Notes to the Financial Statements - PwC
PwC Holdings Ltd and Its Subsidiaries
Notes to the Financial Statements
for the financial year ended 31 December 2005
Reference
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. General1,2
PwC Holdings Ltd (the "Company") is incorporated and domiciled in Singapore and is publicly traded on the Singapore Exchange. The address of its registered office3 is 350 Harbour Street, #30-00, Singapore 049929.
The principal activities of the Company are the manufacturing of component parts used in the electrical and electronic industry, and investment holding. The principal activities of its subsidiaries are manufacturing of component parts used in the electrical and electronic industry, manufacturing of furniture, and construction of buildings and equipment. The glass business segment was discontinued during the financial year (Note 11).
FRS 1(126)(a) FRS 1(126)(b)
Guidance Notes
General 1. The following items need not be disclosed in the financial statements if they are disclosed
elsewhere in the information published with the financial statements:
(a) the domicile and legal form of the company, its country of incorporation and the address of the registered office;
(b) a description of the nature of the company's operations and its principal activities; and (c) the name of the parent company and the ultimate parent company of the group
2. If the Company changes its name during the financial year, this change should be disclosed as suggested below:
"With effect from [effective date of change], the name of the Company was changed from XYZ Pte Ltd to ZYX Pte Ltd."
3. If the principal place of business is different from the registered office, the former should be disclosed.
FRS 1(126) FRS 1(46)(a) FRS 1(126)(a)
2. Significant accounting policies1,2
2.1 Basis of preparation25,26
The financial statements have been prepared in accordance with Singapore Financial Reporting Standards ("FRS") 3,4. The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group's accounting policies. It also requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. Critical accounting estimates and assumptions used that are significant to the financial statements, and areas involving a higher degree of judgement or complexity, are disclosed in Note 4.
FRS 1(103)(a) FRS 1(14) FRS 1(108)(a)
FRS 1(113) FRS 1(116)
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Illustrative Annual Report 2005
81
PwC Holdings Ltd and Its Subsidiaries
Notes to the Financial Statements
for the financial year ended 31 December 2005
Reference
In 2005, the Group and the Company adopted the new or revised FRS and Interpretations to FRS (INT FRS) that are applicable in the current financial year. The 2005 financial statements have been amended as required, in accordance with the relevant transitional provisions in the respective FRS and INT FRS5. The following are the FRS and INT FRS that are relevant to the Group:
FRS 1 (revised 2004) Presentation of Financial Statements FRS 2 (revised 2004) Inventories FRS 8 (revised 2004) Accounting Policies, Changes in Accounting Estimates and Errors FRS 10 (revised 2004) Events after the Balance Sheet Date FRS 16 (revised 2004) Property, Plant and Equipment FRS 17 (revised 2004) Leases FRS 21 (revised 2004) The Effects of Changes in Foreign Exchange Rates FRS 24 (revised 2004) Related Party Disclosures FRS 27 (revised 2004) Consolidated and Separate Financial Statements FRS 28 (revised 2004) Investments in Associates FRS 31 (revised 2004) Interests in Joint Ventures FRS 32 (revised 2004) Financial Instruments: Disclosure and Presentation FRS 33 (revised 2004) Earnings per Share FRS 36 (revised 2004) Impairment of Assets FRS 38 (revised 2004) Intangible Assets FRS 39 (revised 2004) Financial Instruments: Recognition and Measurement FRS 102 Share-based Payments FRS 103 Business Combinations FRS 105 Non-current Assets Held for Sale and Discontinued Operations INT FRS 101 Changes in Existing Decommissioning, Restoration and Similar Liabilities Amendments to INT FRS 12 Consolidation ? Special Purpose Entities
The adoption of the above FRS and INT FRS did not result in substantial changes to the Group's accounting policies except as disclosed in Note 3.
2.2 Revenue recognition
Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services, net of goods and services tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised as follows:
(a) Sale of goods
Revenue from the sale of goods is recognised when a Group entity has delivered the products to the customer, the customer has accepted the products and collectibility of the related receivables is reasonably assured.
Component parts and furniture are often sold with a right of return. Accumulated experience is used to estimate and provide for such returns at the time of sale.
(b) Rendering of services
Revenue from logistics services is recognised over the period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be performed. The accounting policy for revenue from construction contracts is disclosed in Note 2.8.
FRS 8(28)(b) FRS 8(28)(a)
FRS 1(127) FRS 2(40) FRS 8(54) FRS 10(23) FRS 16 (81) FRS 17(69) FRS 21(58) FRS 24(23) FRS 27(43) FRS 28(41) FRS 31 (58) FRS 32(96) FRS 33(74) FRS 36(139) FRS 38(130) FRS 39(103) FRS 102(60) FRS 103(78) FRS 105(44) INT FRS 101(9) Amendment to INT FRS 12 (7) FRS 8(28)(c)
FRS 18(35)(a) FRS 18(9)
FRS 18(14)
FRS 18(20)
Significant accounting policies
82 pwc
PwC Holdings Ltd and Its Subsidiaries
Notes to the Financial Statements
for the financial year ended 31 December 2005
Reference
(c) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cashflow discounted at original effective interest rate of the instrument, and thereafter amortising the discount as interest income.
FRS 18(30)(a)
(d) Dividend income Dividend income is recognised when the right to receive payment is established.
FRS 18(30)(c)
(e) Rental income
Rental income from operating leases on investment properties is recognised on a straight-line basis over the lease term. Rental income from finance leases on plant and equipments is recognised based on a constant periodic rate of return over the lease term using the net investment method.
FRS 17(50) FRS 17(39)
2.3 Group accounting6
(a) Subsidiaries
Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
FRS 27(13) FRS 27(14)
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. Please refer to Note 2.6(a) for the accounting policy on goodwill on acquisition of subsidiaries.
FRS 103(14) FRS 103(24)
FRS 103(36)
Subsidiaries are consolidated from the date on which control is transferred to the Group to the date on which that control ceases. In preparing the consolidated financial statements, intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group7.
FRS 27(30) FRS 27(24)
FRS 27(29)
Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the Group. It is measured at the minorities' share of the fair value of the subsidiaries' identifiable assets and liabilities at the date of acquisition by the Group and the minorities' share of changes in equity since the date of acquisition, except when the losses applicable to the minority in a subsidiary exceed the minority interest in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minority are attributed to the equity holders of the Company, unless the minority has a binding obligation to, and is able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority are attributed to the equity holders of the Company until the minority's share of losses previously absorbed by the equity holders of the Company has been recovered.
FRS 27(4) FRS 27(22)(c)
FRS 27(35)
Please refer to Note 2.10 for the Company's accounting policy on investments in subsidiaries.
Significant accounting policies
Illustrative Annual Report 2005
83
PwC Holdings Ltd and Its Subsidiaries
Notes to the Financial Statements
for the financial year ended 31 December 2005
Reference
(b) Associated companies
Associated companies are entities over which the Group has significant influence, but not control, generally accompanying a shareholding of between and including 20% and 50% of the voting rights. Investments in associated companies are accounted for in the consolidated financial statements using the equity method of accounting. Investments in associated companies in the consolidated balance sheet include goodwill (net of accumulated amortisation) identified on acquisition, where applicable. Please refer to Note 2.6(a) for the Group's accounting policy on goodwill.
Equity accounting involves recording investments in associated companies initially at cost, and recognising the Group's share of its associated companies' post-acquisition results and its share of post-acquisition movements in reserves against the carrying amount of the investments. When the Group's share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company.
In applying the equity method of accounting, unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group's interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of associated companies to ensure consistency of accounting policies with those of the Group.7
Please refer to Note 2.10 for the Company's accounting policy on investments in associated companies.
(c) Joint ventures
Joint ventures are entities over which the Group has contractual arrangements to jointly share the control with one or more parties. The Group's interest in joint ventures is accounted for in the consolidated financial statements by proportionate consolidation10.
Proportionate consolidation involves combining the Group's share of joint ventures' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture to the extent that it is attributable to the other venturers. The Group does not recognise its share of results from the joint ventures that arose from the Group's purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. Where necessary, adjustments are made to the financial statements of joint ventures to ensure consistency of accounting policies with those of the Group.7
Please refer to Note 2.10 for the Company's accounting policy on investments in joint ventures.
(d) Transaction costs
Costs directly attributable to an acquisition are included as part of the cost of acquisition.
FRS 28(2) FRS 28(6) FRS 28(13) FRS 28(23)(a) FRS 28(11) FRS 28(29) FRS 28(30)
FRS 28(22) FRS 28(27)
FRS 31(24) FRS 31(30)
FRS 31(34) FRS 31(48) FRS 31(49)
FRS 103(29)
Significant accounting policies
84 pwc
PwC Holdings Ltd and Its Subsidiaries
Notes to the Financial Statements
for the financial year ended 31 December 2005
Reference
2.4 Property, Plant and Equipment (a) Measurement (i) Land and buildings Land and buildings are initially recorded at cost.
Freehold land is subsequently stated at fair value less accumulated impairment losses (Note 2.11). Buildings and leasehold land are subsequently stated at fair value less accumulated depreciation and accumulated impairment losses (Note 2.11).
Fair values of land and buildings are determined by an independent professional valuer on a triennial basis and whenever their carrying amounts are likely to differ materially from their fair values11. When an asset is revalued, any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset. The net amount is then restated to the revalued amount of the asset. Revaluation surpluses are taken to the asset revaluation reserve, unless they offset previous revaluation losses of the same asset that were taken to the income statement. Revaluation losses are taken to the asset revaluation reserve, to the extent that they offset previous revaluation surpluses of the same asset that were taken to the asset revaluation reserve. Other revaluation surpluses or losses are taken to the income statement.
(ii) Other Property, Plant and Equipment
All other property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses (Note 2.11).
(iii) Component of costs
The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
(b) Depreciation
Freehold land is not depreciated. Depreciation on other property, plant and equipment is calculated using the straight line method to allocate their depreciable amounts over their estimated useful lives. The estimated useful lives are as follows:
Buildings and leasehold land Motor vehicles Plant and equipment
Useful lives Shorter of 50 years and the lease term 4 years 5 ? 15 years
The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date.
FRS 16(73)(a) FRS 16(31)
FRS 16(32) FRS 16(34) FRS 16(35)(b) FRS 16(39) FRS 16(40)
FRS 16(73)(a)
FRS 16(16)(b) FRS 16(16)(c) FRS 39(98)(b)
FRS 16(73)(b) FRS 16(73)(c)
FRS 16(51)
Significant accounting policies
Illustrative Annual Report 2005
85
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