of a new liability. The difference in the respective carrying amounts is recognised in the statement of comprehensive income. (c) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 2.14 Cash and bank balances Cash and bank balances in the statement of financial position comprise cash at banks and on hand, demand deposits, short-term deposits with a maturity of three months or less and highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows, cash and cash equivalents consist of cash and bank balances as defined above, net of outstanding bank overdrafts as they are considered 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 first-in first-out basis. - Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs. These costs are assigned on a first-in first-out basis. 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 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 a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. Annual Report 2018 76 Hup Seng Industries Berhad (Company No: 226098-P) 31 December 2018 [ Notes to the Financial Statements (cont’d) ]
Annual Report 2018 77 Hup Seng Industries Berhad (Company No: 226098-P) [ Notes to the Financial Statements (cont’d) ] 31 December 2018 2. Summary of significant accounting policies (cont’d) 2.16 Provisions (cont’d) Provisions are reviewed at each reporting date 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.
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