Early Adoption of FRSs and Amendments to FRSs
During the financial year, the Group early adopted FRS 4 Insurance Contracts in accordance with the transitional provisions require simultaneous adoption of Financial Guarantee Contracts (Amendments to IAS 39 and IFRS 4) issued by the International Accounting Standards Board (“IASB”) in August 2005. This pronouncement permits the accounting policy choice of scoping financial guarantee contracts in accordance with FRS 139 Financial Instruments: Recognition and Measurement, or as insurance contracts in accordance with FRS 4.
The disclosure requirements in FRS 4 need not apply to comparative information that relates to annual periods beginning before 1 January 2010.
Consequently, the Group designates corporate guarantees given to banks for credit facilities granted to subsidiaries as insurance contracts as defined in FRS 4. The Group recognises these insurance contracts as recognised insurance liabilities when there is a present obligation, legal or constructive, as a result of a past event, when 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.
At every reporting date, the Group shall assess whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If this assessment shows that the carrying amount of the insurance liabilities is inadequate, the entire deficiency shall be recognised in income statement.
Recognised insurance liabilities shall only be removed from the balance sheet when and only when, it is extinguished via a discharge, cancellation or expiration.
The early adoption of FRS 4 does not result in any adjustment to recognised items of assets, liabilities, income and expense of the Group in both, the current year and prior years. Financial guarantees of the Company are disclosed in Note XX to the financial statements.
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