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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)
2.16 Provisions (cont’d)
Provision for reinstatement costs
Provision for reinstatement cost arose from the estimated cost of dismantling, removing and restoring
the leasehold properties at the end of their lease terms.
The reinstatement costs which are provided at the present value of estimated costs required to settle
the obligation are recognised as part of the cost of that particular asset. The estimated future cost
if reinstatement is reviewed annually and adjusted as appropriate.
2.17 Financial guarantees
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due
in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs
that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition,
financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it
is probable that the liability will be higher than the amount initially recognised less amortisation, the
liability is recorded at the higher amount with the difference charged to profit or loss.
2.18 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. 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.
2.19 Employee benefits
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.
