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HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 31 December 2014
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.14 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 amounts 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.
2.15 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 weighted average cost basis;
–
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 weighted average cost 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.
2.16 Provisions
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.
