy:

Derivatives

Forward currency contracts and interest rate swap contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, interest rate curves and forward rate curves.

Residential investment properties

The valuation of residential investment properties are based on comparable market transactions that consider sales of similar properties that have been transacted in the open market.

FRS 113.93.a and b





d) Level 3 fair value measurements

i) Information about significant unobservable inputs used in Level 3 fair value measurements Ð

The following table shows the information about fair value measurements using significant unobservable inputs (Level 3)

Description Fair Value at 31 December

2013

Valuation techniques

Unobservable inputs

Range (weighted average)

Recurring fair value measurements

Available-for-sale financial assets:

Unquoted equity securities

139

Discounted cash flow

Cost of equity Dividend yield Discount for lack of marketability

6% to 11% (7.3%) 3% to 7.5% (4.6%) 5% to 20% (15%)

Unquoted debt securities

1,563 Discounted cash flow

Probability of default Loss severity

5% to 50% (10%) 40% to 100% (60%)


(685) Discounted cash flow

Probability of meeting contractual earnings target Own credit risk

20% to 100% (60%) 6% to 10% (8%)

Property, plant and equipment

Freehold land

11,874 Market comparable approach

Yield adjustments based on management’s assumptions*

15% to 30% (20%)

Buildings



10% to 20% (15%)

Investment properties:

Commercial



10% to 25% (13%)

Non-recurring fair value measurements

Disposal group classified as held for sale

199 Discounted cash flow

Weighted average cost of capital Long-term revenue growth rate Long-term pre-tax operating margin Discount for lack of marketability

6% to 12% (10.1%) 3% to 5.5% (4.2%) 7.5% to 13% (9.2%) 5% to 20% (10%)

*The yield adjustments are made for any difference in the nature, location or condition of the specific property.

FRS 113.93.d





d) Level 3 fair value measurements (continued)

i) Information about significant unobservable inputs used in Level 3 fair value measurements Ð (continued)

For unquoted equity securities, a significant increase (decrease) in the expected dividend yield would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in discount for lack of marketability would result in a significantly lower (higher) fair value measurement. A change in assumption used for dividend yield may warrant a directionally opposite change in assumption for discount for lack of marketability.

For unquoted debt securities, significant increases (decreases) in prepayment rates, probability of default and loss severity in the event of default would result in a significant lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

For contingent consideration, a significant increase (decrease) in the probability of meeting the contractual earnings target would result in a significantly higher (lower) fair value measurement.

For freehold land and buildings and commercial investment properties, a significant increase (decrease) in yield adjustments based on management’s assumptions would result in a significantly higher (lower) fair value measurement.

FRS 113.93.h.i






i) Information about significant unobservable inputs used in Level 3 fair value measurements Ð (continued)

The following table shows the impact on the Level 3 fair value measurement of assets and liabilities that are sensitive to changes in unobservable inputs that reflect reasonably possible alternative assumptions. The positive and negative effects are approximately the same.

31 December 2013

Effect of reasonably possible alternative assumptions

Carrying amount

Profit or loss Other comprehensive

income

$’000 $’000 $’000

Recurring fair value measurements

Available-for-sale financial assets:

Unquoted equity securities 139 - 15

Unquoted debt securities 1,563 - 56


Freehold land 11,874 - 1,206

Buildings 3,291 - 300

Investment property:

Commercial 2,831 350 -

Contingent consideration for business combination (685) 35 -

In order to determine the effect of the above reasonably possible alternative assumptions, the Group adjusted the following key unobservable inputs used in the fair value measurement:

- For unquoted equity securities, the Group adjusted the discount for lack of marketability by increasing and decreasing the assumptions by 5% to 8% depending on the individual characteristics of the instrument.

- For unquoted debt securities, the Group adjusted the probability of default and loss severity assumptions used to calculate the credit valuation adjustment. The adjustments made were to increase and decrease the assumptions by 6%, which is within the range based on the Group’s internal credit risk assessment for the counterparties.

- For contingent consideration for business combination, the Group adjusted the probability of meeting the contractual earnings target by increasing and decreasing assumption by 10%.

- For freehold land and buildings, the Group adjusted the yield adjustments based on management’s assumptions by increasing and decreasing the adjustments by 2% depending on nature, location or condition of the specific property.

- For commercial investment properties, the Group adjusted the yield adjustments based on management’s assumptions by increasing and decreasing the adjustments by 3% depending on nature, location or condition of the specific property.

FRS 113.93.h.ii






ii) Movements in Level 3 assets and liabilities measured at fair value ÊÎ

The following table presents the reconciliation for all assets and liabilities measured at fair value based on significant unobservable inputs (Level 3):

Group

2013 $’000

Fair value measurements using significant unobservable inputs (Level 3)

Available-for-sale financial assets



Contingent consideration

Total

Unquoted equity

securities

Unquoted debt

securities

Freehold land

Buildings Commercial

Opening balance 28 980 10,726 3,574 2,380 - 17,688 Total gains or losses for the period

Included in profit or loss - - - - 350 (235) 115 Included in other comprehensive income 42 28 1,206 300 - - 1,576

Purchases, issues, sales and settlements

Purchases 103 576 4,000 1,194 400 - 6,273 Sales (34) (21) (3,068) (1,710) - - (4,833) Transfer from/(to) investment properties - - - 300 (300) - -

Attributable to discontinued operation - - (1,010) (310) - - (1,320) Exchange differences - - 20 10 1 - 31 Elimination of accumulated depreciation on revaluation - - - (67) - - (67) Arising from acquisition of subsidiary - - - - - (450) (450) Closing balance 139 1,563 11,874 3,291 2,831 (685) 19,013

FRS 113.93.e FRS 113.93.e.i FRS 113.93.e.ii FRS 113.93.e.iii






ii) Movements in Level 3 assets and liabilities measured at fair value ÊÎ

The following table presents the reconciliation for all assets and liabilities measured at fair value based on significant unobservable inputs (Level 3):

Group

2013 $’000

Fair value measurements using significant unobservable inputs (Level 3)

Available-for-sale financial assets



Contingent consideration

Total

Unquoted equity

securities

Unquoted debt

securities

Freehold land

Buildings Commercial

Total gains and losses for the period included in Profit or loss: - Other income

Net gain from fair value adjustment of investment properties (i) - - - - 350 - 350

- Other expenses Fair value adjustment of contingent consideration of business combination (ii) - - - - - (235) (235)

Other comprehensive income: - Net gain on fair

value changes of available-for-sale financial assets 42 28 - - - - 70

- Net surplus on revaluation of land and buildings - - 1,001 249 - - 1,250

(i) Relates to net gain from fair value adjustment of investment properties held as at 31 December 2013.

(ii) Relates to unrealised loss from fair value adjustment of contingent consideration for business combination as at 31 December 2013.

FRS 113.93.e.i FRS 113.93.e.ii






iii) Valuation policies and procedures Ñ

The Group’s Chief Financial Officer (CFO), who is assisted by the Head of Treasury and senior controller (collectively referred to as the “CFO office”) oversees the Group’s financial reporting valuation process and is responsible for setting and documenting the Group’s valuation policies and procedures. In this regard, the CFO office reports to the Group’s Audit Committee.

For all significant financial reporting valuations using valuation models and significant unobservable inputs, it is the Group’s policy to engage external valuation experts to perform the valuation. The CFO office is responsible for selecting and engaging valuation experts that possess the relevant credentials and knowledge on the subject of valuation, valuation methodologies, and FRS 113 fair value measurement guidance.

For valuations performed by external valuation experts, the CFO office reviews the appropriateness of the valuation methodologies and assumptions adopted. The CFO office also evaluates the appropriateness and reliability of the inputs (including those developed internally by the Group) used in the valuations.

In selecting the appropriate valuation models and inputs to be adopted for each valuation that uses significant non-observable inputs, external valuation experts are requested to calibrate the valuation models and inputs to actual market transactions (which may include transactions entered into by the Group with third parties as appropriate) that are relevant to the valuation if such information are reasonably available. For valuations that are sensitive to the unobservable inputs used, external valuation experts are required, to the extent practicable to use a minimum of two valuation approaches to allow for cross-checks.

Significant changes in fair value measurements from period to period are evaluated by the CFO office for reasonableness. Key drivers of the changes are identified and assessed for reasonableness against relevant information from independent sources, or internal sources if necessary and appropriate.

The CFO office documents and reports its analysis and results of the external valuations to the Audit Committee on a quarterly basis. The Audit Committee performs a high-level independent review of the valuation process and results and recommends if any revisions need to be made before presenting the results to the Board of Directors for approval.

FRS 113.93.g





e) Assets and liabilities not carried at fair value but for which fair value is disclosed

The following table shows an analysis of the Group’s assets and liabilities not measured at fair value at 31 December 2013 but for which fair value is disclosed:

Group

2013 $’000


Quoted prices in

active markets

for identical assets

(Level 1)



prices (Level 2)


inputs (Level 3)

Total

Carrying amount

Assets

Government bonds 675 - - 675 660

Investment in associates 10,600 - - 10,600 10,595

Staff loans (non-current) - - 60 60 63

Liabilities:

Deferred cash settlement - - (205) (205) (200)

Loans and borrowings (non-current)

- Obligations under finance leases - - (769) (769) (720)

- Fixed rate bank loans and bonds - - (4,983) (4,983) (4,890)

- Convertible redeemable preference shares - - (509) (509) (450)

Company

Assets

Amounts and loans due from subsidiaries - 13,432 - 13,432 13,563

Staff loans (non-current) - - 49 49 51

Liabilities:

Fixed rate bank loans and bonds - - (3,162) (3,162) (3,100)

Convertible redeemable preference shares - - (509) (509) (450)

Determination of fair value

Amounts and loans due from subsidiaries, Staff loans, Deferred cash, Lease obligations under finance leases, Fixed rate bank loans and bonds, and Convertible redeemable preference shares

The fair values as disclosed in the table above are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the end of the reporting period.

FRS 113.97 FRS 107.25 FRS 113.97 FRS 113.93.d





f) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value are as follows: î

Group Company

Note 2013

$’000

2012

$’000

2013

$’000

2012

$’000

Carrying amount

Fair value

Carrying amount

Fair value

Carrying amount

Fair value

Carrying amount

Fair value

Financial assets:

Government bonds 22 660 675 650 665 – – – –

Equity securities, at t

22 500 T 600 T – – – –

Amounts and loans due from subsidiaries 21 – – – – 13,972 13,432 14,635 14,161

Staff loans (non-current) 21 63 60 48 45 51 49 36 34

Financial liabilities:

Deferred cash settlement 31 (200) (205) – – – – – –

Loans and borrowings (non-current) 30

- Obligations under finance leases (720) (769) (160) (169) – – – –

- Fixed rate bank loans and bonds (4,890) (4,983) (5,240) (5,342) (3,100) (3,162) (3,000) (3,060)

- Convertible redeemable preference shares (450) (509) (428) (459) (450) (509) (428) (459)

T Investment in equity securities carried at cost

Fair value information has not been disclosed for the Group’s investments in equity securities that are carried at cost because fair value cannot be measured reliably. These equity securities represent ordinary shares in an Israeli high-technology company that is not quoted on any market and does not have any comparable industry peer that is listed. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is significant. The Group does not intend to dispose of this investment in the foreseeable future. The Group intends to eventually dispose of this investment through sale to institutional investors. ï

FRS 107.7 and 31 FRS 107.25,26 and 29

FRS 107.30.a-d FRS 107.27





Commentary:

Ê Disclosures in tabular format

An entity shall present the quantitative disclosures required by FRS 113 in a tabular format unless another format is more appropriate. The disclosure requirements of FRS 113 need not be applied in comparative information provided for periods before initial application.

Ë In this illustration, the current use of the non-financial assets does not differ from their highest and best use. If for recurring and non-recurring fair value measurements, the highest and best use of a non-financial asset differs from its current use, an entity shall disclose the fact and why the non-financial asset is being used in a manner that differs from its highest and best use.

Ì In this illustration, the Group’s commercial properties are categorised within Level 3 of the fair value hierarchy as the properties’ fair values are determined based on comparable market transactions adjusted for significant unobservable inputs such as yield adjustments relating to nature, location and condition of the specific property.

In this illustration, the Group’s residential investment properties are categorised within Level 2 of the fair value hierarchy as the properties’ fair values are determined solely based on observable inputs other than quoted prices.

Í In this illustration, the Group does not have any liability measured at fair value and issued with an inseparable third-party credit enhancement.

For a liability measured at fair value and issued with an inseparable third-party credit enhancement, an issuer shall disclose the existence of that credit enhancement and whether it is reflected in the fair value measurement of the liability.

FRS 113.99 FRS 113.C3 FRS 113.94 FRS 113.93.i FRS 113.98

Classes of assets and liabilities

An entity shall determine appropriate classes of assets and liabilities on the basis of the following:

a. The nature, characteristics and risks of the asset or liability; and

b. The level of the fair value hierarchy within which the fair value measurement is categorised.

The number of classes may need to be greater for fair value measurements categorised within Level 3 of the fair value hierarchy because those measurements have a greater degree of uncertainty and subjectivity. Determining appropriate classes of assets and liabilities for which disclosures about fair value measurements should be provided requires judgement. A class of assets and liabilities will often require greater disaggregation than the line items presented in the balance sheet. If another FRS specifies the class for an asset or a liability, an entity may use that class in providing the disclosures required in FRS 113 if that class meets the requirements in this paragraph.






Î Transfers between fair value hierarchy

Transfers between Level 1 and Level 2

FRS 113 requires disclosures of the amount of any transfers between Level 1 and Level 2 of the fair value hierarchy for assets and liabilities held at the end of the reporting period that are measured at fair value on a recurring basis and the reasons for those transfers. Transfers into each level shall be disclosed and discussed separately from transfers out of each level.

In this illustration, there were no assets or liabilities transferred between Level 1 and Level 2.

Illustrative disclosure if an entity has transfers of assets or liabilities between Level 1 and Level 2.

The following table shows transfers from Level 1 to Level 2 of the fair value hierarchy for assets and liabilities which are recorded at fair value.

The above financial assets were transferred from Level 1 to Level 2 as they were delisted from the stock exchange and therefore ceased to be actively traded during the year and fair values were consequently measured using valuation techniques and using observable market inputs.

Group

2013 $’000

Financial assets held-for-trading - Quoted equity securities XXX Financial investments available-for-sale - Other debt securities XXX

Transfers into or out of Level 3

FRS 113 requires disclosures of the amount of any transfers into or out of Level 3 of the fair value hierarchy, the reasons for those transfers and the entity’s policy for determining when transfers between levels are deemed to have occurred. Transfers into Level 3 shall be disclosed and discussed separately from transfers out of Level 3.

In this illustration, there were no assets or liabilities transferred from Level 1 and Level 2 to Level 3.

Illustrative disclosure if there were transfers of assets or liabilities into Level 3.

During the financial year ended 31 December 2013, the Group transferred certain financial instruments from Level 2 to Level 3 of the fair value hierarchy. The carrying amount of the total financial assets transferred was $XXX.

The reason for the transfers from Level 2 to Level 3 is that inputs to the valuation models for the other debt securities ceased to be observable. Prior to transfer, the fair value of the instruments was determined using observable market transactions or binding broker quotes for the same or similar instruments. Since the transfer, these instruments have been valued using valuation models incorporating significant non market-observable inputs.

Illustrative disclosure if there were transfers of assets or liabilities out of Level 3.

The Group transferred an unquoted equity security from Level 3 to Level 1 of the fair value hierarchy. The carrying amount of the total financial assets transferred was $XXX.

The security was transferred from Level 3 into Level 1 as it was listed on the stock exchange during the financial year. Prior to the transfer, the fair value of the security was determined using valuation model incorporating significant non market-observable inputs. Since the transfer, the fair value of the security is determined based on market price quoted in the stock exchange.

FRS 113.93.c FRS 113.93.e.iv






ë In this illustration, there has been no change in valuation technique for recurring and non-recurring fair value measurements categorised within Level 2 and Level 3 of the fair value hierarchy. If there has been a change in valuation technique (e.g. changing from a market approach to an income approach or use of an additional valuation technique), the entity shall disclose that change and the reason(s) for making it.

í An entity shall disclose for recurring fair value measurements categorised within Level 3 of the fair value hierarchy:

i. for all such measurements, a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs to a different amount might result in a significantly higher or lower fair value measurement. If there are interrelationships between those inputs and other unobservable inputs used in the fair value measurement, an entity shall also provide a description of those interrelationships and of how they might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement. To comply with that disclosure requirement, the narrative description of the sensitivity to changes in unobservable inputs shall include, at a minimum, the unobservable inputs disclosed when complying with FRS 113.93(d).

ii. for financial assets and financial liabilities, if changing one or more of the unobservable inputs to reflect reasonably possible alternative assumptions would change fair value significantly, an entity shall state the fact and disclose how the effect of a change to reflect a reasonably possible alternative assumption was calculated. For that purpose, significance shall be judged with respect to profit or loss, and total assets or total liabilities, or, when changes in fair value are recognised in other comprehensive income, total equity.

ì For recurring and non-recurring fair value measurements categorised within Level 3 of the fair value hierarchy, a description of valuation processes used by the entity (including, for example, how an entity decides its valuation policies and procedures and analyses changes in fair value measurements from period to period.

An entity might disclose the following:

(a) for the group within the entity that decides the entity’s valuation policies and procedures:

(i) its description;

(ii) to whom that group reports; and

(iii) the internal reporting procedures in place (e.g. whether and, if so, how pricing, risk management or audit committees discuss and assess the fair value measurements;

(b) the frequency and methods for calibration, back testing and other testing procedures of pricing models;

(c) the process for analysing changes in fair value measurements from period to period;

(d) how the entity determined that third-party information, such as broker quotes or pricing services, used in the fair value measurement was developed in accordance with FRS 113; and

(e) the methods used to develop and substantiate the unobservable inputs used in a fair value measurement.

FRS 113.93.d FRS 113.93.h FRS 113.93.g FRS 113.IE65

It is important to note that the illustration on valuation policies and procedures for recurring and non-recurring fair value measurements categorised within Level 3 of the fair value hierarchy is based on certain assumed facts regarding circumstances surrounding XYZ Holdings (Singapore) Limited. The valuation policies and procedures of other entities may be different and disclosures would have to be customised in the light of specific facts and circumstances applicable to the entity.






Fair value of financial assets and liabilities

î FRS 107.25 requires the fair value of each class of financial assets and liabilities to be disclosed in a way that permits it to be compared with its carrying amount. However, disclosures of fair value are not required:

- When the carrying amount is a reasonable approximation of fair value (e.g., short-term trade and other receivables and payables, and long-term loans that are re-priced to market rate);

- For an investment in equity instruments that do not have a quoted market price in an active market, or derivatives linked to such equity instruments, that is measured at cost in accordance with FRS 39 because its fair value cannot be measured reliably; or

- For a contract containing a discretionary participation feature (as described in FRS 104) if the fair value of that feature cannot be measured reliably.

In this illustration, in addition to the above exemptions, the comparison between carrying amount and fair value of financial assets or liabilities that are carried at fair value (e.g., held for trading investments and derivatives) has not been disclosed as these assets are carried at fair value.

Financial instruments whose fair value cannot be reliably measured

ï FRS 107 requires the disclosure of fair value information for financial instruments whose fair value cannot be reliably measured to include disclosure of whether and how the entity intends to dispose of such financial instruments.

If financial instruments whose fair value previously could not be reliably measured are derecognised, that fact, their carrying amounts at the time of de-recognition, and the amount of gain or loss recognised shall be disclosed.

FRS 107.25 and 29 FRS 107.20.d FRS 107.30.e




40. Financial risk management objectives and policies ÊË

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. The board of directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Officer, Head of Treasury and Head of Credit Control. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks, except as disclosed in Note 40 (a) Credit risk section.

Commentary:

Nature and extent of risks arising from financial instruments

Ê FRS 107 requires an entity to disclose qualitative and quantitative information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date, including the entity’s policies and processes for accepting, measuring, monitoring and controlling such risks. In addition, an entity is required to disclose any change in the qualitative information from the previous period and explain the reasons for the change.

The disclosures in response to FRS 107 illustrated in this note are based on assumed circumstances of XYZ Holdings (Singapore) Limited and may not be applicable or relevant to other entities. Each entity should customise the information disclosed according to the specific circumstances, financial risk exposures, and risk management policies and procedures relevant to the entity.

Alternative approaches of disclosure

Ë Decentralised disclosures

In this illustration, most of the information regarding the nature and extent of risks arising from financial instruments required by FRS 107.31-42, has been disclosed in one centralised note. Alternatively, an entity may disclose such information in the respective balance sheet item notes where appropriate.

Incorporating disclosures by cross reference

The disclosures of information regarding the nature and extent of risks arising from financial instruments may instead be incorporated in the financial statements by cross-reference from the financial statements to some other statement, such as management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. Without the information incorporated by cross-reference, the financial statements are incomplete.

FRS 107.7 and 31 FRS 107.31-33 and IG15 FRS 107.33.c FRS 107.31, 33 and IG17

FRS 107.AGB6




40. Financial risk management objectives and policies (continued)

a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and short-term deposits and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. For transactions that do not occur in the country of the relevant operating unit, the Group does not offer credit terms without the approval of the Head of Credit Control. During the financial year, the Group has adopted a new policy to enter into trade credit insurance for first-time customers who wish to trade on credit terms in order to mitigate heightened credit risks arising from revenue growth strategies.

Excessive risk concentration

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

In order to avoid excessive concentrations of risk, the Group’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Group to manage risk concentrations at both the relationship and industry levels. The Group does not apply hedge accounting.

Exposure to credit risk ÊË

At the end of the reporting period, the Group’s and the Company’s maximum exposure to credit risk is represented by:

- A nominal amount of $565,000 (2012: $255,000) relating to a corporate guarantee provided by the Group to the banks on associates’ and joint venture’s loans

- A nominal amount of $5,400,000 (2012: $5,400,000) relating to a corporate guarantee provided by the Company to a bank on a subsidiary’s bank loan

Information regarding credit enhancements for trade and other receivables is disclosed in Note 21.

FRS 107.33.a-b and IG15 FRS 107.33.c FRS 107.33.a-b FRS 107.IG15.c FRS 107 AGB9-B10

FRS 107.36.b





a) Credit risk (continued)

Credit risk concentration profile Ì

The Group determines concentrations of credit risk by monitoring the country and industry sector profile Í of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the end of the reporting period is as follows:

Group

2013 2012

$’000 % of total $’000 % of total

By country:

Singapore 12,629 51% 14,399 55%

People’s Republic of China 5,448 22% 5,515 21%

Malaysia 3,467 14% 3,442 13%

Vietnam 1,981 8% 1,619 6%

Other countries 1,238 5% 1,185 5%

24,763 100% 26,160 100%

By industry sectors:

Multi-industry conglomerates 10,200 41% 11,438 44%

Electronics 7,539 31% 7,496 29%

Property 6,178 25% 6,403 24%

Others 846 3% 823 3%

24,763 100% 26,160 100%

At the end of the reporting period, approximately:

- 21% (2012: 19%) of the Group’s trade receivables were due from 5 major customers who are multi-industry conglomerates located in Singapore.

- 11% (2012: 9%) of the Group’s trade and other receivables were due from related parties while almost all of the Company’s receivables were balances with related parties.

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are with creditworthy debtors with good payment record with the Group. Cash and short-term deposits, investment securities and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 21 (Trade and other receivables) and Note 22 (Investment securities).

FRS 107.34.a and AGB8 FRS 107.34.a, 34.c and AGB8 FRS 107.36.c FRS 107.37





a) Credit risk (continued)

Commentary:

Credit risk relating to financial assets or financial liabilities at fair value through profit or loss

Ê In this illustration, no financial instrument has been designated as financial assets or financial liabilities at fair value through profit or loss. If an entity has designated a loan or receivable or financial liability as at fair value through profit or loss, FRS 107 requires further disclosures regarding the maximum credit risk exposures of such receivables and the amount by which any related credit derivatives or similar instruments mitigate that credit risk exposure; changes in fair value during the period and cumulatively, of such loan or receivable or financial liabilities that is attributable to changes in credit risk (including the methods of determining such fair value changes) and of any related credit derivatives or similar instruments; and the difference between the financial liability’s carrying amount and the contractual repayment amount.

Disclosure of maximum exposure to credit risk

Ë For financial instruments where the carrying amount best represents the maximum exposure to credit risk, the disclosure of the maximum exposure to credit risk is not required.

Quantitative disclosures

Ì FRS 107 requires the disclosure of summary quantitative data about an entity’s exposure to financial risk (e.g., credit risk, liquidity risk and market risk) that is based on the information provided internally to key management personnel of the entity (as defined in FRS 24, Related Party Disclosures), e.g., the board of directors or CEO. As such, the disclosures would be defined by the actual information used by management in managing financial risks, which may be different from those disclosed in this illustration.

In addition, if the above-mentioned quantitative data disclosed as at the end of the reporting period are unrepresentative of the entity’s exposure to risk during the period, the entity shall provide further information that is representative e.g., an entity might disclosed the highest, lowest and average amount of risk to which it was exposed during the period to meet the disclosure requirement.

Í The identification of concentrations of credit risk requires judgment taking into account the circumstances of the entity. Apart from country and industry sectors, other measures of credit risk concentrations may include credit rating or other measures of credit quality, limited number of individual counterparties, or groups of closely related counterparties.

FRS 107.9-11 FRS 107.36.a FRS 107.34.a FRS 107.35 and IG20 FRS 107.AGB8 and IG18





b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group’s and the Company’s liquidity risk management policy is that not more than 20% (2012: 20%) of loans and borrowings (including overdrafts and convertible redeemable preference shares) should mature in the next one year period, and that to maintain sufficient liquid financial assets and stand-by credit facilities with three different banks. At the end of the reporting period, approximately 8% (2012: 15%) of the Group’s loans and borrowings will mature in less than one year based on the carrying amount reflected in the financial statements, excluding discontinued operation. None (2012: none) of the Company’s loans and borrowings will mature in less than one year at the end of the reporting period. Êç

The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

Analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities at the end of the reporting period based on contractual undiscounted repayment obligations. é

2013 $’000

2012 $’000

Group

One year or less è

One to five

years Over five

years Total One year or less è

One to five years

Over five years Total

Financial assets: ê

Trade and other receivables 24,921 2,984 – 28,905 26,936 2,980 – 29,916

Cash and short-term deposits 6,117 – – 6,117 4,858 – – 4,858

Derivatives ë 170 – – 170 105 – – 105

Total undiscounted financial assets 31,208 2,984 – 35,192 31,899 2,980 – 34,879

Financial liabilities:

Trade and other payables 17,517 250 – 17,767 19,140 – – 19,140

Other liabilities 2,974 – – 2,974 2,579 – – 2,579

Loans and borrowings 1,189 12,817 4,275 18,281 2,290 12,659 3,277 18,226

Contingent consideration for business combination 685 – – 685 – – – –

Derivatives ë 22 – – 22 – – – – Total undiscounted

financial liabilities 22,387 13,067 4,275 39,729 24,009 12,659 3,277 39,945 Total net undiscounted

financial assets/ (liabilities) 9,821 (10,083) (4,275) (4,537) 7,890 (9,679) (3,277) (5,066)

FRS 107.33.a-b, 39.c and IG5 FRS 107.33.b, 39.c and AGB11F.e FRS 107.AGB11F.a and c FRS 107.34.a, 34.c and AGB8 FRS 107.39.a, b and AGB11D





b) Liquidity risk (continued)

2013 $’000

2012 $’000

Company

One year or less è

One to five years


One year or less è

One to five years


Financial assets: ê

Trade and other receivables 338 17,289 – 17,627 350 17,855 – 18,205

Cash and short-term deposits 4,621 – 4,621 4,145 – – 4,145

Total undiscounted

financial assets 4,959 17,289 – 22,248 4,495 17,855 – 22,350 Financial liabilities:

Trade and other payables 470 – – 470 414 – – 414

Other liabilities 481 – – 481 446 – – 446

Loans and borrowings – 4,682 2,084 6,766 – 3,796 2,540 6,336

Total undiscounted financial liabilities 951 4,682 2,084 7,717 860 3,796 2,540 7,196

Total net undiscounted

financial assets/ (liabilities) 4,008 12,607 (2,084) 14,531 3,635 14,059 (2,540) 15,154

The table below shows the contractual expiry by maturity of the Group and Company’s contingent liabilities and commitments. The maximum amount of the financial guarantee contracts are allocated to the earliest period in which the guarantee could be called. í

2013 $’000

2012 $’000

One year or less è

One to five

years Over five

years Total One year or less è

One to five years


Group

Financial guarantees 320 245 – 565 15 240 – 255 Company

Financial guarantees – 5,400 – 5,400 – 5,400 – 5,400

FRS 107.AGB11C.c






Commentary:


Ê Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Other factors to consider in disclosing liquidity risk

ç The application guidance in FRS 107 illustrates the other factors that an entity might also consider disclosing which include, but are not limited to, whether the entity:

(a) has committed borrowing facilities (e.g., commercial paper facilities) or other lines of credit (e.g., stand-by credit facilities) that it can access to meet liquidity needs;

(b) holds deposits at central banks to meet liquidity needs;

(c) has very diverse funding sources;

(d) has significant concentrations of liquidity risk in either its assets or its funding sources;

(e) has internal control processes and contingency plans for managing liquidity risk;

(f) has instruments that include accelerated repayment terms (e.g., on the downgrade of the entity’s credit rating);

(g) has instruments that could require the posting of collateral (e.g., margin calls for derivatives);

(h) has instruments that allows the entity to choose whether it settles its financial liabilities by delivering cash (or another financial asset) or by delivering its own shares; or

(i) has instruments that are subject to master netting agreements.

Maturity analysis for financial liabilities

é In this illustration, certain undiscounted payments presented differ from the carrying amount included in the balance sheet because the balance sheet amounts are based on discounted cash flows.

When the amount payable is not fixed, the maturity analysis is determined by reference to the conditions existing at the reporting date. For example, when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the reporting date.

è The number of time bands illustrated is only an example. An entity should use its judgment to determine the number of time bands that is suitable for the entity.

When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which the entity can be required to pay. For example, financial liabilities that the entity can be required to repay on demand are included in the earliest time band.

FRS 107.AGB11F FRS 107.AGB11D FRS 107.AGB11







Maturities of financial assets held for liquidity purposes

ê FRS 107.39.c requires an entity to describe how it manages the liquidity risk inherent in the items disclosed in the quantitative disclosures required in FRS 107.39.a and b. If financial assets are readily saleable or expected to generate cash inflows to meet cash outflows on financial liabilities and if that information is necessary to enable users of its financial statements to evaluate the nature and extent of liquidation risk. An entity shall disclose a maturity analysis of financial assets it holds for managing liquidity risks.

Quantitative liquidity risk disclosures

ë FRS 107 specified minimum liquidity risk disclosures, i.e., the contractual maturity analysis of financial liabilities, required by FRS 107.39.

FRS 107 permits derivative liabilities to be excluded from the paragraph 39 maturity analysis, unless the “contractual maturities are essential for an understanding of the timing of the cash flows”. The application guidance cites an interest rate swap designated in a cash flow hedging relationship as an example of such an essential case. Given that the hedged cash flows are required to be highly probable, the swap would normally be expected to be held to maturity. For those derivatives included in the contractual maturity analysis, the guidance still requires gross cash flows to be disclosed for those derivatives which will involve a gross exchange of cash flows, such as currency swaps. Below is an illustration of such a presentation:

Group $’000

One year or less

One to five years

Over five years

Total

Derivatives:

- Interest rate swaps – settled net XXX – – XXX

- Forward currency contracts – gross payments XXX – – XXX

- Forward currency contracts – gross receipts (XXX) – – (XXX)

Financial guarantees issued

í FRS 107 requires issued financial guarantee contracts to be recorded in the contractual maturity analysis based on the maximum amount guaranteed. They are to be allocated to the earliest date they can be drawn down, irrespective of whether it is likely that those guarantees will be drawn or the amount that is expected to be paid.

FRS 107.AGB11E FRS 107.AGB11B FRS 107.AGB11D FRS 107.AGB11C.c





c) Interest rate risk Ê

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings, interest-bearing loans given to related parties and investments in debt securities. The Group does not hedge its investment in fixed rate debt securities as they have active secondary or resale markets to ensure liquidity. The Company’s loans at floating rate given to related parties form a natural hedge for its non-current floating rate bank loan. All of the Group’s and the Company’s financial assets and liabilities at floating rates are contractually re-priced at intervals of less than 6 months (2012: less than 6 months) from the end of the reporting period.

The Group’s policy is to manage interest cost using a mix of fixed and floating rate debts. The Group’s policy is to keep 40% to 70% (2012: 40% to 70%) of its loans and borrowings at fixed rates of interest. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps. At the end of the reporting period, after taking into account the effect of an interest rate swap, approximately 62% (2012: 58%) of the Group’s borrowings are at fixed rates of interest. Ë

Sensitivity analysis for interest rate risk Ì

At the end of the reporting period, if SGD interest rates Í had been 75 (2012: 75) basis points lower/higher with all other variables held constant, the Group’s profit before tax would have been $20,000 (2012: $18,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings, lower/higher interest income from floating rate loans to related parties and lower/higher positive fair value of an interest rate swap, and the Group’s other reserve in other comprehensive income would have been $30,000 (2012: $30,000) higher/lower, arising mainly as a result of an increase/decrease in the fair value of fixed rate debt securities classified as available-for-sale. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility as in prior years.

FRS 107.33.a- b and IG16 FRS 107.33.b and 34.a FRS 107.40, IG36 and AGB18





c) Interest rate risk Ê (continued)

Commentary:

Sources of interest rate risk

Ê Interest rate risk arises on interest-bearing financial instruments recognised in the balance sheet (e.g., loans and receivables and debt instruments issued) and on some financial instruments not recognised in the balance sheet (e.g., some loan commitments).


Ë Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Sensitivity analysis for market risk

Ì FRS 107 requires disclosure of sensitivity analysis for each type of market risk to which an entity is exposed at the reporting date, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date. These analyses shall be provided for the whole of an entity’s business. However, an entity may also “drill down” to provide different types of sensitivity analysis for different classes of financial instruments.

The sensitivity analysis should be based on changes in the risk variable that were reasonably possible at the reporting date having considered the economic environments in which the entity operates, the type of market risk concerned and the time frame over which the assessment is being made i.e., the period until the entity will next present the analysis e.g., next annual reporting period. A reasonably possible change should not include remote or “worst case” scenarios or “stress test”.

An entity should also disclose the methods and assumptions used in preparing the sensitivity analysis, and changes from the previous period in the methods and assumptions used, including the reasons for such changes.

Instead of the sensitivity analysis illustrated, FRS 107 permits an entity to use a sensitivity analysis that reflects interdependencies between risk variables, such as a value-at-risk methodology, if it uses this analysis to manage its exposure to financial risks. This applies even if such a methodology measures only the potential for loss and does not measure the potential for gain. In such cases, the entity should also disclose an explanation of the method and objective of the analysis (e.g., whether the model relies on Monte Carlo simulations), the main parameters and assumptions used (e.g., the holding period and confidence level), and limitations that may result in the information disclosed not fully reflecting the fair value of assets and liabilities involved.

When the sensitivity analyses disclosed are unrepresentative of a risk inherent in a financial instrument (e.g., because the end of the reporting period exposure does not reflect exposure during the financial year), the entity shall disclose that fact and the reason it believes the sensitivity analyses are unrepresentative, including additional disclosures regarding the risk inherent in that financial instrument.

In this illustration, company-level sensitivity analysis has not been disclosed because according to the assumed scenario, XYZ Holdings (Singapore) Limited is an investment holding company with no significant net exposure to market price risk. If this is not the case, the entity should provide company-level disclosures as appropriate.

FRS 107.AGB22

FRS 107.40.a

FRS 107.AGB21

FRS 107.AGB19 and IG35 FRS 107.40.b and c FRS 107.41 and AGB20 FRS 107.42 and IG37-40

FRS 107.34.b





c) Interest rate risk Ê (continued)


Sensitivity analysis for interest rate risk

Í In this illustration, the interest rate risk sensitivity analysis has been performed for the effect of a change in SGD interest rates because it is relevant to the interest rate risk exposure of XYZ Holdings (Singapore) Limited. An entity might disclose a sensitivity analysis for interest rate risk for each currency in which the entity has material exposure to interest rate risk.

Illustrative tabular disclosure of interest rate risk sensitivity analysis where more than one currency is involved:

The table below demonstrates the sensitivity to a reasonably possible change in interest rates with all other variables held constant, of the Group’s profit before tax (through the impact on interest expense on floating rate loans and borrowings) and the Group’s equity (through the impact on other reserves for fixed rate debt securities classified as available-for-sale).

Group $’000

Increase/ decrease in basis points

Effect on profit before tax

Effect on equity

2013

- Singapore dollar +15 (XX) (XX)

- US dollar +20 (XX) (XX)

- Singapore dollar -10 XX XX

- US dollar -15 XX XX

2012

- Singapore dollar +15 (XX) (XX)

- US dollar +20 (XX) (XX)

- Singapore dollar -10 XX XX

- US dollar -15 XX XX

FRS 107.IG34





d) Foreign currency risk Ê

The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Malaysian Ringgit (Ringgit) and Renminbi (RMB). The foreign currencies in which these transactions are denominated are mainly United States Dollars (USD). Approximately 23% (2012: 25%) of the Group’s sales are denominated in foreign currencies whilst almost 80% (2012: 83%) of costs are denominated in the respective functional currencies of the Group entities. The Group’s trade receivable and trade payable balances at the end of the reporting period have similar exposures.

The Group and the Company also hold cash and short-term deposits denominated in foreign currencies for working capital purposes. At the end of the reporting period, such foreign currency balances are mainly in USD.ç

The Group requires all of its operating entities to use forward currency contracts to eliminate the currency exposures on any individual transactions in excess of $100,000 for which payment is anticipated more than one month after the Group has entered into a firm commitment for a sale or purchase. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy not to enter into forward contracts until a firm commitment is in place. It is the Group’s policy to negotiate the terms of the forward currency contracts to match the terms of the firm commitment to maximise hedge effectiveness.

At 31 December 2013, the Group had hedged 75% (2012: 68%) and 70% (2012: 65%) of its foreign currency denominated sales and purchases respectively, for which firm commitments existed at the end of the reporting period, extending to March 2014 (2012: March 2013). ç The Group does not apply hedge accounting for such foreign currency denominated sales and purchases.

The Group is also exposed to currency translation risk è arising from its net investments in foreign operations, including Malaysia, People’s Republic of China (PRC) and Vietnam. The Group’s investment in its Vietnam subsidiary is hedged by a USD denominated bank loan, which mitigates structural currency exposure arising from the subsidiary’s net assets. The Group’s net investments in Malaysia and PRC are not hedged as currency positions in Ringgit and RMB are considered to be long-term in nature.

Sensitivity analysis for foreign currency risk é

The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in the USD, RMB and Ringgit exchange rates against the respective functional currencies of the Group entities, with all other variables held constant. è

Group

2013 $’000

2012 $’000

Profit before tax Profit before tax USD/SGD - strengthened 3% (2012: 3%) –30 –30

- weakened 3% (2012: 3%) +28 +28

USD/RMB - strengthened 4% (2012: 4%) –15 –12

- weakened 4% (2012: 4%) +15 +12

RMB/SGD - strengthened 4% (2012: 4%) +57 +66

- weakened 4% (2012: 4%) –57 –66

Ringgit/SGD - strengthened 3% (2012: 4%) +40 +68

- weakened 3% (2012: 4%) –40 –68

FRS 107.33.a and 34.a FRS 107.33.a and 34.a FRS 107.33.b FRS 107.34.a

FRS 107.40 and AGB18





d) Foreign currency risk Ê (continued)

Commentary:

Disclosure of amounts denominated in foreign currencies

Ê The disclosure of exposures to foreign currency amounts is required under the disclosure principles of FRS 107.31 (nature and extent of risks) as well as the specific requirement in FRS 107.34 to disclose summary quantitative data about the entity's exposure to risks (including foreign currency risks) arising from financial instruments. In this illustration, most of the information regarding foreign currency risk exposures is presented in Note 40(d), Note 21, Note 27 and Note 31. These disclosures include a mixture of quantitative data that are measured in dollar amounts (e.g., cash and short-term deposits amount denominated in foreign currency) as well as data that are not measured in dollar amounts, e.g., the exposures arising from trade receivables are represented by the percentage of total trade receivables denominated in foreign currencies.

Each entity should customise the information disclosed according to its specific circumstances.


ç Please refer to commentary no. 3 of Note 40(a) (Credit risk)


é Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)

è According to FRS 107, foreign currency risk arises on financial instruments that are denominated in a foreign currency i.e., in a currency other than the functional currency in which they are measured. For the purpose of FRS 107, currency risk does not arise from financial instruments that are non-monetary items or from financial instruments denominated in the functional currency. Currency translation risk arising from its net investments in foreign operations does not fall within the definition of foreign currency risk according to FRS 107. In the scenario illustrated, there is no impact (other than those affecting net profit) to equity arising from exposures to currency risk as defined by FRS 107.

Illustrative disclosure if there are impact to equity arising from exposures to currency risk:

The following table demonstrates the sensitivity of the Group’s profit before tax and equity to a reasonably possible change in the USD, RMB and Ringgit exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.

Group 2013

$’000 2012 $’000

Profit before

tax

Equity Profit before

tax

Equity

USD/SGD - strengthened X% (2012: X%) –XX –XX –XX –XX - weakened X% (2012: X%) +XX +XX +XX +XX USD/RMB - strengthened X% (2012: X%) –XX –XX –XX –XX - weakened X% (2012: X%) +XX +XX +XX +XX RMB/SGD - strengthened X% (2012: X%) –XX –XX –XX –XX - weakened X% (2012: X%) +XX +XX +XX +XX Ringgit/SGD - strengthened X% (2012: X%) –XX –XX –XX –XX

- weakened X% (2012: X%) +XX +XX +XX +XX

FRS 107.31 and 34 FRS 107.AG B23





e) Market price risk

Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity securities. These securities are quoted on the Singapore Exchange Securities Trading Limited (SGX-ST) in Singapore and are classified as held for trading or available-for-sale financial assets. The Group does not have exposure to commodity price risk.

The Group’s objective is to manage investment returns and equity price risk using a mix of investment grade shares with steady dividend yield and non-investment grade shares with higher volatility. The Group’s policy is to limit its interest in the latter type of investments to 25% (2012: 25%) of its entire equity portfolio. Any deviation from this policy is required to be approved by the CEO and audit committee. At the end of the reporting period, 24% (2012: 19%) of the Group’s equity portfolio consist of non-investment grade shares of companies operating in PRC and Singapore, while the remaining portion of the equity portfolio comprise investment grade shares included in the Straits Times Index (STI). Ê

Sensitivity analysis for equity price risk ËÌ

At the end of the reporting period, if the STI had been 2% (2012: 2%) higher/lower with all other variables held constant, the Group’s profit before tax would have been $88,000 (2012: $78,000) higher/lower, arising as a result of higher/lower fair value gains on held for trading investments in equity instruments, and the Group’s other comprehensive income would have been $66,000 (2012: $77,000) higher/lower, arising as a result of an increase/decrease in the fair value of equity securities classified as available-for-sale.

Commentary:


Ê Please refer to commentary no. 3 of Note 40(a) (Credit risk)


Ë Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)

Ì In this illustration, the sensitivity analysis for equity price risk has been performed by analysing the effect of a reasonably possible change in STI on the fair value of the equity instruments held by the Group, as it is assumed that all the quoted equity securities held by the Group are listed in Singapore.

FRS 107.33.a FRS 107.33.b and 34.a FRS 107.40, AGB17-18 and AGB25-27




41. Capital management Ê

Capital includes debt and equity items as disclosed in the table below.

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2013 and 31 December 2012.

As disclosed in Note 34(c), a subsidiary of the Group is required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the above-mentioned subsidiary for the financial years ended 31 December 2013 and 2012. Ë

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio between 20% and 40%. The Group includes within net debt, loans and borrowings (excluding convertible redeemable preference shares), trade and other payables, less cash and short-term deposits excluding discontinued operations. Capital includes convertible redeemable preference shares, equity attributable to the owners of the Company less the fair value adjustment reserve and the abovementioned restricted statutory reserve fund.

Group

2013 $’000

2012 $’000

Loans and borrowings (Note 30) 14,849 15,718 Trade and other payables (Note 31) 17,717 19,140

Less: - Convertible redeemable preference shares (Note 30) (450) (428)

- Cash and short-term deposits (Note 27) (6,117) (4,858)

Net debt 25,999 29,572

Convertible redeemable preference shares 450 428

Equity attributable to the owners of the Company 72,669 66,927

Less: - Fair value adjustment reserve (672) (436)

- Statutory reserve fund (903) (740)

Total capital 71,544 66,179

Capital and net debt 97,543 95,751

Gearing ratio 27% 31%

FRS 1.134 FRS 1.135.a.i FRS 1.135.a

FRS 1.135.a and c FRS 1.135.a.ii and d FRS 1.135.a FRS 1.135.b




41. Capital management Ê (continued)

Commentary:

Disclosure of capital management information according to entity specific circumstances

Ê FRS 1 requires the disclosure of information (as provided to key management personnel) that enables users of financial statements to evaluate the entity’s objectives, policies and processes for managing capital, including (but not limited to) a description and summary quantitative data of what it manages as capital, the presence and impact of externally imposed capital requirements and how the entity is meeting its objectives for managing capital etc. This note as well as FRS 1.IG10 provide illustrative examples of such disclosures of an entity that is not a regulated financial institution.

It is important to note that the illustration provided in this note is based on certain assumed facts regarding circumstances surrounding XYZ Holdings (Singapore) Limited and its objectives, policies and processes for managing capital. For example, a gearing ratio with a specific measurement basis has been disclosed as this is the measure used to monitor capital. The Group considers both capital and net debt as relevant components of funding, hence part of its capital management. Other entities may use different methods to monitor capital or use gearing ratios with different measurement bases. Disclosures would have to be customised in the light of specific facts and circumstances applicable to the entity.

Also, an entity may manage capital in a number of ways and be subject to a number of different capital requirements. For example, a conglomerate may include entities that undertake insurance and banking activities, and those entities may also operate in several jurisdictions. When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or distorts a financial statement user’s understanding of an entity’s capital resources, the entity shall disclose separate information for each capital requirement to which the entity is subject to.

Externally imposed capital requirement

Ë In this illustration, it is assumed that the externally imposed capital requirement has been complied with. When an entity has not complied with externally imposed capital requirements, the consequences of such non-compliance shall be disclosed. FRS 1.IG 11 has an example that illustrates the application of FRS 1.135.e when an entity has not complied with externally imposed capital requirement during the period.

FRS 1.134 and 135

FRS 1.136 FRS 1.135.e




42. Segment information Ê

For management purposes, the Group is organised into business units based on their products and services, and has four reportable segments as follows:

I. The electronic components segment is a supplier of digital and analogue electronic components for consumer and industrial-grade electronics manufacturers. It offers products and services in the areas of common and specialised electronic components, energy efficiency, and electrical architecture.

II. The property segment is in the business of constructing, developing and leasing out of residential and commercial properties. This reportable segment has been formed by aggregating the property construction/development operating segment and the investment properties operating segment, which are regarded by management to exhibit similar economic characteristics.

III. The corporate segment is involved in Group-level corporate services, treasury functions and investments in marketable securities.

IV. The fire prevention equipment and services segment produces and installs extinguishers, fire prevention equipment and fire retardant fabrics. This segment has been classified as a discontinued operation during the financial year (Note 11).

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

FRS 108.20, 21.a FRS 108.22

FRS 108.12 FRS 108.27

FRS 108.28.b

FRS 108.27.a




42. Segment information Ê (continued)

Electronic

components Property Corporate

Fire prevention equipment and

services (Discontinued operation) Ë

Adjustments and eliminations Notes

Per consolidated financial

statements FRS 108.20,21.b

2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Revenue:

External customers 105,292 103,965 31,428 38,606 – – 13,152 14,598 (13,152) (14,598) A 136,720 142,571 FRS 108.23.a and 32

Inter-segment – – – – 265 120 – – (265) (120) B – – FRS 108.23.b

Total revenue 105,292 103,965 31,428 38,606 265 120 13,152 14,598 (13,417) (14,718) 136,720 142,571 Results:

Interest income Ì – – – – 430 327 – – – – 430 327 FRS 108.23.c

Dividend income – – – – 526 406 – – – – 526 406 FRS 108.23.f

Fair value gains on investment properties – – 495 125 – – – – – – 495 125 FRS 108.23.f

Depreciation and amortisation 2,038 1,967 925 883 150 115 150 125 (150) (125) A 3,113 2,965 FRS 108.23.e

Share of results of associates – 94 657 234 – – – – – – 657 328 FRS 108.23.g

Impairment of non-financial assets 500 – – – – – 650 – (650) – A 500 – FRS 36.129.a FRS 108.23.f

Other non-cash expenses 1,121 754 107 95 310 218 – – – – C 1,538 1,067 FRS 108.23.i

Segment profit/(loss) 6,035 5,698 2,152 2,763 452 438 (551) (193) (1,031) (1,590) D 7,057 7,116 FRS 108.23 Assets:

Investment in associates – 566 10,595 9,755 – – – – – – 10,595 10,321 FRS 108.24.a

Additions to non-current assets 8,134 2,872 2,803 1,560 758 221 – – – – E 11,695 4,653 FRS 108.24.b

Segment assets Í 77,689 73,426 22,518 21,169 12,450 11,960 2,270 2,450 10,815 10,605 F 125,742 119,610 FRS 108.23 Segment liabilities Í 16,076 15,748 10,533 8,358 1,314 1,189 1,043 1,130 22,129 24,358 G 51,095 50,783 FRS 108.23





Notes Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements Î

A The amounts relating to the fire prevention equipment and services segment has been excluded to arrive at amounts shown in profit or loss as they are presented separately in the statement of comprehensive income within one line item, “loss from discontinued operation, net of tax”.

B Inter-segment revenues are eliminated on consolidation.

C Other non-cash expenses consist of amortisation of land use rights, share-based payments, inventories written-down, provisions, and impairment of financial assets as presented in the respective notes to the financial statements.

D The following items are added to/(deducted from) segment profit to arrive at “profit before tax from continuing operations” presented in the consolidated income statement:

2013 $’000

2012 $’000

Segment results of discontinued operation 551 193 Share of results of associates 657 328 Profit from inter-segment sales (105) (50) Finance costs (1,715) (1,512) Unallocated corporate expenses (419) (549) (1,031) (1,590)

E Additions to non-current assets consist of additions to property, plant and equipment, investment properties and intangible assets.

F The following items are added to/(deducted from) segment assets to arrive at total assets reported in the consolidated balance sheet:

2013 $’000

2012 $’000

Investment in associates 10,595 10,321 Deferred tax assets 470 463 Inter-segment assets (250) (179) 10,815 10,605

G The following items are added to/(deducted from) segment liabilities to arrive at total liabilities reported in the consolidated balance sheet:

2013 $’000

2012 $’000

Deferred tax liabilities 2,378 1,926 Income tax payable 2,927 6,734 Loans and borrowings (including discontinued operation) 16,849 15,718 Inter-segment liabilities (25) (20) 22,129 24,358

FRS 108.21.c

FRS 108.28.a and b

FRS 108.28.a

FRS 108.28.e FRS 108.28.b

FRS 108.28.c

FRS 108.28.d





Geographical information ë

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

Revenues Non-current assets

2013 2012 2013 2012

$’000 $’000 $’000 $’000

Singapore 76,432 86,464 20,570 19,346

People’s Republic of China 32,970 33,005 15,896 15,591

Malaysia 20,990 20,440 5,061 4,138

Vietnam and others 19,480 17,260 3,082 3,010

Discontinued operation (13,152) (14,598) (1,016) -

136,720 142,571 43,593 42,085

Non-current assets information presented above consist of property, plant and equipment, investment properties, intangible assets, and land use rights as presented in the consolidated balance sheet.

Information about a major customer í

Revenue from one major customer amount to $15,102,000 (2012: $16,080,000), arising from sales by the electronics components segment.

Commentary:

Information about segment profit or loss

Ê In addition to a measure of profit or loss and total assets for each reportable segments, entities

are required to disclose the following about each reportable segment if the specified amounts are included in the measure of segment profit or loss reviewed by the chief operating decision maker (CODM), or are otherwise regularly provided to the CODM, even if not included in that measure of segment profit or loss: (a) Revenues from external customers (b) Revenues from transactions with other operating segments of the same entity (c) Interest revenue (d) Interest expense* (e) Depreciation and amortisation (f) Material items of income and expense disclosed in accordance with paragraph 86 of FRS 1

Presentation of Financial Statements (g) The entity’s interest in profit or loss of associates and joint ventures accounted for by the

equity method (h) Income tax expense or income* (i) Material non-cash items other than depreciation and amortisation

* In this illustration, interest expense and income tax expense have not been disclosed by segment as these items are managed on a group basis, and are not provided to the CODM at the operating segment level.

FRS 108.33.a and b FRS 108.20 FRS 108.33.a.i and b.i FRS 108.34

FRS 108.23






Discontinued operation

Ë FRS 108 does not provide specific disclosure requirements for an operating segment classified as discontinued operation. An entity is therefore not required to provide such segment information as long as the classification criteria held for sale is met. It is however allowed to continue to present segment information as long as the definition as operating segment is met. In this illustration, an entire reportable segment has been classified as discontinued operation in the current period. As this operating segment still meet the quantitative thresholds for separate reporting, it continues to be reported in the segment information.

Interest income

Ì An entity shall report interest revenue separately from interest expense for each reportable segment unless a majority of the segment’s revenues are from interest and the CODM relies primarily on net interest revenue to assess the performance of the segment and make decisions about resources to be allocated to the segment. In that situation, an entity may report that segment’s interest revenue net of its interest expense and disclose that it has done so.

Disclosure of operating segment assets and segment liabilities

Í Disclosure of operating segment assets and liabilities are required only where such measures are provided to the CODM.

Explanation of measurements of segment profit or loss, segment assets and segment liabilities

Î If not apparent from the disclosures of reconciliations in this note, entities are required to disclose further information regarding the nature of differences between the measurements of segment profit or loss, segment assets, segment liabilities, and the entity’s profit or loss before tax and discontinued operations, assets and liabilities. Those differences could include accounting policies and policies for allocation of centrally incurred costs, jointly used assets, jointly utilised liabilities that are necessary for an understanding of the reported segment information.

The following should also be disclosed, where applicable: - The nature of any changes from prior periods in the measurement methods used to

determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss.

- The nature and effect of any asymmetrical allocations to reportable segments. For example, an entity might allocate depreciation expense to a segment without allocating the related depreciable assets to that segment.

FRS 108.13 FRS 108.23 FRS 108.23 FRS 108.27.b-d FRS 108.27.e-f






Information about segment profit or loss

ë An entity should disclose: a. Revenues from external customers (i) attributed to the entity’s country of domicile; and (ii)

attributed to all foreign countries in total from which the entity derives revenues. If revenues from external customers attributed to an individual foreign country are material, those revenues should be disclosed separately. An entity should disclose the basis for attributing revenues from external customers to individual countries.

b. Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, and rights arising under insurance contracts (i) located in the entity’s country of domicile and (ii) located in all foreign countries in total in which the entity holds assets. If assets in an individual foreign country are material, those assets should be disclosed separately.

Information about major customers

Ð For the purposes of disclosing information about major customers, a group of entities known to a reporting entity to be under common control shall be considered a single customer, and a government (national, state, provincial, territorial, local or foreign) and entities known to the reporting entity to be under the control of that government shall be considered a single customer.

43. Dividends

Group and Company

2013 $’000

2012 $’000

Declared and paid during the financial year:

Dividends on ordinary shares: - Final exempt (one-tier) dividend for 2012: 4.34 cents (2011: 4.45 cents)

per share 1,001 1,025 - Interim exempt (one-tier) dividend for 2013: 2.49 cents (2012: 2.41

cents) per share 612 557

1,613 1,582

Proposed but not recognised as a liability as at 31 December:

Dividends on ordinary shares, subject to shareholders’ approval at the AGM: - Final exempt (one-tier) dividend for 2013: 4.10 cents (2012: 6.50 cents)

per share 1,008 1,501

FRS 108.33 FRS 108.34 FRS 1.137.a, FRS 10.12




44. Events occurring after the reporting period

On 14 January 2014, a building of the Group, with net carrying value of $900,000, was severely damaged by fire and inventories with net carrying value of $157,000 were lost. It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of inventories by $250,000. The financial statements for the year ended 31 December 2013 have not been adjusted for the financial effect of this incident.

On 15 February 2014, the Company completed the disposal of one of its wholly-owned subsidiary, Good Fire Prevention Pte Ltd (GFP), which has been classified as discontinued operation (Note 11) as at 31 December 2013, for a cash consideration of $150,000.

45. Authorisation of financial statements for issue

The financial statements for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 27 February 2014.

FRS 10.21 and 22.d FRS 10.21 and 22.a FRS 10.17


Appendix A-1 Consolidated statement of comprehensive income in one statement – illustrating the analysis of expenses by nature


Illustrating the Statement of Comprehensive Income in one statement with the analysis of expenses by nature:

Note

2013 $’000

2012 $’000 FRS 1A.81.10A, FRS 1A.102

Continuing operations Revenue X 136,720 142,571 FRS 1A.82.a, FRS 1A.102 Other items of income FRS 1A.102 Interest income X 430 327 FRS 18.35.b.iii Dividend income from investment securities 526 406 FRS 18.35.b.v Other income X 1,725 1,195 Items of expense FRS 1A.99 Raw materials and consumables used (98,607) (92,477) FRS 1A.102 Changes in inventories of finished goods and work-in-progress (2,203) (16,631) FRS 1A.102

Employee benefits expense X (20,502) (19,024) FRS 1A.102

Depreciation and amortisation expense (3,113) (2,965) FRS 1A.102

Impairment losses (833) (425) FRS 1A.85 Net foreign exchange loss (136) (145) FRS 21.52.a Finance costs (1,715) (1,512) FRS 1A.82.b Other expenses (5,892) (4,532) FRS 1A.102 Share of results of associates 657 328 FRS 1A.82.c, FRS 28.38 Profit before tax from continuing operations X 7,057 7,116 FRS 1A.85 Income tax expense X (1,557) (1,687) FRS 1A.82.d, FRS 12.77 Profit from continuing operations, net of tax 5,500 5,429 FRS 1A.85 Discontinued operation

Loss from discontinued operation, net of tax X (544) (188) FRS 1A.82.ea, FRS 105.33.a & 33A

Profit for the year 4,956 5,241 FRS 1A.81A.a Other comprehensive income: å

Items that will not be reclassified to profit or loss: FRS 1A.82A.a Net surplus on revaluation of freehold land and buildings 1,250 2,404 FRS 1A.82A.a, FRS 16.77.f Share of gain on property revaluation of associates Ë 62 10 FRS 1A.82A.a, FRS 28.39 1,312 2,414 Items that may be reclassified subsequently to profit or loss: FRS 1A.82A.b Net gain on fair value changes of available-for-sale financial assets 174 98 FRS 1A.82A.b Foreign currency translation (181) (82) FRS 1A.82A.b, FRS 21.52.b (7) 16

Other comprehensive income for the year, net of tax 1,305 2,430 FRS 1A.81A.b Total comprehensive income for the year 6,261 7,671 FRS 1A.81A.c Profit for the year attributable to: Owners of the Company Profit from continuing operations, net of tax 5,320 5,029 FRS 105.33.d Loss from discontinued operation, net of tax (544) (188) FRS 105.33.d 4,776 4,841 FRS 1A.81B.a.ii Non-controlling interests Profit from continuing operations, net of tax 180 400 Loss from discontinued operation, net of tax - - 180 400 FRS 1A.81B.a.i

Total comprehensive income attributable to: Owners of the Company 6,091 7,211 FRS 1A.81B.b.ii Non-controlling interests 170 460 FRS 1A.81B.b.i 6,261 7,671

Attributable to: Owners of the Company Total comprehensive income from continuing operations, net of tax X 6,585 7,379 FRS 105.33.d Total comprehensive income from discontinued operations, net of tax X (494) (168) FRS 105.33.d 6,091 7,211


Appendix A-1 Consolidated statement of comprehensive income in one statement – illustrating the analysis of expenses by nature and early adoption of amendments to FRS 1


Note

2013 $’000

2012 $’000 FRS 1A.81.a, FRS 1A.102

Earnings per share from continuing operations attributable to owners of the Company (cents per share)

Basic X 22.98 21.81 FRS 33.66 Diluted X 22.73 21.58 FRS 33.66 Earnings per share (cents per share) Basic X 20.63 21.00 FRS 33.66 Diluted X 20.17

20.53 FRS 33.66

Commentary:

Tax effects related to each component of other comprehensive income

å An entity may present components of other comprehensive income either:

(a) net of related tax effects, as illustrated in the statement of comprehensive income, or

(b) before related tax effects with one amount shown for the aggregate amount of income tax relating to those items.

If an entity elects alternative (b), it shall allocate the tax between the items that might be reclassified subsequently to the profit or loss section and those that will not be reclassified subsequently to the profit or loss section.

Ë In this illustration, the share of other comprehensive income of associates relates to property revaluation attributable to owners of the associates, an item which will not be reclassified to profit or loss subsequently.

If an entity has share of other comprehensive income of associates which relates to items that may be reclassified subsequently to profit or loss, the item shall be presented under the group of items that may be reclassified subsequently to profit or loss.

FRS 1A.91 FRS 1A.82A


Appendix A-2 Hedge accounting


Extracts of summary of significant accounting policies illustrating accounting policies relating to hedge accounting:

X. Summary of significant accounting policies

X.X Hedge accounting

The Group applies hedge accounting for certain hedging relationships which qualify for hedge accounting.

For the purpose of hedge accounting, hedges are classified as:

§ fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment

§ cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment; or

§ hedges of a net investment in a foreign operation.

At the inception of a hedging relationship, the Group formally designates and documents the hedging relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:

Fair value hedges

The change in the fair value of a hedging derivative is recognised in profit or loss in finance costs. The change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of the carrying value of the hedged item and is also recognised in profit or loss in finance costs.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through profit or loss over the remaining term to of the hedge using the effective interest rate method. Effective interest rate amortisation may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognised, the unamortised fair value is recognised immediately in profit or loss.

When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit or loss.

The Group has an interest rate swap that is used as a hedge for the exposure of changes in the fair value of its X% fixed rate secured loan. See Note X for more details.

FRS 107.21

FRS 39.86.a

FRS 39.86.b

FRS 39.86.c FRS 39.55.a FRS 39.88 FRS 39.89 FRS 39.92

FRS 39.93




Extracts of summary of significant accounting policies illustrating accounting policies relating to hedge accounting: (continued)

X. Summary of significant accounting policies (continued)

X.X Hedge accounting (continued)

Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in profit or loss in other expenses.

The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments, as well as forward commodity contracts for its exposure to volatility in the commodity prices. The ineffective portion relating to foreign currency contracts is recognised in finance costs and the ineffective portion relating to commodity contracts is recognised in other operating income. Refer to Note X for more details.

Amounts recognised as other comprehensive income are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

Hedges of a net investment

Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised as other comprehensive income while any gains or losses relating to the ineffective portion are recognised in profit or loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to profit or loss.

The Group uses a loan as a hedge of its exposure to foreign exchange risk on its investments in foreign subsidiaries. Refer to Note X for more details.

FRS 39.95 FRS 39.97, 98 and 100 FRS 39.101 FRS 39.102




Extracts of notes to the financial statements illustrating the disclosures of fair value hedge accounting:

X. Hedging activities

X.X Fair value hedges Ê

At 31 December 2013, the Group had an interest rate swap agreement in place with a notional amount of USDXXX ($XXX) (2012: nil) whereby the Group receives a fixed rate of interest of X.XX% and pays a variable rate equal to LIBOR+X% on the notional amount. The swap is being used to hedge the exposure to changes in the fair value of its X.XX% secured loan.

The decrease in fair value of the interest rate swap of $XXX (2012: nil) has been recognised in finance costs and offset with a similar gain on the bank borrowings. The ineffectiveness recognised in 2013 was immaterial.

Commentary:

Disclosure requirement regarding fair value hedges

Ê FRS 107 requires separate disclosures of the amount of gain or loss on the hedging instrument and on the hedged item attributable to the hedged risk in a fair value hedge relationship.

FRS 107.22 FRS 107.24.a FRS 107.24.a




Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge accounting:


X.X Cash flow hedges Ê

Foreign currency risk

Foreign currency forward contracts measured at fair value through other comprehensive income are designated as hedging instruments in cash flow hedges of forecast sales in the United States and forecast purchases in the United Kingdom. These forecast transactions are highly probable, and they comprise about 25% of the Group’s total expected sales and about 65% of its total expected purchases.

While the Group also enter into other foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchases, these other contracts are not designated in hedge relationships and are measured at fair value through profit and loss.

The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.

The terms of the foreign currency forward contracts have been negotiated for the expected highly probable forecast transactions. As a result, no hedge ineffectiveness arises requiring recognition through profit or loss. Notional amounts are as provided in Note X.

The cash flow hedges of the expected future sales in January 2014 were assessed to be highly effective and a net unrealised gain of $XXX, with a deferred tax liability of $XXX relating to the hedging instruments, is included in other comprehensive income.

The cash flow hedges of the expected future purchases in February and March 2014 were assessed to be highly effective, and as at 31 December 2013, a net unrealised loss of $XXX, with a related deferred tax asset of $XXX was included in other comprehensive income in respect of these contracts.

At the end of December 2012, the cash flow hedges of the expected future sales in the first quarter of 2013 were assessed to be highly effective and an unrealised gain of $XXX with a deferred tax liability of $XXX was included in other comprehensive income in respect of these contracts. The cash flow hedges of the expected future purchases in the first quarter of 2013 were also assessed to be highly effective and an unrealised loss of $XXX, with a deferred tax asset of $XXX was included in other comprehensive income in respect of these contracts.

The amount removed from other comprehensive income during the year and included in the carrying amount of the hedging items as a basis adjustment was immaterial for both 2013 and 2012. The amounts retained in other comprehensive income at 31 December 2013 are expected to mature and affect profit or loss in 2014.

2013 2012

Assets Liabilities Assets Liabilities

Group $’000 $’000 $’000 $’000

Foreign currency forward contracts

Fair value XXX (XXX) XXX (XXX)

FRS 107.23.a FRS 107.24.b

FRS 107.23.c

FRS 107.23.c FRS 107.23.c FRS 107.23.d, e and a




Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge accounting:


X.X Cash flow hedges Ê (continued)

Commodity price risk

The Group purchases copper on an ongoing basis as its operating activities in the electronic division require a continuous supply of copper for the production of its electronic devices. The increased volatility in copper price over the past 12 months has led to the decision to enter into commodity forward contracts

These contracts, which commenced on 1 July 2013, are expected to reduce the volatility attributable to price fluctuations of copper. Hedging the price volatility of forecast copper purchases is in accordance with the risk management strategy outlined by the Board of Directors. The hedging relationships are for a period between 3 to 12 months based on existing purchase agreements. The Group designated only the spot-to-spot movement of the entire commodity purchase price as the hedged risk. The forward points of the commodity forward contracts are therefore excluded from the hedge designation. Changes in fair value of the forward points are recognised in profit or loss in ‘Other expenses’ were immaterial during the year.

As at 31 December 2013, the fair value of outstanding commodity forward contracts amounted to a liability of $XXX. The ineffectiveness recognised in ‘Other expenses’ in profit or loss for the current year was $XXX (see Note X). The cumulative effective portion of $XXX is reflected in other comprehensive income and will affect the profit or loss in the first six months of 2014.




Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge accounting: (continued)


X.X Cash flow hedges Ê (continued)

Hedging reserve

The cash flow hedge reserve contains the effective portion of the cash flow hedge relationships incurred as at the reporting date. $XXX are made up of the net movements in cash flow hedges and the effective portion of the forward commodity contract, net of tax.

X.X Components of other comprehensive income

Group

2013

$’000

2012

$’000

Net movement on cash flow hedges:

Gain/ (losses) arising during the year

– Commodity forward contracts (XXX) (XXX)

– Foreign currency forward contracts (XXX) – Reclassification adjustments for gains included in the statement of

comprehensive income Ë XXX XXX

(XXX) XXX

Commentary:

Disclosure requirements regarding cash flow hedges

Ê Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or loss that arises from cash flow hedges.

Ë FRS 107 requires the disclosure of the amount of gain or loss on a hedging instrument in a cash flow hedge relationship reclassified from equity to profit or loss, showing the amount included in each line in the statement of comprehensive income.

FRS 1.79.b FRS 1.97 FRS 1.92, FRS 107.23.d FRS 107.24.b FRS 107.23.d




Extracts of notes to the financial statements illustrating the disclosures of hedge of net investments in foreign operations:


X.X Hedge of net investments in foreign operations

Included in loans at 31 December 2013 was a borrowing of USDXXX which has been designated as a hedge of the net investment in the two subsidiaries in the United States, XX Inc. and XXX Inc. This borrowing is being used to hedge the Group’s exposure to foreign exchange risk on these investments. Gains or losses on the retranslation of this borrowing are transferred to other comprehensive income to offset any gains or losses on translation of the net investments in the subsidiaries. There is no ineffectiveness in the years ended 31 December 2013 and 2012. Ê

X.X Foreign currency translation reserve

The foreign currency translation reserve is also used to record the effect of hedging of net investments in foreign operations.

X.X Components of other comprehensive income

Group

2013

$’000

2012

$’000

Net gains/(losses) on hedge of net investment XXX (XXX)

Commentary:

Disclosure requirement regarding hedges of net investments in foreign operations

Ê Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or loss that arises from hedges of net investments in foreign operations.

FRS 107.22 FRS 1.79.b FRS 1.82.g

FRS 107.24.c


Appendix A-3 Agreements for the construction of real estate


Extract of summary of significant accounting policies illustrating accounting policies relating to agreements for the construction of real estate:

Commentary:

Stage of completion

Ê The stage of completion of a contract may be determined in a variety of ways. The entity uses the method that measures reliably the work performed. Depending on the nature of the contract, other acceptable methods include surveys of work performed and completion of a physical proportion of the contract work.

X. Significant accounting policies

X.X Revenue

X) Sale of completed development property

A development property is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied.

XX) Sale of development property under construction

Where development property is under construction and agreement has been reached to sell such property when construction is complete, the Directors consider whether the contract comprises:

- A contract to construct a property; or

- A contract for the sale of completed property

a) Where a contract is judged to be for the construction of a property, revenue is recognised using the percentage of completion method as construction progresses.

b) Where the contract is judged to be for the sale of a completed property, revenue is recognised when the significant risks and rewards of ownership of the real estate have been transferred to the buyer (i.e. revenue is recognised using the completed contract method).

i) If, however, the legal terms of the contract are such that the construction represents the continuous transfer of work in progress to the purchaser, the percentage of completion method of revenue recognition is applied and revenue is recognised as work progresses.

ii) In Singapore context, INT FRS 115 includes an accompanying note on the application of INT FRS 115 in Singapore which requires the percentage of completion method of revenue recognition to be applied to sale of private residential properties in Singapore prior to completion of the properties that are regulated under the Singapore Housing Developers (Control and Licensing) Act (Chapter 130) and uses the standard form of sale and purchase agreements (SPAs) prescribed in the Housing Developers Rules. The accompanying note to INT FRS 115 does not address the accounting treatment for other SPAs, including SPAs with a Deferred Payment Scheme feature in Singapore.

In the above situations (i) and (ii), the percentage of work completed is measured based on the costs incurred up until the end of the reporting periods as a proportion of total costs expected to be incurred. Ê

INT FRS 115.17 FRS 11.30

FRS 18.14

FRS 18.14 INT FRS 115.13 INT FRS 115.17 INT FRS 115.20.a

INT FRS 115.17, INT FRS 115.20.c




Extract of summary of significant accounting judgments and estimates relating to revenue recognition on development property under construction:

X. Significant accounting judgments and estimates

X.X Key sources of estimation uncertainty

X) Revenue recognition on development property under construction

The Group recognises revenue for pre-completion sales of certain types of properties by reference to the stage of completion using the percentage of completion method. The stage of completion is measured based on the costs incurred up until the end of the reporting periods as a proportion of total costs expected to be incurred. Significant assumptions are required to estimate the total contract costs and the recoverable variation works that affect the stage of completion and the revenue respectively. In making these estimates, management has relied on past experience and knowledge of the project engineers. The carrying amounts of assets and liabilities as well as the revenue from sale of development property (recognised on percentage of completion basis) are disclosed in Note X (Development Property) and Note Y (Revenue) to the financial statements respectively.

Extract of notes to financial statements illustrating the disclosure of revenue from sale of development property:

X. Revenue

Group

2013

$’000

2012

$’000

Revenue from sale of development properties (recognised on completed contract basis)

XXX

XXX

Revenue from sale of development properties (recognised on percentage of completion basis)

XXX

XXX

FRS 18.35.b.i FRS 18.35.b.i, INT FRS 115.20.b

FRS 1.125




Extract of notes to the financial statements illustrating the disclosure of development property:

X. Development property

The Group includes a division that develops residential property, which it sells in the ordinary course of business and has entered into contracts to sell certain of these properties on completion of construction.

The Group has considered the application of INT FRS 15 to these contracts and concluded that there pre-completion contracts were not, in substance, construction contracts. However, where the legal terms were such that the construction represented the continuous transfer of work in progress to the purchaser, the percentage of completion method of revenue recognition has been applied and revenue recognised as work progressed. Development expenditure incurred in respect of inventory property dealt with under the percentage of completion method is recognised in profit or loss in the period incurred.

Revenue from sales of residential property where the contracts are not in substance construction contracts and do not lead to a continuous transfer of work in progress, is recognised when both: (i) construction is complete; and (ii) either legal title to the property has been transferred or there has been an unconditional exchange of contracts. Construction and other expenditure attributable to such property is included in inventory property until disposal. During the year, the Group transferred the remaining unsold units of a residential property to investment property, in conjunction with the commencement of operating lease of these units to a third party.

The amount recognised in costs of sales for the year in respect of inventory property is:

Group

2013

$’000

2012

$’000

In respect of sales recognised on a percentage of completion basis

XXX

XXX

In respect of other inventory property sales XXX

XXX

Group

2013

$’000

2012

$’000

At 1 January XXX XXX Construction costs incurred XXX XXX Interest capitalised XXX XXX Transfer to completed investment property XXX XXX Disposals (recognised in cost of sales) (XXX) - At 31 December (XXX)

(XXX)

INT FRS 115.20 FRS 2.36(d) INT FRS 115.21 FRS 11.40(a) FRS 23.26(a) FRS 40.57(d)




X. Development property

The following table provides information about such continuous transfer agreements that are in progress at the reporting date:

Group

2013

$’000

2012

$’000

Aggregate costs incurred and recognised to date

XXX

XXX Profit before tax recognised to date XXX XXX

Advances received XXX

XXX

INT FRS 115.21


Appendix A-4 Defined benefit plans íì


The following is an illustration of disclosures relating to defined benefit plans upon adoption of the Revised FRS 19 Employee Benefits which is effective for period beginning on or after 1 January 2013.

Extract of summary of significant accounting policies illustrating changes in accounting policies on adoption of Revised FRS 19:


X.X Changes in accounting policies

X Revised FRS 19 Employee Benefits

On 1 January 2013, the Group adopted the Revised FRS 19 Employee Benefits.

For defined benefit plans, the Revised FRS 19 requires all actuarial gains and losses to be recognised in other comprehensive income and unvested past service costs previously recognised over the average vesting period to be recognised immediately in profit or loss when incurred.

Prior to adoption of the Revised FRS 19, the Group recognised actuarial gains and losses as income or expense when the net cumulative unrecognised gains and losses for each individual plan at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets and recognised unvested past service costs as an expense on a straight-line basis over the average vesting period until the benefits become vested. Upon adoption of the revised FRS 19, the Group changed its accounting policy to recognise all actuarial gains and losses in other comprehensive income and all past service costs in profit or loss in the period they occur. Ê

The Revised FRS 19 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying the net balance sheet defined benefit liability or asset by the discount rate used to measure the employee benefit obligation, each as at the beginning of the annual period.

The changes in accounting policies have been applied retrospectively. The effects of adoption on the financial statements are as follows:

FRS 19.172





X.X Changes in accounting policies (continued)

X Revised FRS 19 Employee Benefits (continued)

Group

As at 31 December

2013

As at 31 December

2012

(Restated)

As at 1 January

2012

(Restated)

$’000 $’000 $’000

Increase/(decrease) in:

Consolidated balance sheet

Employee benefit liability XXX XXX XXX

Deferred tax liabilities (XXX) (XXX) (XXX)

Retained earnings (XXX) (XXX) (XXX)

2013 2012

(Restated)

$’000 $’000

Consolidated income statement

Net benefit cost ç XXX XXX

Income tax expense (XXX) (XXX)

Profit for the year

Attributable to the owners of the Company (XXX) (XXX)

Attributable to non-controlling interests (XXX) (XXX)

Basic earnings per share (cents) (XXX) (XXX)

Diluted earnings per share (cents) (XXX) (XXX)

2013 2012

(Restated)

$’000 $’000


Remeasurement of defined benefit obligation XXX XXX

Income tax effects XXX XXX

Other comprehensive income for the year, net of tax

Attributable to the owners of the Company (XXX) (XXX)

Attributable to non-controlling interests (XXX) (XXX)





X.X Defined benefit plan

The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation (derived using a discount rate based on high quality corporate bonds) at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method.

Defined benefit costs comprise the following:

- Service cost

- Net interest on the net defined benefit liability or asset

- Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognised as expense in profit or loss. Past service costs are recognised when plan amendment or curtailment occurs.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on high quality corporate bonds to the net defined benefit liability or asset. Net interest on the net defined benefit liability or asset is recognised as expense or income in profit or loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognised immediately in other comprehensive income in the period in which they arise. Remeasurements are recognised in retained earnings within equity and are not reclassified to profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations).

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognised as a separate asset at fair value when and only when reimbursement is virtually certain.

FRS 19.8

FRS 19.67 FRS 19.120

FRS 19.8 FRS 19.103

FRS 19.8 FRS 19.123 FRS 19.127 FRS 19.122 FRS 19.8 FRS 19.113 FRS 19.116




Extracts of summary of significant accounting estimates and judgments relating to defined benefit plan:

X. Significant accounting judgments and estimates

X.X Key sources of estimation uncertainty

The cost of defined benefit pension plans and other post employment medical benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making various assumptions. These include the determination of the discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, defined benefit obligations are highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The net benefit liability as at 31 December 2013 is $XXX (2012: $XXX). Further details are provided in Note X.

In determining the appropriate discount rate, management considers the interest rates of high quality corporate bonds in the respective currencies with at least AA rating, with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality, and those having excessive credit spreads are removed from the population of bonds on which the discount rate is based, on the basis that they do not represent high quality bonds.

The mortality rate is based on publicly available mortality tables for the specific country and is modified accordingly with estimates of mortality improvements. Future salary increases and pension increases are based on expected future inflation rates for the specific country.

Further details about the assumptions used are provided in Note X.

FRS 1.125




Extracts of notes to the financial statements illustrating the disclosures relating to defined benefit plan:

X. Defined benefit plan Ê

The Group operates two defined benefit pension plans, both of which require contributions to be made to separately administered funds. One provides a pension of 2% of final salary for each year of service (Singapore plan), while the other provides 2.5% of average salary (US plan). Both benefit plans become vested after five years of service and require contributions to be made to separately administered funds. ç The Group also provides additional post employment healthcare benefits to certain senior employees in Singapore. These benefits are unfunded. The amount included in the consolidated balance sheet arising from the entity’s obligation in respect of its defined benefit plans is as follows:

Funded pension plans

Unfunded post-employment medical

benefits Singapore plan US plan Total

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

Present value of defined

benefit obligation

XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

Fair value of plan assets (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) – - –

XXX (XXX) XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

Restrictions on asset recognised

- XXX - - - - - XXX - - -

Net liability arising from defined benefit obligation

XXX (XXX) XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

FRS 19.135.a FRS 19.139.a.i




X. Defined benefit plan Ê (continued)

Changes in present value of the defined benefit obligations are as follow: é

Funded pension plans Unfunded post-employment

medical benefits Singapore plan US plan Total

2013

$’000

2012 (Restated)

$’000

2013

$’000

2012 (Restated)

$’000

2013

$’000

2012 (Restated)

$’000

2013

$’000

2012 (Restated)

$’000

At 1 January XXX XXX XXX XXX XXX XXX XXX XXX

Interest cost XXX XXX XXX XXX XXX XXX - -

Current service cost XXX XXX XXX XXX XXX XXX XXX XXX

Remeasurement (gains)/losses

Actuarial gains and losses arising from changes in demographic assumptions (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX)

Actuarial gains and losses arising from changes in financial assumptions

(XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX)

Past service cost è XXX XXX XXX XXX XXX XXX - -

(Gains)/Losses on settlements è (XXX) XXX (XXX) XXX (XXX) XXX XXX XXX

Contributions from plan participants

- - - - - - XXX XXX

Liabilities extinguished on settlements - - (XXX) - (XXX) - - -

Benefits paid (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) (XXX)

Effects of business combinations and disposal XXX (XXX) - - XXX (XXX) - -

Exchange differences XXX XXX XXX XXX XXX XXX XXX XXX

At 31 December XXX XXX XXX XXX XXX XXX XXX XXX

FRS 19.140.a.ii FRS 19.141





Changes in fair value of plan assets are as follow:


Singapore plan US plan Total

2013

$’000

2012

(Restated)

$’000

2013

$’000

2012

(Restated)

$’000

2013

$’000

2012

(Restated)

$’000

At 1 January XXX XXX XXX XXX XXX XXX

Interest income XXX XXX XXX XXX XXX XXX

Remeasurement gains/(losses)

Return on plan assets XXX XXX XXX XXX XXX XXX

Contributions by employer XXX - - - XXX -

Contributions from plan participants XXX XXX XXX XXX - XXX

Benefits paid (XXX) (XXX) (XXX) (XXX) (XXX) (XXX)

Assets distributed on settlements - - (XXX) - (XXX) -

Effects of business combinations and disposal XXX (XXX) - - XXX (XXX)

Exchange differences – – XXX (XXX) XXX (XXX)

At 31 December XXX XXX XXX XXX XXX XXX

Changes in the effect of the asset ceiling are as follow:


Singapore plan

2013

$’000

2012

(Restated)

$’000

At 1 January XXX -

Interest income XXX -

Remeasurement gains/(losses)

Changes in the effect of limiting to asset ceiling1 (XXX) XXX

Exchange differences – –

At 31 December - XXX

1The maximum economic benefit available is a combination of expected refunds from the plan and reductions in future contributions.

FRS 19.140.a.i FRS 19.141

FRS 19.140.a.iii FRS 19.141





The fair value of plan assets by each classes as at the end of the reporting period are as follow:

Funded pension plans Singapore plan US plan Total

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

31 December

2013 $’000

31 December 2012

(Restated) $’000

1 January 2012

(Restated) $’000

Cash and cash equivalents XXX XXX XXX XXX XXX XXX XXX XXX XXX

Equity instruments

- Manufacturing XXX XXX XXX XXX XXX XXX XXX XXX XXX

- Financial institutions XXX XXX XXX XXX XXX XXX XXX XXX XXX

- Telecommunications XXX XXX XXX XXX XXX XXX XXX XXX XXX

XXX XXX XXX XXX XXX XXX XXX XXX XXX

Debt instruments

- Government securities XXX XXX XXX XXX XXX XXX XXX XXX XXX

- AAA rated debt securities XXX XXX XXX XXX XXX XXX XXX XXX XXX

- Not rated debt securities XXX XXX XXX XXX XXX XXX XXX XXX XXX


Property

- Singapore XXX XXX XXX XXX XXX XXX XXX XXX XXX

- Australia XXX XXX XXX XXX XXX XXX XXX XXX XXX


Derivatives

- Interest rate swaps XXX XXX XXX XXX XXX XXX XXX XXX XXX

- Forward currency contracts XXX XXX XXX XXX XXX XXX XXX XXX XXX


Asset-backed securities XXX XXX XXX XXX XXX XXX XXX XXX XXX

Structured debts XXX XXX XXX XXX XXX XXX XXX XXX XXX

Fair value of plan assets XXX XXX XXX XXX XXX XXX XXX XXX XXX

All equity and debt instruments held have quoted prices in active market. The remaining plan assets do not have quoted market prices in active market.

The plan assets include a property occupied by a subsidiary of the Group with a fair value of $XXX (2012:$XXX) and ordinary shares of XYZ Holdings Limited with a fair value of $XXX (2012: $XXX).

FRS 19.142 FRS 19.143





The cost of defined benefit pension plans and other post employment medical benefits as well as the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making various assumptions. The principal assumptions used in determining pension and post-employment medical benefit obligations for the defined benefit plans are shown below:

2013 %

2012 %

Discount rates:

Singapore plan/ post employment medical plan XX XX

US plan XX XX

Expected rate of return on assets1:

Singapore plan XX XX

US plan XX XX

Future salary increases:


US plan XX XX

Future pension increases:


US plan XX XX

Post retirement mortality for pensioners at 65:

Singapore plan/ post employment medical plan

Male XX XX

Female XX XX

US plan

Male XX XX

Female XX XX

Healthcare cost increase rate: XX XX

1 The expected rate of return is calculated by weighting the expected rates of return on individual categories of plan assets in accordance with the anticipated balance in the plan’s investment portfolio. These expected rates of return are determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been a significant change in the expected rate of return on assets due to the improved stock market scenario.

FRS 19.144





The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation as of the end of the reporting period, assuming if all other assumptions were held constant: êë

Increase/(decrease)

31 December 2013

Singapore

Plan US Plan

Unfunded post-

employment medical benefits

Discount rates +XX basis points (XXX) (XXX) (XXX)

- XX basis points XXX XXX XXX

Expected rate of return on assets +XX % XXX XXX -

- XX % (XXX) (XXX) -

Future salary increases +XX % XXX XXX XXX

- XX % (XXX) (XXX) (XXX)

Future pension increases +XX % XXX XXX XXX

- XX % (XXX) (XXX) (XXX) Post retirement mortality for pensioners at 65:

Male +XX % XXX XXX XXX


Female +XX % XXX XXX XXX


Healthcare cost increase rate +XX % XXX XXX XXX


The management performed an Asset-Liability Matching Study (ALM) annually. The principal technique of the Group’s ALM is to ensure the expected return on assets to be sufficient to support the desired level of funding arising from the defined benefit plans. The Group’s current strategic investment strategy consists of 50% of equity instruments, 30% of debt instruments, 15% of investment properties and 5% of cash. The use of debt instruments in combination with interest rate swaps will reduce the sensitivities caused by the term of the defined benefit obligation by 25%. ë

The Group’s defined benefit pension plans are funded by its subsidiaries. The employees of the Group contribute 6% of the pensionable salary and the remaining residual contributions are paid by the subsidiaries of the Group. ë

The Group expects to contribute $XXX (2012: $XXX) to the defined benefit pension plans in 2014.

The average duration of the defined benefit obligation at the end of the reporting period is 18.4 years (2012: 17.5 years).

FRS 19.145

FRS19.146 FRS19.147.a

FRS19.147.b FRS19.147.c




Commentary:

Ê To meet the disclosure objective of Revised FRS 19 for defined benefit plans, an entity shall consider all the following:

(a) the level of detail necessary to satisfy the disclosure requirements,

(b) how much emphasis to place on each of the various requirements,

(c) how much aggregation or disaggregation to undertake; and

(d) whether users of financial statements need additional information to evaluate the quantitative information disclosed.

If the disclosures provided in accordance with the specific requirements of Revised FRS 19 are insufficient to meet the objectives above, the entity shall disclose additional information necessary to meet those objectives. For example, an entity may present an analysis of the present value of defined benefit obligation that distinguishes the nature, characteristics and risks of the obligation. Such a disclosure could distinguish:

- between amounts owing to active members, deferred members, and pensioners

- between vested benefits and accrued but not vested benefits

- between conditional benefits, amounts attributable to future salary increases and other benefits

An entity shall assess whether all or some disclosures should be disaggregated to distinguish plans or groups of plans with materially different risks. For example, an entity may disaggregate disclosure about plans showing one or more of the following features:

- different geographical locations

- different characteristics such as flat salary pension plans, final salary pension plans or post-employment medical plans

- different regulatory environments

- different reporting segments

- different funding arrangements (e.g. wholly unfunded, wholly or partly funded)

ç When disclosing the characteristics of defined benefit plans and risks associated with them, an entity shall disclose:

(a) information about the characteristics including

- the nature of benefits provided by the plan (e.g. final salary defined benefit plan or contribution-based plan with guarantee).

- a description of the regulatory framework in which the plan operates, for example the level of any minimum funding requirements, and any effect of the regulatory framework on the plan, such as the asset ceiling.

- a description of any other entity’s responsibilities for the governance of the plan, for example responsibilities of trustees or of board members of the plan.

(b) a description of the risks to which the plan exposes the entity, focused on any unusual entity-specific or plan-specific risks, and of any significant concentrations of risk. For example, if plan assets are invested primarily in one class of investments, e.g. property, the plan may expose the entity to a concentration of property market risk.

(c) a description of any plan amendments, curtailments and settlements.

é An entity shall provide reconciliation from the opening balance to the closing balance for any reimbursement rights and the related obligation, if applicable.

FRS 19.136 FRS 19.137 FRS 19.138 FRS 19.139 FRS 19.140.b





Í Past service cost and gains and losses arising from settlements need not be distinguished if they occur together.

Î In the financial statements for periods beginning before 1 January 2014, an entity need not present comparative information for the disclosures about the sensitivity of the defined benefit obligation.

Ï Revised FRS 19 introduces a number of new disclosure requirements. These include:

Sensitivity analysis

- A sensitivity analysis for each significant assumption as of the end of the reporting period, showing how the defined benefit obligation would have been affected by changes in the relevant assumption that were reasonably possible at that date.

- The method and assumptions used in preparing the sensitivity analyses and the limitation of those methods.

- Changes from the previous period in the methods and assumptions used in preparing the sensitivity analyses, and the reasons for such changes.

Asset-liability matching strategies

- A description of any asset-liability matching strategies used by the plan or the entity, including the use of annuities and other techniques, such as longevity swaps, to manage risk.

Cash flow information

- A description of any funding arrangements, and funding policy that affect future contributions to the defined benefit plan.

- Expected contributions to the plan for the next annual reporting period.

- Information about the maturity profile of the defined benefit obligation (including, but not limited to, weighted average duration of the defined benefit obligation).

Ð Multi-employer plans

In this illustration, we do not illustrate multi-employer plans. If the Group participates in a multi-employer plan and accounts for that plan as a defined benefit plan, it shall disclose the following in addition to information required by paragraphs 135-147 of the Revised FRS 19:

(a) a description of the funding arrangements, including the method used to determine the entity’s rate of contributions and any minimum funding requirements.

(b) a description of the extent to which the entity can be liable to the plan for other entities’ obligations under the terms and conditions of the multi-employer plan.

(c) a description of any agreed allocation of a deficit or a surplus on:

i. wind-up of the plan; or

ii. the entity’s withdrawal from the plan.

(d) if the entity accounts for that plan as if it were a defined contribution plan, it shall disclose the following, in addition to the information required by (a) – (c) and instead of the information required by paragraph 139 to 147 of the Revised FRS 19:

i. the fact that the plan is a defined benefit plan.

ii. the reason why sufficient information is not available to enable the entity to account for the plan as a defined benefit plan.

FRS 19.141.d FRS 19.173.b FRS 19.145.a FRS 19.145.b FRS 19.145.c

FRS 19.146

FRS 19.147.a FRS 19.147.b FRS 19.147.c FRS 19.33.b FRS 19.148





í Multi-employer plans (continued)

iii. the expected contributions to the plan for the next annual reporting period.

iv. information about any deficit or surplus in the plan that may affect the amount of future contributions, including the basis used to determine that deficit or surplus and the implications, if any, for the entity.

v. an indication of the level of participation of the entity in the plan compared with other participating entities. Examples of measures that might provide such an indication include the entity’s proportion of the total contributions to the plan or the entity’s proportion of the total number of active members, retired members, and former members entitled to benefits, if that information is available.

Ñ Defined benefit plans that share risks between entities under common control

In this illustration, we do not illustrate defined benefit plans that share risks between entities under common control. If an entity participates in a defined benefit plan that shares risks between entities under common control, it shall disclose:

(a) the contractual agreement or stated policy for charging the net defined benefit cost or the fact that there is no such policy.

(b) the policy for determining the contribution to be paid by the entity.

(c) if the entity accounts for an allocation of the net defined benefit cost as noted in paragraph 41 of Revised FRS 19 î, all the information about the plan as a whole required by paragraph 135-147 of Revised FRS 19.

(d) if the entity accounts for the contribution payable for the period as noted in paragraph 41 of Revised FRS 19 î, the information about the plan as a whole required by paragraphs 135 – 137, 142 - 144 and 147 (a) and (b) of Revised FRS 19.

The information required by (c) and (d) can be disclosed by cross-reference to disclosures in another group entity’s financial statements if:

(a) that group entity’s financial statements separately identify and disclose the information required about the plan; and

(b) that group entity’s financial statements are available to users of the financial statements on the same terms as the financial statements of the entity and at the same time as, or earlier than, the financial statements of the entity.

Ò Paragraph 41 of Revised FRS 19 requires an entity participating in a defined benefit plan that share risks between entities under common control to obtain information about the plan as a whole measured in accordance with Revised FRS 19 on the basis of assumptions that apply to the plan as a whole. If there is a contractual agreement or stated policy for charging to individual group entities the net defined benefit cost for the plan as a whole measured in accordance with Revised FRS 19, the entity shall, in its separate or individual financial statements, recognise the net defined benefit cost so charged. If there is no such agreement or policy, the net defined benefit cost shall be recognised in the separate or individual financial statements of the group entity that is legally the sponsoring employer for the plan. The other group entities shall, in their separate or individual financial statements, recognise a cost equal to their contribution payable for the period.

FRS 19.148

FRS 19.149

FRS 19.150 FRS 19.41


Appendix A-5 Consolidated financial statements, joint arrangements and disclosure of interests in other entities


FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements, FRS 112 Disclosure of Interests in Other Entities and the consequential amendments to FRS 27 Separate Financial Statements and FRS 28 Investments in Associates and Joint Ventures are effective for annual periods beginning on or after 1 January 2014. Ê The following is an illustration of disclosures assuming FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised 28 have been early adopted for the year ending 31 December 2013. Ê

Extract of summary of significant accounting policies illustrating accounting policies on adoption of FRS 110, FRS 111, FRS 112 and the consequential amendments to Revised FRS 27 and Revised FRS 28:


X.X Changes in accounting policies

X FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised FRS 28

On 1 January 2013, the Group early adopted FRS 110, FRS 111, FRS 112 and the consequential amendments to Revised FRS 27 and Revised FRS 28 which are effective for annual periods beginning on or after 1 January 2014. Ê

FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements

FRS 27 was amended to address accounting for subsidiaries, jointly controlled entities and associates in separate financial statements.

FRS 110 establishes a new control model that applies to all entities including special purpose entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations. ç

Prior to the adoption of FRS 110, the Group controls an investee when the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. Upon application of FRS 110, the Group has reassessed its investments in accordance with the new definition of control. As a result of the reassessment, the Group concluded that it has control over ABC Ltd which was previously accounted for as an associated company.é

The Group acquired 47% of ownership interest in ABC Ltd in 2005 and there was no change in the Group’s ownership in ABC Ltd since then. The remaining 53% of the ordinary shares of ABC Ltd are owned by thousands of shareholders, which none of the shareholders hold more than 1 per cent of the voting rights individually.

In assessing whether the Group has control over an investee where the Group holds less than a majority of voting rights, the Group considers factors such as the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of other vote holders as well as any additional facts and circumstances that indicate the Group has, or does not have, the current ability to direct the relevant activities of the investee, including the voting patterns at the investee’s previous shareholders’ meetings.

FRS 110.C1 FRS 111.C1 FRS 112.C1 FRS 27R.18 FRS 28R.45






FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements (continued)

The change in accounting policy has been applied retrospectively in accordance with the transitional provisions in FRS 110. The assets, liabilities and non-controlling interests in ABC Ltd are measured as if ABC Ltd had been consolidated from the date when the Group obtained control in 2005, è by applying the requirements of FRS 103 (issued in 2004). ê The effects of adoption on the financial statements are as follows ë:

Group

As at 31 December

2013

As at 31 December

2012 (Restated)

As at 1 January

2012 (Restated)

$’000 $’000 $’000

(Decrease)/increase in: Consolidated balance sheet Investment in associate (XXX) (XXX) (XXX) Property, plant and equipment XXX XXX XXX Investment properties XXX XXX XXX Trade and other receivables XXX XXX XXX Cash and short-term deposits XXX XXX XXX Trade and other payables XXX XXX XXX Income tax payable XXX XXX XXX Provisions XXX XXX XXX Loans and borrowings XXX XXX XXX Deferred tax liabilities XXX XXX XXX

Impact on net assets XXX XXX XXX

Non-controlling interests XXX XXX XXX Others reserves XXX XXX XXX

Impact on equity XXX XXX XXX

FRS 8.28.b FRS 8.28.d FRS 110.C4.a






FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements (continued)

Group

2013 2012

(Restated)

$’000 $’000

Increase/(decrease) in:


Revenue XXX XXX

Cost of sales XXX XXX

Interest income XXX XXX

Other income XXX XXX

Marketing and distribution XXX XXX

Administrative expenses XXX XXX

Share of results of associates (XXX) (XXX)

Finance costs XXX XXX

Income tax expense XXX XXX

Profit for the year XXX XXX

Profit for the year attributable to

Owners of the Company - -

Non-controlling interests XXX XXX

Basic earnings per share (cents per share) - -

Diluted earnings per share (cents per share) - -


Net surplus on revaluation of freehold land and buildings XXX XXX

Foreign currency translation XXX XXX

Share of other comprehensive income of associates (XXX) (XXX)

Income tax effects XXX XXX

Other comprehensive income for the year, net of tax XXX XXX

Total comprehensive income for the year XXX XXX

Total comprehensive income for the year attributable to


Non-controlling interests XXX XXX






FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures

FRS 111 uses the principle of control in FRS 110 to define joint control and removes the option to account for joint ventures using proportionate consolidation. Accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the parties a right to the underlying assets and obligations is accounted for by recognising the share of those assets and obligations. Joint ventures that give the parties a right to the net assets is accounted for using the equity method. The revised FRS 28 was amended to describe the application of equity method to investments in joint ventures in addition to associates.

The adoption of FRS 111 has resulted in the Group having to revise its method of accounting for its joint arrangement. Investment in jointly controlled entity had been previously consolidated proportionately. Under FRS 111, this arrangement is classified as joint venture to be equity accounted.

The change in accounting policy has been applied in accordance with the transitional provision in FRS 111. The initial investment was measured as the aggregate of the carrying amounts of the assets and liabilities that the Group previously proportionately consolidated. The effects of adoption on the financial statements are as follows ë:

Group

As at 31 December

2013

As at 31 December

2012

(Restated)

As at 1 January

2012

(Restated)

$’000 $’000 $’000 Increase/(decrease) in: Consolidated balance sheet Investment in joint venture XXX XXX XXX Property, plant and equipment (XXX) (XXX) (XXX) Trade and other receivables (XXX) (XXX) (XXX) Goodwill (XXX) (XXX) (XXX) Cash and cash equivalents (XXX) (XXX) (XXX)

FRS 8.28.b FRS 8.28.d FRS 111.C2






FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures (continued)

Group

As at 31 December

2013

As at 31 December

2012

(Restated)

As at 1 January

2012

(Restated)

$’000 $’000 $’000 Decrease in: Consolidated balance sheet Trade and other payables (XXX) (XXX) (XXX) Income tax payable (XXX) (XXX) (XXX) Provisions (XXX) (XXX) (XXX) Deferred tax liabilities (XXX) (XXX) (XXX)

Group

2013 2012 (Restated) $’000 $’000

(Decrease)/increase in: Consolidated income statement Revenue (XXX) (XXX) Cost of sales (XXX) (XXX) Interest income (XXX) (XXX) Other income (XXX) (XXX) Marketing and distribution (XXX) (XXX) Administrative expenses (XXX) (XXX) Income tax expense (XXX) (XXX) Share of profits of a joint venture XXX XXX




Commentary

Ê FRS 110, FRS 111, FRS 112 and the consequential amendments to FRS 27 and FRS 28 are effective for annual periods beginning on or after 1 January 2014. The new standards may be adopted early, but must all be adopted as of the same date, except that an entity may early adopt the disclosure provisions for FRS 112 without adopting the other new standards.

The Accounting Standard Council announced on 31 August 2012 that it will allow stakeholders more time to implement FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised FRS 28 (collectively the Relevant Standards). The mandatory effective date of the Relevant Standards is deferred for a year from annual periods beginning on or after 1 January 2013 to annual periods beginning on or after 1 January 2014.

Earlier application of the Relevant Standards continues to be permitted, subject to the requirements for earlier application as set out in the Relevant Standards.

Investment entities

Ë FRS 110 provides exception to the consolidation requirement for entities that met the definition of an investment entity. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss in accordance with FRS 39 Financial Instruments: Recognition and Measurement

In this illustration, the Company does not meet the definition of an investment entity and therefore does not apply the exception to consolidation under FRS 110. When a parent determines that it is an investment entity in accordance with FRS 110, the following disclosures are required.

(a) Information about significant judgements and assumptions it has made in determining that it is an investment entity. If the investment entity does not have one or more of the typical characteristics of an investment entity, it shall disclose its reasons for concluding that it is nevertheless an investment entity.

(b) When an entity becomes, or ceases to be, an investment entity, it shall disclose the change of investment entity status and the reasons for the change. In addition, an entity that becomes an investment entity shall disclose the effect of the change of status on the financial statements for the period presented including:

- The total fair value, as of the date of change of status, of the subsidiaries that cease to be consolidated

- The total gain or loss, if any, calculated in accordance with paragraph B101 of FRS 110

- The line item(s) in profit or loss in which the gain or loss is recognised (if not presented separately)

(c) For each unconsolidated subsidiary, an investment entity shall disclose:

- the subsidiary’s name;

- the principal place of business (and country of incorporation if different from the principal place of business) of the subsidiary; and

- the proportion of ownership interest held by the investment entity and, if different, the proportion of voting rights held.

(d) If an investment entity is the parent of another investment entity, the parent shall also provide the disclosures in item (c) above for investments that are controlled by its investment entity subsidiary. The disclosure may be provided by including, in the financial statements of the parent, the financial statements of the subsidiary (subsidiaries) that contain the above information.

FRS 110.C1 FRS 111.C1 FRS 27R.18 FRS 28R.45 FRS 112.C1 and C2 FRS 112.9A FRS 112.9B

FRS 112.19B

FRS 113.19C




Commentary (continued)

Investment entities (continued)

Ë (e) The nature and extent of any significant restrictions (eg resulting from borrowing arrangements, regulatory requirements or contractual arrangements) on the ability of an unconsolidated subsidiary to transfer funds to the investment entity in the form of cash dividends or to repay loans and advances made to the unconsolidated subsidiary by the investment entity

(f) Any current commitments or intentions to provide financial or other support to an unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in obtaining financial support.

(g) If, during the reporting period, an investment entity or any of its subsidiaries has, or without having a contractual obligation to do so, provided financial or other support to an unconsolidated subsidiary (eg purchasing assets of, or instruments issued by, the subsidiary or assisting the subsidiary in obtaining financial support), the entity shall disclose:

- The type and amount of support provided to each unconsolidated subsidiary

- The reasons for providing the support

(h) The terms of any contractual arrangements that could require the entity or its unconsolidated, controlled, structured entity, including events or circumstances that could expose the reporting entity to a loss (eg liquidity arrangements or credit triggers associated with obligations to purchase assets of the structured entity or to provide financial support).

(i) If during the reporting period an investment entity or any of its unconsolidated subsidiaries has, without having a contractual obligation to do so, provided financial or other support to an unconsolidated, structured entity that the investment entity did not control, and if that provision of support resulted in the investment entity controlling the structured entity, the investment entity shall disclose an explanation of the relevant factors in reaching the decision to provide that support.

Ì Potential voting rights

In this illustration, the Group does not have potential voting rights in its investee.

The following is an illustrative change in accounting policy when the Group has potential voting rights in its investee:

Prior to the adoption of FRS 110, the Group controls an investee when the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. Upon application of FRS 110, the Group has reassessed its investments in accordance with the new definition of control. As a result of the reassessment, the Group concluded that it does not have control over JJJ Ltd which was previously accounted for as a subsidiary.

The Group holds 33.33% of voting rights in JJJ Ltd. In addition to its equity instruments, the Group also holds debt instruments that are convertible into ordinary shares of JJJ Ltd at any time for a fixed price. If the debt were converted, the Group would hold 60% of the voting rights of the investee.

FRS 113.19D.a

FRS 113.19D.b FRS 113.19E FRS 113.19F FRS 113.19G





Ì Potential voting rights (continued)

In reassessing whether the Group have control over an investee, the Group considers the voting rights and potential voting rights that it holds, as well as the rights and potential voting rights held by others. Potential voting rights are only considered if they are substantive.

Upon adoption of FRS 110, the Group concluded that it does not have power over JJJ Ltd as the potential voting rights are not substantive as the conversion option is deeply out of the money. Accordingly, the Group accounts for JJJ Ltd as an associate using the equity method.

The change in accounting policy has been applied retrospectively in accordance with the transitional provisions in FRS 110. The retained interest in JJJ Ltd is measured at the amount at which it would have been measured if the requirements of FRS 110 had been effective when the Group became involved with JJJ Ltd. Î The effects of adoption on the financial statements are as follows ë:

Group

As at 31 December

2013

As at 31 December

2012 (Restated)

As at 1 January

2012 (Restated)

$’000 $’000 $’000

Increase/(decrease) in: Consolidated balance sheet Investment in associate XXX XXX XXX Property, plant and equipment (XXX) (XXX) (XXX) Investment property (XXX) (XXX) (XXX) Trade and other receivables (XXX) (XXX) (XXX) Cash and cash equivalents (XXX) (XXX) (XXX) Trade and other payables (XXX) (XXX) (XXX) Current tax liabilities (XXX) (XXX) (XXX) Provisions (XXX) (XXX) (XXX) Loans and borrowings (XXX) (XXX) (XXX) Deferred tax liabilities (XXX) (XXX) (XXX)

Impact on net assets (XXX) (XXX) (XXX)

FRS 8.28.b FRS 8.28.d FRS 110.C5





ç Potential voting rights (continued)

Group

2013 2012

(Restated)

$’000 $’000

(Decrease)/increase in:


Revenue (XXX) (XXX)

Cost of sales (XXX) (XXX)

Interest income (XXX) (XXX)

Other income (XXX) (XXX)

Marketing and distribution (XXX) (XXX)

Administrative expenses (XXX) (XXX)

Share of results of associates XXX XXX

Finance costs (XXX) (XXX)

Income tax expenses (XXX) (XXX)

Profit for the year (XXX) (XXX)

Profit for the year attributable to


Non-controlling interests (XXX) (XXX)

Basic earnings per share (cents) - -

Diluted earnings per share (cents) - -

(Decrease)/increase in:


Net surplus on revaluation of freehold land and buildings (XXX) (XXX)

Foreign currency translation (XXX) (XXX)

Share of other comprehensive income of associates XXX XXX

Income tax effects (XXX) (XXX)

Other comprehensive income for the year, net of tax (XXX) (XXX)

Total comprehensive income for the year (XXX) (XXX)

Total comprehensive income for the year attributable to


Non-controlling interests (XXX) (XXX)





Ì In this illustration, the Group measures the assets, liabilities and non-controlling interests in the investee, ABC Ltd as if that investee had been consolidated from the date when the Group obtained control of that investee. If measuring the investee’s assets, liabilities and non-controlling interests retrospectively is impracticable, the deemed acquisition date shall be the beginning of the earliest period for which retrospective application is practicable, which may be the current period.

Í FRS 110 allows an entity to apply either FRS 103 (2008) or FRS 103 (issued in 2004). In this illustration, the Group applied the requirements of FRS 103 (issued in 2004). Alternatively, the Group may apply FRS 103 (issued in 2008).

Î In this illustration, the Group measures the retained interest in the investee, JJJ Ltd at the amount at which it would have been measured if the requirements of FRS 110 had been effective when the Group became involved with that investee. If measurement of the retained interest is impracticable, the Group shall account for the loss of control at the beginning of the earliest period for which application of FRS 110 is practicable, which may be the current period. The Group shall recognise any difference between the previously recognised amount of the assets, liabilities and non-controlling interest and the carrying amount of the Group’s involvement with the investee as an adjustment to equity for that period. In addition, the Group shall provide comparative information and disclosures of the circumstances that led to the condition that makes retrospective application impracticable and from when the change in accounting policy has been applied.

Ï In this illustration, the Group disclosed the amount of adjustment for the current period and each prior period upon the initial application of FRS 110 and FRS 111. FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires the disclosure of the amount of the adjustment for the current period and each prior period unless it is impracticable to determine the amount of the adjustment upon initial application of a Standard or an Interpretation.

FRS 110.C4.c.i FRS 110.C4B FRS 110.C5 FRS 8.28.h FRS 8.28





X.X Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Ê Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Losses and other comprehensive income are attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it

- de-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts as at the date when controls is lost;

- de-recognises the carrying amount of any non-controlling interest;

- de-recognises the cumulative translation differences recorded in equity;

- recognises the fair value of the consideration received;

- recognises the fair value of any investment retained;

- recognises any surplus or deficit in profit or loss;

- re-classifies the Group’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.

X.X Subsidiaries

A subsidiary is an investee that is controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Thus, the Group controls an investee if an only if the Group has all of the following:

- power over the investee

- exposure, or rights or variable returns from its involvement with the investee; and

- the ability to use its power over the investee to affect its returns

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

FRS 110.4 FRS 110.Appendix A FRS 110.B92 FRS 110.19 and B87 FRS 110.B86.c FRS 110.20 and B88 FRS 110.B94 FRS 110.23 FRS 110.B98

FRS 110.6

FRS 110.7 FRS 110.8 FRS 27R.17.c





X.X Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from equity attributable to owners of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

Commentary

Ê The financial statements of the parents and its subsidiaries used in the preparation of the consolidated financial statements shall be prepared as of the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial statements as of the same date as the financial statements of the parent, unless it is impracticable to do so.

Where it is impracticable to do so, the parent may use the financial statements of a subsidiary prepared as of a reporting date different from that of the parent, provided adjustments are made for the effects of the significant transactions or events that occur between that date and the date of the parent’s financial statements, and the difference between the reporting dates of the subsidiary and the parent is no more than three months. In addition, the length of the reporting periods and any difference in the reporting dates shall be the same from period to period.

When the financial statements of a subsidiary used in the preparation of consolidated financial statements are as of a date or for a period that is different from that of the consolidated financial statements, an entity shall disclose the date of the end of the reporting period of the financial statements of that subsidiary and the reason for using a different date or period.

FRS 110.Appendix A FRS 110.22 FRS 110.23 FRS 110.B96

FRS 110.B92 FRS 110.B93 FRS 112.11





X.X Joint arrangements

A joint arrangement is a contractual arrangement whereby two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

A joint arrangement is classified either as joint operation or joint venture, based on the rights and obligations of the parties to the arrangement.

To the extent the joint arrangement provides the Group with rights to the assets and obligations for the liabilities relating to the arrangement, the arrangement is a joint operation. To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the arrangement is a joint venture.

The Group reassesses whether the type of joint arrangement in which it is involved has changed when facts and circumstances change.

a) Joint operations

The Group recognises in relation to its interest in a joint operation,

- its assets, including its share of any assets held jointly;

- its liabilities, including its share of any liabilities incurred jointly;

- its revenue from the sale of its share of the output arising from the joint operation;

- its share of the revenue from the sale of the output by the joint operation; and

- its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the accounting policies applicable to the particular assets, liabilities, revenues and expenses.

When the Group enters into transaction involving a sale or contribution of assets with a joint operation in which it is a joint operator, the Group recognises gains and losses resulting from such a transaction only to the extent of the interests held by the other parties to the joint operation.

When the Group enters into a transaction involving purchase of assets with a joint operation in which it is a joint operator, the Group does not recongise its share of the gains and losses until it resells those assets to a third party. When such transactions provide evidence of a reduction in the net realisable value of the assets to be purchased or of an impairment loss of those assets, the Group recognises it share of those losses.

b) Joint ventures

The Group recognises its interest in a joint venture as an investment and accounts for the investment using the equity method. The accounting policy for investment in joint venture is set out in Note X.X.

FRS 111.4 FRS 111.7 FRS 111.14 FRS 111.15 FRS 111.16 FRS 111.19 FRS 111.20 FRS 111.21 FRS 111.B34 FRS 111.B36 FRS 111.B37 FRS 112.21.b.i





X.X Joint ventures and associates

An associate is an entity over which the Group has the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control of those policies.

The Group account for its investments in associates and joint ventures using the equity method from the date on which it becomes an associate or joint venture.

On acquisition of the investment, any excess of the cost of the investment over the Group’s share of the net fair value of the investee’s identifiable assets and liabilities is accounted as goodwill and is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment is included as income in the determination of the entity’s share of the associate or joint venture’s profit or loss in the period in which the investment is acquired.

Under the equity method, the investment in associates or joint ventures are carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates or joint ventures. The profit or loss reflects the share of results of operations of the associates or joint ventures. Distributions received from joint ventures or associates reduce the carrying amount of the investment. Where there has been a change recognised in other comprehensive income by the associates or joint ventures, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associates or joint ventures.

When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture Ê, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in associate or joint ventures. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate or joint venture is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognises the amount in profit or loss.

The financial statements of the associates and joint ventures are prepared as the same reporting date as the Company. ç Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Upon loss of significant influence or joint control over the associate or joint venture, the Group measures the retained interest at fair value. Any difference between the fair value of the aggregate of the retained interest and proceeds from disposal and the carrying amount of the investment at the date the equity method was discontinued is recognised in profit or loss.

The Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would have been required if that associate or joint venture had directly disposed of the related assets or liabilities.

When an investment in an associate becomes an investment in a joint venture or an investment in joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

FRS 28R.3 FRS 28R.16 FRS 28R.32 FRS 28R.32 FRS 28R.10

FRS 28R.28

FRS 28R.38 and 39 FRS 28R.40 FRS 28R.42 FRS 28R.33 and 34 FRS 28R.35 FRS 28R.22 FRS 28R.22.c FRS 28R.24





X.X Joint ventures and associates (continued)

If the Group’s ownership interest in an associate or a joint venture is reduced, but the Group continues to apply the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

Commentary

Associates and joint ventures

Ê The interest in an associate or a joint venture is the carrying amount of the investment in the associate or joint venture under the equity method together with any long-term interests that, in substance, form part of the investor’s net investment in the associate or joint venture. For example, an item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, an extension of the entity’s investment in that associate or joint venture. Such items may include preference shares and long-term receivables or loans but do not include trade receivables, trade payables or any long-term receivables for which adequate collateral exists, such as secured loans.

Ë The financial statements of the associate or joint venture are prepared as of the same reporting date as the Company unless it is impracticable to do so. When the financial statements of an associate or joint venture used in applying the equity method are prepared as of a different reporting date from that of the Company, adjustments are made for the effects of significant transactions or events that occur between that date and the reporting date of the Company. In any case, the difference between the end of the reporting period of the associate and that of the investor shall be no more than three months. The length of the reporting period and any difference between the ends of the reporting periods shall be the same from period to period.

When the financial statements of an associate or a joint venture used in applying the equity method are as of a reporting date or for a period that is different from that of the Company, the reporting date of the financial statements of the associate or joint venture and the reason for using a different reporting date or different period shall be disclosed.

FRS 28R.38 FRS 28R.33 and 34

FRS 112.22.b

FRS 28R.25




X. Judgments made in applying accounting policies Êç

X.X Consolidation of entities in which the Group holds less than 50%

In the process of applying the Group’s accounting policies, management has made significant judgments in relation to the following subsidiary controlled by the Group:

ABC Ltd:

The Group is the largest shareholder with a 47% equity interest. The remaining shareholders are widely dispersed with no one owning more than 1% equity interest. Based on these facts and circumstances, the Group determined that it has sufficiently dominant voting interests that gives it control over ABC Ltd. Details of ABC Ltd are set out in Note X.

X.X Significant influence over Drill Pte. Ltd

Management concluded that Drill Pte. Ltd is an associate of the Group although the Group only has 19% voting interest in Drill Pte. Ltd. The Group determined that it has significant influence over Drill Pte. Ltd as the Group has the power to participate in the financial and operating policy decisions via its representatives on the Board of Directors of Drill Pte. Ltd.

Commentary

Ê An entity shall disclose information about significant judgements and assumptions it has made (and changes to those judgements and assumptions) in determining:

(a) that it has control of another entity,

(b) that it has joint control of an arrangement or significant influence over another entity; and

(c) the type of joint arrangement (i.e. joint operation or joint venture) when the arrangement has been structured through a separate vehicle.

Such disclosures, for example, includes significant judgements and assumptions made in determining that:

(a) it does not control another entity even though it holds more than half of the voting rights of the other entity.

(b) it controls another entity even though it holds less than half of the voting rights of the other entity.

(c) it is an agent or a principal

(d) it does not have significant influence even though it holds 20% or more of the voting rights of another entity.

(e) it has significant influence even though it holds less than 20% of the voting rights of another entity.

ç When changes in facts and circumstances are such that the conclusion about whether it has control, joint control or significant influence changes during the reporting period, an entity shall disclose the significant judgements and assumptions made by the entity as set out above.

FRS 1.122 FRS 112.7.a

FRS 112.7 FRS 112.9 FRS 112.8




Extracts of notes to the financial statements illustrating the disclosures relating to subsidiaries:

X. Interests in subsidiaries Êç

A) Composition of the Group

The Group has the following investment in subsidiaries.

Name

Principal place of

business é Principal activities

Proportion (%) of ownership interest è

2013 2012

Held by the Company:

XYZ Technologies Pte Ltd i Singapore Manufacture of electronic components

100 100

XYZ Investment Pte Ltd i Singapore Investment holding 100 100

XYZ Land Pte Ltd i Singapore Investment holding 100 100

Good Fire Prevention Pte Ltd i

Singapore Installation of fire prevention equipment and provision of installation services

100 100

Held through XYZ Technologies Pte Ltd:

XYZ China Co. Ltd ii People’s Republic of China

Manufacture of electronic components

70 75

XYZ Vietnam Ltd ii Vietnam Manufacture of electronic components

100 80


80 -*

Sun Pte Ltd i Singapore Manufacture of electronic components

-# 100

ABC Ltd ii Vietnam Manufacture of electronic components

47 47

Held through XYZ Land Pte Ltd:

XYZ Developers Pte Ltd i Singapore Property development 100 100

XYZ Constructors Sdn Bhd ii Malaysia Property development 100 100

Lion Land Pte Ltd i Singapore Property investment 100 100

i Audited by Ernst & Young LLP, Singapore ii Audited by member firms of EY Global in the respective countries

* The Group holds 25% ownership interest in MSAX Sdn Bhd in 2012 and account for it as an associate (Note X).

# The Group accounts the remaining interest in Sun Pte Ltd of 15% as available-for-sale financial assets.

FRS 112.10.a.i FRS 27R.17.b SGX 717




X. Interests in subsidiaries Êç (continued)

B) Interest in subsidiaries with material non-controlling interest (NCI)

The Group has the following subsidiaries that have NCI that are material to the Group.

31 December 2013:

Name of Subsidiary

Principal place of business é

Proportion of ownership interest held by non-controlling interest è

Profit/(Loss) allocated to NCI during the reporting period

Accumulated NCI at the end of reporting period

Dividends paid to NCI

ABC Ltd Vietnam 53% XXX XXX XXX

MSAX Sdn Bhd

Malaysia 20% XXX XXX XXX

31 December 2012:

Name of Subsidiary

Principal place of business é

Proportion of ownership interest held by non-controlling interest è

Profit/(Loss) allocated to NCI during the reporting period

Accumulated NCI at the end of reporting period

Dividends paid to NCI

ABC Ltd Vietnam 53% XXX XXX XXX

Significant restrictions: ê

The nature and extent of significant restrictions on the Group’s ability to use or access assets and settle liabilities of subsidiaries with material non-controlling interests are:

Cash and cash equivalents of $XXX held in Vietnam are subject to local exchange control regulations. These regulations places restriction on the amount of currency being exported other than through dividends.

FRS 112.12 FRS 112.B10.a FRS 112.10.b.i FRS 112.13





C) Summarised financial information about subsidiary with material NCI ë

Summarised financial information including goodwill on acquisition and consolidation adjustments but before intercompany eliminations of subsidiaries with material non-controlling interests are as follows:

Summarised balance sheet

ABC Ltd MSAX Sdn Bhd As at 31

December 2013 $’000

As at 31 December 2012

$’000


$’000


$’000 Current

Assets XXX XXX XXX XXX Liabilities (XXX) (XXX) (XXX) (XXX) Net current assets XXX XXX XXX XXX

Non current Assets XXX XXX XXX XXX Liabilities (XXX) (XXX) (XXX) (XXX) Net non current assets XXX XXX XXX XXX Net assets XXX XXX XXX XXX

Summarised statement of comprehensive income

ABC Ltd MSAX Sdn Bhd 2013

$’000 2012 $’000

2013 $’000

2012 $’000

Revenue XXX XXX XXX XXX Profit before income tax XXX XXX XXX XXX Income tax expense (XXX) (XXX) (XXX) (XXX) Profit after tax – continuing

operations XXX XXX XXX XXX

Profit after tax – discontinued operations

- - - -

Other comprehensive income XXX XXX XXX XXX Total comprehensive income XXX XXX XXX XXX

Other summarised information

ABC Ltd MSAX Sdn Bhd 2013

$’000 2012 $’000

2013 $’000

2012 $’000

Net cash flows from operations XXX XXX XXX XXX

Acquisition of significant Property, Plant & Equipment XXX XXX XXX XXX

FRS 112.12.g FRS 112.B10.b





D) Changes in group ownership interests in a subsidiary without loss of control

Disposal of ownership interest in subsidiary, without loss of control

On 13 June 2013, the Group disposed of a 5% equity interest in XYZ China Co. Ltd. Following the disposal, the Group still controls XYZ China Co. Ltd., retaining 70% of the ownership interests. The transaction has been accounted for as an equity transaction with non-controlling interests, resulting in:

Acquisition of ownership interest in subsidiary

On 31 March 2013, the Group’s subsidiary company, XYZ Technologies Pte Ltd (XYZ Technologies), acquired an additional 20% equity interest in XYZ Vietnam Ltd (XYZ Vietnam) from its non-controlling interests. As a result of this acquisition, XYZ Vietnam became a wholly-owned subsidiary of XYZ Technologies. The difference between the consideration and the carrying value of the additional interest acquired has been recognised as “Premium paid on acquisition of non-controlling interests” within equity. The following summarises the effect of the change in the Group’s ownership interest in XYZ Vietnam on the equity attributable to owners of the Company:

2013

$’000 Proceeds from sale of 5% ownership interest XXX Net assets attributable to NCI (XXX) Increase in equity attributable to parent XXX Represented by:

Decrease in foreign currency translation reserve (XXX) Decrease in asset revaluation reserve (XXX) Other reserves XXX

Increase in equity attributable to parent entity XXX

2013

$’000 Purchase consideration for the acquisition of 20% ownership interest XXX Carrying value of additional interest acquired (XXX) Increase in equity attributable to parent XXX Represented by:

Increase in asset revaluation reserve XXX Other reserves XXX

Increase in equity attributable to parent entity XXX

FRS 112.10.b.iii FRS 112.18 FRS 112.10.b.iii FRS 112.18





E) Loss of control in subsidiary

On 27 February 2013, the Group entered into a sale agreement to dispose of 85% of its interest in its wholly-owned subsidiary, Sun Pte Ltd., at its carrying value. The disposal consideration was fully settled in cash. The disposal was completed on 30 April 2013, on which date control of Sun Pte Ltd. passed to the acquirer.

The value of assets and liabilities of Sun Pte Ltd. recorded in the consolidated financial statements as at 27 February 2013, and the effects of the disposal were:

Gain on disposal:

The gain or loss on disposal attributable to measuring the retained interest amounted to $XXX was included in other income in profit or loss.

2013

$’000

Property, plant and equipment XXX

Trade and other receivables XXX

Inventories XXX

Cash and short-term deposits XXX

XXX

Trade and other payables (XXX)

Income tax payable (XXX)

Carrying value of net assets (XXX)

Cash consideration XXX

Cash and cash equivalents of the subsidiary (XXX)

Net cash inflow on disposal of a subsidiary XXX

2013

$’000

Cash received XXX

Net assets derecognised (XXX)

Fair value of retained interest XXX

Cumulative exchange differences in respect of the net assets of the subsidiary reclassified from equity on loss of control of subsidiary XXX

Gain on disposal XXX

FRS 112.10.b.iv FRS 7.40.d

FRS 112.19




Commentary:

Ê An entity shall disclose information that enables users of its consolidated financial statements

(a) to understand:

i. the composition of the group; and

ii. the interest that non-controlling interests have in the group’s activities and cash flows; and

(b) to evaluate:

i. the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities, of the group

ii. the nature of, and changes in, the risks associated with its interests in consolidated structured entities

iii. the consequences of changes in its ownership interest in a subsidiary that do not result in a loss of control; and

iv. the consequences of losing control of a subsidiary during the reporting period.

Ë An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy the information needs of users, how much emphasis it places on different aspects of the requirements and how it aggregates the information. It is necessary to strike a balance between burdening financial statements with excessive detail that may not assist users of financial statements and obscuring information as a result of too much aggregation.

Ì An entity shall disclose the country of incorporation if different from the principal place of business of the subsidiary.

Í An entity shall disclose the proportion of voting rights if different from the proportion of ownership interests held.

Î An entity shall disclose:

(a) Significant restrictions (e.g. statutory, contractual and regulatory restrictions) on its ability to access or use the assets and settle the liabilities of the group, such as:

i. those that restrict the ability of a parent or its subsidiaries to transfer cash or other assets to (or from) other entities within the group.

ii. guarantee or other requirements that may restrict dividends and other capital distributions being paid, or loans and advances being made or repaid, to (or from) other entities within the group.

(b) The nature and extent to which protective rights of non-controlling interests can significantly restrict the entity’s ability to access or use the assets and settle the liabilities of the group (such as when a parent is obliged to settle liabilities of a subsidiary before settling its own liabilities, or approval of non-controlling interests is required either to access the assets or to settle the liabilities of a subsidiary).

(c) The carrying amounts in the consolidated financial statements of the assets and liabilities to which those restrictions apply.

Ï The summarised financial information presented shall be the amounts before inter-company eliminations.

FRS 112.10 FRS 112.B2 FRS 112.12.b FRS 27R.17.b.ii FRS 112.12.d FRS 27R.17.b.iii

FRS 112.13 FRS 112.B11





í Nature of the risks associated with an entity’s interests in consolidated structured entities

In this illustration, the Group does not consolidate any structured entity. If the Group provides financial support to consolidated structured entities, please refer to the following disclosure requirements:

An entity shall disclose the terms of any contractual arrangements that could require the parent or its subsidiaries to provide financial support to a consolidated structured entity, including events or circumstances that could expose the reporting entity to a loss (e.g. liquidity arrangements or credit rating triggers associated with obligations to purchase assets of the structured entity or provide financial support).

If during the reporting period a parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a consolidated structured entity (e.g. purchasing assets of or instruments issued by the structured entity), the entity shall disclose:

(a) the type and amount of support provided, including situations in which the parents or its subsidiaries assisted the structured entity in obtaining financial support; and

(b) the reasons for providing the support.

If during the reporting period a parent or any of its subsidiaries has, without having a contractual obligation to do so, provided financial or other support to a previously unconsolidated structured entity and that provision of support resulted in the entity controlling the structured entity, the entity shall disclose an explanation of the relevant factors in reaching that decision.

An entity shall disclose any current intentions to provide financial or other support to a consolidated structured entity, including intentions to assist the structured entity in obtaining financial support.

FRS 112.14 FRS 112.15 FRS 112.16 FRS 112.17




Extract of notes to the financial statements illustrating the disclosures relating to joint arrangements:

X. Investment in joint arrangements Êç

Investment in joint venture éëí

The Group’s investment in joint venture is summarised below:

As at 31 December

2013

As at 31 December

2012

$’000 $’000

XYZ-ABC JV Co.Ltd XXX XXX

The Group has 50% (2012: 50%) interest in the ownership and voting rights in a joint venture, XYZ-ABC JV Co. Ltd that is held through a subsidiary. è This joint venture is incorporated in People’s Republic of China and is a strategic venture in the business of property investment. ê The Group jointly controls the venture with other partner under the contractual agreement and requires unanimous consent for all major decisions over the relevant activities.

Dividends of $XXX (2012:$XXX) were received from XYZ-ABC JV Co. Ltd.

Summarised financial information in respect of XYZ-ABC JV Co. Ltd is as follows: ì


2013 2012

$’000 $’000 Cash and short-term deposits (XXX) (XXX) Other current assets XXX XXX Total current assets XXX XXX Non-current assets excluding goodwill XXX XXX Total assets XXX XXX Current financial liabilities (excluding trade, other payables and provisions) (XXX) (XXX) Other current liabilities (XXX) (XXX) Total current liabilities (XXX) (XXX) Non-current financial liabilities (excluding trade, other payables and provisions) (XXX) (XXX) Other non- current liabilities (XXX) (XXX) Total non-current liabilities (XXX) (XXX) Total comprehensive income (XXX) (XXX) Net assets excluding goodwill XXX XXX

FRS 112.21.a.i FRS 112.21 FRS 27R.17.b FRS 112.B12.a FRS 112.21.b.ii FRS 112.B12 FRS 112.B13




X. Investment in joint arrangements Êç (continued)

X.X Investment in joint venture (continued)


2013 2012

$’000 $’000

Revenue XXX XXX Depreciation and amortisation XXX XXX Interest income XXX XXX Interest expense (XXX) (XXX) Profit before tax XXX XXX

Income tax expense (XXX) (XXX) Profit after tax XXX XXX Other comprehensive income XXX XXX

Total comprehensive income XXX XXX

The summarised financial information presented is the amounts included in the financial statements of the joint venture prepared in accordance with FRS adjusted for fair value adjustments made at the time of acquisition and for difference in accounting policies as detailed in the reconciliation below.

A reconciliation of the summarised financial information to the carrying amounts of XYZ-ABC JV Co.Ltd is as follows:

2013 2012

$’000 $’000

Group share of 50% of net assets excluding goodwill of $XXX (2012: $XXX) XXX XXX

Goodwill on acquisition XXX XXX

Fair value adjustments XXX XXX

XXX XXX

Significant restrictions î

ABC-XYZ JV Co. Ltd is restricted by regulatory requirements by paying dividends greater than 50% of the annual profit.

FRS 112.21.b.ii FRS 112.B13 FRS 112.B14.a FRS 112.B14.b FRS 112.22.a




X. Investment in joint arrangements Êç (continued)

X.X Investment in joint venture (continued)

Commitments ï

The Group’s commitments made jointly with its joint venture, ABC-XYZ JV Co. Ltd is as follows:

2013 2012

$’000 $’000

Commitments to contribute funds for the acquisition of property, plant and equipment XXX XXX

Contingent liabilities

2013 2012

$’000 $’000

Contingent liabilities incurred by the Group arising from its interests in joint venture XXX XXX

Group’s share of joint venture’s contingent liabilities XXX XXX

FRS 112.23.a FRS 112.23.b




Extract of notes to the financial statements illustrating the disclosures relating to associates:

X. Investment in associates ç

The Group’s material investments in associates are summarised below:

i Audited by Ernst & Young LLP, Singapore ii Audited by member firm of EY Global in Malaysia

*The Group holds 100% of ownership interest in MSAX Sdn Bhd in 2013 and accounts for it as a subsidiary (Note X).

2013 2012

$’000 $’000

QSpeed Pte Ltd XXX XXX

HKI Pte Ltd XXX XXX

Other associates XXX XXX

XXX XXX

Fair value of investment in an associate for which there is a published price quotation é XXX XXX

Name Country of

incorporation ê Principal activities

Proportion (%) of ownership interest è

2013 2012 Held through subsidiaries:

QSpeed Pte Ltd i Singapore Manufacture of electronic

t

35 35

MSAX Sdn Bhd ii Malaysia Manufacture of electronic

t

–* 25

Heart Land Ltd i Singapore Investment properties 45 45

HKI Pte Ltd i Singapore Investment properties 47 47

Drill Pte Ltdi Singapore Investment properties 19 19

The activities of the associates are strategic to the Group activities.

The Group has not recognised losses relating to QSpeed Pte Ltd where its share of losses exceeds the Group’s interest in this associate. The Group’s cumulative share of unrecognised losses at the end of the reporting period was $XXX (2012: $XXX), of which $XXX (2012: $XXX) was the share of the current year’s losses. The Group has no obligation in respect of these losses. í

The Group has not recognised its share of the current year profit of $XXX (2012: $XXXl) relating to HKI Pte Ltd as the Group’s cumulative share of unrecognised losses with respect to that associate was $XXX (2012: $XXX) at the end of the reporting period. í

Dividends of $XXX (2012: $XXX) and $XXX (2012: $XXX) were received from QSpeed Pte Ltd and HKI Pte Ltd respectively.

FRS 112.21.a.i FRS 112.B16 FRS 112.21.b.iii FRS 112.21 FRS 27R.17.b SGX 717

FRS 112.21.a.ii FRS 112.22.c FRS 112.B12.a




X. Investment in associates ç (continued)

Aggregate information about the Group’s investments in associates that are not individually material are as follows: ë

2013 2012

$’000 $’000

Profit or loss after tax from continuing operations XXX XXX

Other comprehensive income XXX XXX

Total comprehensive income XXX XXX

The summarised financial information in respect of QSpeed Pte Ltd and HKI Pte Ltd, which are material to the Group are as follows: ì


QSpeed Pte Ltd HKI Pte Ltd

As at December

2013

As at December

2012

As at December

2013

As at December

2012 $’000 $’000 $’000 $’000 Current assets XXX XXX XXX XXX

Non-current assets excluding goodwill XXX XXX XXX XXX

Goodwill XXX XXX XXX XXX

Total assets XXX XXX XXX XXX

Current liabilities (XXX) (XXX) (XXX) (XXX)

Non- current liabilities (XXX) (XXX) (XXX) (XXX)

Total liabilities (XXX) (XXX) (XXX) (XXX)

Net assets XXX XXX XXX XXX

Net assets excluding goodwill XXX XXX XXX XXX

FRS 112.21.c FRS 112.B16

FRS 112.21.b FRS 112.B12






The summarised financial information presented is the amounts included in the financial statements of the associates prepared in accordance with FRS adjusted for fair value adjustments made at the time of acquisition and for difference in accounting policies as detailed in the reconciliation below.

QSpeed Pte Ltd HKI Pte Ltd

2013 2012 2013 2012

$’000 $’000 $’000 $’000

Revenue XXX - XXX XXX

Profit after tax from continuing operations XXX - XXX XXX

Other comprehensive income XXX - XXX XXX

Total comprehensive income XXX - XXX XXX

A reconciliation of the summarised financial information to the carrying amounts of QSpeed Pte Ltd and HKI Pte Ltd are as follows:

QSpeed Pte Ltd 2013 2012

$’000 $’000




XXX XXX

HKI Pte Ltd




XXX XXX

FRS 112.21.b FRS 112.B12 FRS 112.B14.a FRS 112.B14.b





Significant restrictions î

QSpeed Pte Ltd. is restricted by regulatory requirements by paying dividends greater than 60% of the annual profit.

Contingent liabilities

2013 2012

$’000 $’000

Contingent liabilities incurred by the Group arising from its interests in its associates XXX XXX

Group’s share of associates’ contingent liabilities XXX XXX

FRS 112.22.a

FRS 112.23.b




Commentary:

Ê In this illustration, the Group does not have investment in joint operation.

The following disclosures are required for investments in joint operations:

(a) the name of the joint operation

(b) the nature of the entity’s relationship with the joint operations, (by, for example, describing the nature of the activities of the joint operation and whether it is strategic to the entity’s activities)

Other disclosures required for joint ventures are not applicable for joint operations.

Ë For interests in joint arrangements and associates, an entity shall disclose information that enables users of its financial statements to evaluate:

(a) the nature, extent and financial effects of its interests in joint arrangements and associates, including the nature and effects of its contractual relationship with the other investors with joint control of, or significant influence over, joint arrangements and associates; and

(b) the nature of, and changes in, the risks associated with its interests in joint ventures and associates.

Ì If the joint venture or associate is accounted for using the equity method, the entity shall disclose the fair value of its investment in the joint venture or associate, if there is a quoted market price for the investment.

Í An entity shall disclose the proportion of voting rights held for each joint arrangement or associate if different from the proportion of ownership interests held.

Î An entity shall disclose the principal place of business for each joint arrangement and associate if different from the country of incorporation of the joint arrangement or associate.

Ï In this illustration, the Group have only one investment in joint venture which is material and does not have any immaterial associate that is classified as discontinued operation.

The following disclosures are required, in aggregate for all individually immaterial joint ventures and separately for all individually immaterial associates:

- the carrying amount of its interests

- its share of the joint ventures’ or associates’

(a) profit or loss from continuing operations

(b) post-tax profit or loss from discontinued operations

(c) other comprehensive income

(d) total comprehensive income

These disclosures above shall be disclosed separately for joint ventures and associates.

FRS 112.21.a FRS 112.20 FRS 112.21.b.iii FRS 112.21.a.iv FRS 112.21.a.iii FRS 112.21.c FRS 112.B16





Ð In this illustration, the Group does not have any unrecognised share of losses of its investment in joint venture.

If the Group have stopped recognising its share of losses of its joint venture or associate when applying the equity method, it shall disclose the unrecognised share of losses of the joint venture or associate, both for the reporting period and cumulatively.

Ñ An entity may present the summarised financial information on the basis of the joint venture’s or associate’s financial statements if:

(a) the entity measures its interest in the joint venture or associate at fair value; and

(b) the joint venture or associate does not prepare FRS financial statements and preparation on that basis would be impracticable or cause undue cost.

In that case, the entity shall disclose the basis on which the summarised financial information has been prepared.

Ò An entity shall also disclose the nature and extent of any significant restrictions (e.g. resulting from borrowing arrangements, regulatory requirements or contractual arrangements between investors with joint control of or significant influence over a joint venture or an associate) on the ability of joint ventures or associates to transfer funds to the entity in the form of cash dividends, or to repay loans and advances.

Ó An entity shall disclose total commitments it has made but not recognised at the reporting date (including its share of commitments made jointly with other investors with joint control of a joint venture) relating to its interests in joint ventures. Commitments are those that may give rise to a future outflow of cash or other resources.

Unrecognised commitments that may give rise to a future outflow of cash or other resources include:

(a) unrecognised commitments to contribute funding or resources as a result of, for example:

i. the constitution or acquisition agreements of a joint venture (that, for example, require an entity to contribute funds over a specific period).

ii. capital-intensive projects undertaken by a joint venture.

iii. unconditional purchase obligations, comprising procurement of equipment, inventory or services that an entity is committed to purchasing from, or on behalf of, a joint venture.

iv. unrecognised commitments to provide loans or other financial support to a joint venture.

v. unrecognised commitments to contribute resources to a joint venture, such as assets or services.

vi. other non-cancellable unrecognised commitments relating to a joint venture.

(b) Unrecognised commitments to acquire another party’s ownership interest (or a portion of that ownership interest) in a joint venture if a particular event occurs or does not occur in the future.

FRS 112.22.c FRS 112.B15 FRS 112.22.a FRS 112.B18 FRS 112.B19




Extract of notes to the financial statements illustrating the disclosures relating to interest in unconsolidated structured entities:

X. Interests in unconsolidated structured entities Êçéè

A) Disclosure of the nature of interests in unconsolidated structured entities

The Group has sponsored a number of unconsolidated structured entities to dispose of its interests in collateralised mortgage obligations, collateralised mortgage back securities and credit card receivables. In respect of these entities in which the Group no longer has an interest at the reporting date details of income received and the carrying amounts of financial assets transferred to these entities are as follows:

Income from unconsolidated structured entities in which no interest is held at 31 December 2013:

2013 2012

$’000 $’000

Fee income XXX XXX

Gains on re-measurement of assets transferred to structured entities XXX XXX

XXX XXX

Split by:

Collateralised debt obligation XXX -

Commercial mortgage backed securities XXX XXX

Credit card receivables - XXX

XXX XXX

Carrying amounts of assets transferred to unconsolidated structured entities in the reporting period as at date of transfer:

Transferred

in 2013 Transferred

in 2012

$’000 $’000

Collateralised debt obligation XXX XXX

Commercial mortgage backed securities XXX XXX

Credit card receivables XXX XXX

XXX XXX

FRS 112.26 FRS 112.27.a FRS 112.27.b FRS 112.28

FRS 112.27.c




X. Interests in unconsolidated structured entities Êçéè (continued)

B) Disclosure of the nature of risks of unconsolidated structured entities

The Group has interest in a number of unconsolidated structured entities. These are summarised as follows:

Carrying amount

recognised in financial statements

of the Group

Maximum loss

exposure

Carrying amount

recognised in financial statements

of the Group

Maximum loss

exposure

2013 2013 2012 2012

Note $’000 $’000 $’000 $’000

Senior loan notes (a) XXX XXX XXX XXX

Junior loan notes (b) XXX XXX XXX XXX

Interest rate swap (asset) (c) XXX XXX XXX XXX

Credit default swap (liability) (d) XXX XXX XXX XXX

Lease receivables (e) XXX XXX XXX XXX

(a) The senior loan notes are included in the balance sheet in the line item “assets available-for-sale (AFS)”. The maximum loss exposure represents the fair value at the reporting date.

(b) The junior loan notes are included in the balance sheet in the line of “loans and receivables”. The maximum loss exposure represents the amortised cost at the reporting date. The lease receivables are included in the balance sheet in the line item “other receivables”.

(c) The interest rate swap is included in the balance sheet in the line item “derivative assets” and is measured at fair value through profit or loss. The 10 year swap pays a floating rate of interest which is uncapped and therefore maximum loss exposure is the potentially unlimited and not quantifiable. If SIBOR was to increase by 1,000 basis points for the entire life of the swap, an event which the directors consider is extremely remote, it would cause a loss of $XXX.

(d) The credit default swap is included in the balance sheet in the line item “derivative liabilities” and is measured at fair value through profit or loss. The maximum loss exposure assume the 100% default of all principal and interest payments on the loan portfolio of the structured entity to which the credit default swap has been issued. The probability of this occurring is extremely remote.

(e) The maximum loss exposure represents the carrying amount of the receivable.

FRS 112.29




X. Interests in unconsolidated structured entities Êçéè (continued)

C) Provision of financial support – no contractual obligation

During the reporting period the Company provided financial support in the form of assets with a fair value of $XXX (2012:$XXX) and credit rating of “AAA” to PCC Ltd., in exchange for assets with an equivalent fair value. There was no contractual obligation to exchange these assets. The transaction was initiated because the assets held by PCC Ltd. has a credit rating of less than “AA” and a further ratings downgrade could potentially trigger calls on loan note issued by PCC Ltd. The Company did not suffer a loss on the transaction.

D) Provision of financial support – contractual obligation

The Company has given a contractual commitment to SPE Pte. Ltd, whereby if the assets held as collateral by SPE Pte. Ltd for its issued loan notes fall below a credit rating of “AAA” then the parent will substitute assets of an equivalent fair value with an “AAA” rating. The maximum fair value of assets to be substituted is $XXX. The Company is not expecting to suffer a loss on any transaction arising from this commitment but will receive assets with a lower credit rating from those substituted.

FRS 112.30 FRS 112.31




Commentary

Ê A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

A structured entity often has some or all of the following features or attributes:

(a) restricted activities.

(b) a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors.

(c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support.

(d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).

Examples of entities that are regarded as structured entities include, but are not limited to:

(a) securitisation vehicles.

(b) asset-backed financings.

(c) some investment funds.

An entity that is controlled by voting rights is not a structured entity simply because, for example, it receives funding from third parties following a restructuring.

ç An entity shall disclose information that enables users of its financial statements

(a) to understand the nature and extent of its interests in unconsolidated structured entities;

(b) to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities. ê

Ì The information required by commentary ç includes information about an entity’s exposure to risk from involvement that it had with unconsolidated structured entities in previous periods (e.g. sponsoring the structured entity), even if the entity no longer has any contractual involvement with the structured entity at the reporting date.

è Nature of interests:

An entity shall disclose qualitative and quantitative information about its interests in unconsolidated structured entities, including, but not limited to, the nature, purpose, size and activities of the structured entity and how the structured entity is financed.

FRS 112.B21

FRS 112.B22

FRS 112.B23

FRS 112.B24 FRS 112.24 FRS 112.25 FRS 112.26





Î Examples of additional information that, depending on the circumstances, might be relevant to an assessment of the risks to which an entity is exposed when it has an interest in an unconsolidated structured entity are:

(a) the terms of an arrangement that could require the entity to provide financial support to an unconsolidated structured entity (e.g. liquidity arrangements or credit rating triggers associated with obligations to purchase assets of the structured entity or provide financial support including:

i. a description of events or circumstances that could expose the reporting entity to a loss.

ii. whether there are any terms that would limit the obligation.

iii. whether there are any other parties that provide financial support and, if so, how the reporting entity’s obligation ranks with those of other parties.

(b) losses incurred by the entity during the reporting period relating to its interests in unconsolidated structured entities.

(c) the types of income the entity received during the reporting period from its interest in unconsolidated structured entities.

(d) whether the entity is required to absorb losses of an unconsolidated structured entity before other parties, the maximum limit of such losses for the entity, and (if relevant) the ranking and amounts of potential losses borne by parties whose interests rank lower than the entity’s interest in the unconsolidated structured entity.

(e) information about any liquidity arrangements, guarantees or other commitments with third parties that may affect the fair value or risk of the entity’s interests in unconsolidated structured entities.

(f) any difficulties an unconsolidated structured entity has experienced in financing its activities during the reporting period.

(g) in relation to the funding of an unconsolidated structured entity, the forms of funding (e.g. commercial paper or medium-term notes) and their weighted-average life. That information might include maturity analysis of the assets and funding of an unconsolidated structured entity if the structured entity has loner-term assets funded by shorter-term funding.

FRS 112.B26


Appendix B Comparison between FRS and IFRS


and

Reference Description

Aligned with IFRS?

Yes. No. Notes

Preface Preface to the Financial Reporting Standards P Framework Framework for the Preparation and Presentation of Financial

P

FRS 1 Presentation of Financial Statements P FRS 2 Inventories P FRS 7 Cash Flow Statements P FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors P FRS 10 Events After the Reporting Period P FRS 11 Construction Contracts P FRS 12 Income Taxes P i FRS 14 Segment Reporting P FRS 16 Property, Plant and Equipment P Ê FRS 17 Leases P FRS 18 Revenue P FRS 19 Employee Benefits P FRS 20 Accounting for Government Grants and Disclosure of Government

P

FRS 21 The Effects of Changes in Foreign Exchange Rates P FRS 23 Borrowing Costs P FRS 24 Related Party Disclosures P FRS 26 Accounting and Reporting by Retirement Benefit Plans P FRS 27 Consolidated and Separate Financial Statements P çê FRS 28 Investments in Associates P çê FRS 29 Financial Reporting in Hyperinflationary Economies P FRS 31 Interests in Joint Ventures P çê FRS 32 Financial Instruments: Presentation P FRS 33 Earnings Per Share P FRS 34 Interim Financial Reporting P FRS 36 Impairment of Assets P FRS 37 Provisions, Contingent Liabilities and Contingent Assets P FRS 38 Intangible Assets P FRS 39 Financial Instruments: Recognition and Measurement P ë FRS 40 Investment Property P FRS 41 Agriculture P FRS 101 First-Time Adoption of Financial Reporting Standards P FRS 102 Share-based Payment P è FRS 103 Business Combinations P é FRS 104 Insurance Contracts P FRS 105 Non-current Assets Held for Sale and Discontinued Operations P FRS 106 Exploration for and Evaluation of Mineral Resources P FRS 107 Financial Instruments: Disclosure P FRS 108 Operating Segments P FRS 110 Consolidated Financial Statements P Î FRS 111 Joint Arrangements P Î FRS 112 Disclosure of Interest in Other Entities P Î FRS 113 Fair Value Measurement P




Notes on differences between FRS and IFRS

å FRS 16 has a transitional provision which exempts an entity which had –

§ Revalued its property, plant and equipment before 1 January 1984; or

§ Performed any one-off revaluation on its property, plant and equipment between 1 January 1984 and 31 December 1996 (both dates inclusive), from complying with the requirement to keep the valuation current by periodic valuation.

IAS 16 does not have such a transitional provision and therefore, all property, plant and equipment that had been revalued prior to adoption of IAS 16 would have to be revalued on a periodic basis.

ç One of the conditions for exemption from preparing consolidated financial statements, equity accounting or proportionate consolidation under IAS 27, IAS 28 and IAS 31 is ‘the ultimate or any intermediate parent of the parent produces consolidated financial statements available for public use that comply with International Financial Reporting Standards.’ The requirement that the consolidated financial statements comply with IFRS is not required under FRS 27, FRS 28 and FRS 31.

é IFRS 3 applies to the accounting for business combinations for which the agreement date is on or after 31 March 2004.

FRS 103 is effective for annual periods beginning on or after 1 July 2004.

è FRS 102 is aligned with IFRS 2 except for the scope and the effective date for non-listed companies. IFRS 2 applies to grants of shares, share options or other equity instruments that were granted after 7 November 2002 and had not yet vested at the effective date of IFRS 2. However, the reference date in FRS 102 is 22 November 2002 instead of 7 November 2002. For non-listed companies, FRS 102 is effective only for financial periods beginning from 1 January 2006 whereas IFRS 2 applies to all companies for financial periods beginning from 1 January 2005.

ê IFRS 10, IFRS 11, IFRS 12, Revised IAS 27 and Revised IAS 28 are effective for annual periods beginning on or after 1 January 2013. FRS 110, FRS 111, FRS 112, Revised FRS 27 and Revised FRS 28 are effective only for annual periods beginning on or after 1 January 2014.

ë The following IFRS have not been adopted as FRS:

§ IFRS 9 Financial Instruments

§ Amendments to IAS 39 Financial Instruments: Recognition and Measurement: Novation of Derivatives and Continuation of Hedge Accounting, effective for annual periods beginning on or after 1 January 2014

Recommended Accounting Practice (RAP) in Singapore The following RAP issued by the Institute of Singapore Chartered Accountants set out recommendations on accounting treatment relating to foreign income not remitted to Singapore.

i Foreign income not remitted to Singapore

The practice in Singapore is to recognise and account for a deferred tax liability in respect of foreign-sourced income not remitted to Singapore in the same way as temporary differences associated with investments in subsidiaries etc. as set out in accordance with FRS 12.39. Thus, some companies do not provide deferred tax in respect of foreign income on the basis that they do not intend to remit the funds to Singapore in the foreseeable future.




INT FRS vs. IFRIC Interpretations

Reference Description

Aligned with IFRIC Interpretations

Yes. No. Notes

INT FRS 7 Introduction of the Euro P

INT FRS 10 Government Assistance – No Specific Relation to Operating Activities P

INT FRS 12 Consolidation – Special Purpose Entities P

INT FRS 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers

P

INT FRS 15 Operating Leases – Incentives P

INT FRS 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets P

INT FRS 25 Income Taxes – Changes in the Tax Status of an Enterprise or its Shareholders

P

INT FRS 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease

P

INT FRS 29 Disclosure – Service Concession Arrangements P

INT FRS 31 Revenue – Barter Transactions Involving Advertising Services P

INT FRS 32 Intangible Assets - Web Site Costs P

INT FRS 101 Changes in Existing Decommissioning, Restoration and Similar Liabilities

P

INT FRS 104 Determining Whether an Arrangement Contains a Lease P

INT FRS 105 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

P

INT FRS 106 Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment

P

INT FRS 107 Applying the Restatement Approach under FRS 29 Financial Reporting in Hyperinflationary Economies

P

INT FRS 108 Scope of FRS 102 P

INT FRS 109 Reassessment of Embedded Derivatives P

INT FRS 110 Interim Financial Reporting and Impairment P

INT FRS 111 Group and Treasury Share Transactions P

INT FRS 112 Service Concession Arrangements P

INT FRS 113 Customer Loyalty Programmes P

INT FRS 114 FRS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction

P

INT FRS 115 Agreements for the Construction of Real Estate P Ê

INT FRS 116 Hedges of a Net Investment in a Foreign Operation P

INT FRS 117 Distributions of Non-cash Assets to Owners P

INT FRS 118 Transfers of Assets from Customers P

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments P

INT FRS 120 Stripping Costs in the Production Phase of a Surface Mine P

INT FRS 121 Levies P




Ê IFRIC 15 is effective for annual periods beginning on or after 1 January 2009. INT FRS 115 is effective only for annual periods beginning on or after 1 January 2011.

INT FRS 115 includes an accompanying note on application of INT FRS 115 in Singapore. The accompanying note deals with the accounting treatment for revenue and associated expenses by housing developers who develop more than four units of private residential properties in Singapore for sale prior to completion of the properties. These developers are regulated under the Singapore Housing Developers (Control and Licensing) Act (Chapter 130) and use the standard form of the sales and purchase agreement prescribed in the schedule to the Housing Developers Rules.

ç The following IFRIC Interpretation has not been adopted as INT FRS:

§ IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments, effective for annual periods beginning on or after 1 January 2005

XYZ Holdings (Singapore) Limited -2013

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