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XYZ Holdings (Singapore) Limited

Preface
About this publication
XYZ Holdings (Singapore) Limited
This publication includes the following components:

XYZ Holdings (Singapore) Limited (XYZ) Illustrative report on directors report,


statement by directors and financial statements
Appendix A Additional illustrative disclosures
Appendix B Comparison between Singapore Financial Reporting Standards and
International Financial Reporting Standards

The illustrative financial statements are an illustration of the annual financial statements of a
Singapore-incorporated listed company, XYZ Holdings (Singapore) Limited, prepared in
accordance with:

Singapore Financial Reporting Standards


The Singapore Companies Act, Chapter 50.

The illustrative financial statements serve to provide illustration of annual consolidated


financial statements of a group of companies whose activities include manufacturing,
property development and investment holding. The disclosures contained in these illustrative
financial statements are made based on a hypothetical group of entities and certain
assumptions have been made about the applicability of the disclosures required by Singapore
Financial Reporting Standards. In addition to the aforementioned standards and regulation,
certain disclosure requirements of the Singapore Exchange Securities Trading Limiteds
(SGX-ST) Listing Manual have also been included in these illustrative financial statements.
Readers should note that the disclosure requirements of the SGX-ST may be included in other
parts of the entitys annual report instead.
The illustrative financial statements is designed to capture a wide set of circumstances and
transactions, and in enhancing the relevance of XYZ, all minimum disclosure requirements of
FRS are complied with, generally without considering materiality threshold established in
FRS 1. Also, since XYZ is a fictitious entity, assessing materiality is not possible in some
circumstances. XYZ is a helpful enabler for entities preparing financial statements under FRS,
but its illustrative nature must be appreciated.
This 2014 edition includes illustrative disclosures for FRS 110 Consolidated Financial
Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of Interests in Other
Entities, amendments to FRS 32 Offsetting of Financial Assets and Financial Liabilities, and
amendments to FRS 36 Recoverable Amount Disclosure for Non-Financial Assets.
To provide the user with insight of changes in this publication as compared to the 2013
edition, we have sidelined the new illustrations, disclosure requirements and other editorial
changes in this manner.
Important notices

This publication is intended as an illustrative guide rather than a definitive


statement.
While the illustrative financial statements contain most of the usual disclosures
typically found in the financial statements of a group of companies whose activities
include manufacturing, property development and investment holding, the
disclosures and commentaries in this publication are not meant to be exhaustive.
Reference should be made to the relevant standards and regulations for specific
disclosure requirements.
This publication should not be relied upon as a substitute for seeking professional
advice concerning the appropriate accounting treatment for specific individual
situations or ensuring compliance with the Singapore Financial Reporting Standards
and/or Singapore Companies Act, Chapter 50.

XYZ Holdings (Singapore) Limited

Preface
Singapore Financial Reporting Standards (FRS)
For financial periods beginning on or after 1 January 2014, a number of new and revised
FRSs apply.
A list of the FRSs and INT FRS is provided in Appendix B, which also provides a brief summary
of the major differences with International Financial Reporting Standards (IFRS).
This publication reflects the requirements of the FRSs as at 31 August 2014. No new
accounting standards that would be applicable to financial statements covering periods
beginning on 1 January 2014 are expected. Nevertheless, the situation needs to be
monitored for any developments that may affect 2014 financial statements.
The following FRSs have not been dealt with in this publication:

FRS 26 Accounting and Reporting by Retirement Benefit Plans


FRS 29 Financial Reporting in Hyperinflationary Economies
FRS 34 Interim Financial Reporting
FRS 41 Agriculture
FRS 101 First-time Adoption of Financial Reporting Standards
FRS 104 Insurance Contracts
FRS 106 Exploration for and Evaluation of Mineral Resources
FRS 114 Regulatory Deferral Accounts
INT FRS 112 Service Concession Arrangements
INT FRS 113 Customer Loyalty Programmes
INT FRS 117 Distributions of Non-Cash Assets to Owners
INT FRS 118 Transfer of Assets from Customers
INT FRS 120 Stripping Costs in the Production of a Surface Mine
INT FRS 121 Levies

XYZ Holdings (Singapore) Limited

Preface
Singapore Financial Reporting Standards (FRS) (continued)
Abbreviations
The following abbreviations are used in this publication:
BC

Basis for Conclusions

CA

Singapore Companies Act, Chapter 50

FRS

Singapore Financial Reporting Standards

INT FRS

Interpretations of FRSs

FRS AG

FRS Application Guidance

FRS IG

FRS Implementation Guidance

IAS

International Accounting Standards

IFRS

International Financial Reporting Standards

SSA

Singapore Standards on Auditing

SGX

Singapore Exchange Securities Trading Limited (SGX-ST)s Listing Manual

XYZ Holdings (Singapore) Limited

Contents
Page
General information ................................................................................................................ 1
Directors report...................................................................................................................... 2
Statement by directors ............................................................................................................ 7
Independent auditors report ................................................................................................. . 8
Consolidated income statement ............................................................................................. 10
Consolidated statement of comprehensive income .............................................................. ....11
Balance sheets ..................................................................................................... 16
Statements of changes in equity ............................................................................................ 18
Consolidated cash flow statement .......................................................................................... 26
Notes to the financial statements
1.

Corporate information ................................................................................................... 30

2.

Summary of significant accounting policies ..................................................................... 30


2.1

Basis of preparation ............................................................................................. 30

2.2

Changes in accounting policies ............................................................................. 32

2.3

Standards issued but not yet effective ................................................................. 40

2.4

Basis of consolidation and business combinations .................................................. 42

2.5

Transactions with non-controlling interests ........................................................... 46

2.6

Foreign currency .................................................................................................. 46

2.7

Property, plant and equipment ............................................................................. 47

2.8

Investment properties .......................................................................................... 48

2.9

Intangible assets .................................................................................................. 50

2.10 Land use rights .................................................................................................... 51


2.11 Impairment of non-financial assets ........................................................................ 52
2.12 Subsidiaries ......................................................................................................... 52
2.13 Joint arrangements.............................................................................................. 53
2.14 Joint ventures and associates ............................................................................... 54
2.15 Financial instruments ........................................................................................... 56
2.16 Impairment of financial assets .............................................................................. 61
2.17 Cash and cash equivalents .................................................................................... 63
2.18 Construction contracts ......................................................................................... 63
2.19 Development properties ....................................................................................... 63
2.20 Inventories .......................................................................................................... 64
2.21 Provisions ............................................................................................................ 65
2.22 Government grants .............................................................................................. 66
2.23 Financial guarantee .............................................................................................. 66
2.24 Borrowing costs ................................................................................................... 67
2.25 Convertible redeemable preference shares............................................................ 67

XYZ Holdings (Singapore) Limited

Contents
Page
Notes to the financial statements (continued)
2.26 Employee benefits ................................................................................................ 68
2.27 Leases ................................................................................................................. 71
2.28 Non-current assets held for sale and discontinued operations ................................ 71
2.39 Revenue .............................................................................................................. 72
2.30 Taxes .................................................................................................................. 73
2.31 Share capital and share issuance expenses ............................................................ 75
2.32 Treasury shares ................................................................................................... 75
2.33 Contingencies ......................................................................................................75
3.

Significant accounting judgements and estimates ............................................................ 76


3.1

Judgements made in applying accounting policies ................................................. 76

3.2

Key sources of estimation uncertainty .................................................................. 78

4.

Revenue ............ ........................................................................................................... 81

5.

Interest income .............................................................................................................. 81

6.

Other income ................................................................................................................. 81

7.

Finance costs ................................................................................................................. 82

8.

Other expenses .............................................................................................................. 82

9.

Profit before tax from continuing operations ................................................................... 83

10. Income tax expense ....................................................................................................... 85


11. Discontinued operation and disposal group classified as held for sale ............................... 88
12. Earnings per share......................................................................................................... 90
13. Property, plant and equipment ....................................................................................... 93
14. Investment properties .................................................................................................... 96
15. Intangible assets ............................................................................................................ 98
16. Land use rights ............................................................................................................ 103
17. Investment in subsidiaries ............................................................................................ 103
18. Investment in joint venture ........................................................................................... 117
19. Investment in associates .............................................................................................. 120
20. Deferred tax ................................................................................................................ 123
21. Trade and other receivables ......................................................................................... 125
22. Investment securities ................................................................................................... 131
23. Gross amount due from/(to) customers for contract work-in-progress ............................ 132
24. Development properties................................................................................................ 133
25. Inventories .... .......................................................................................... 134
26. Derivatives .................................................................................................................. 135
27. Cash and short-term deposits ....................................................................................... 136

XYZ Holdings (Singapore) Limited

Contents
Page
Notes to the financial statements (continued)
28. Provisions ................................................................................................................... 137
29. Deferred capital grants ................................................................................................ 138
30. Loans and borrowings .................................................................................................. 139
31. Trade and other payables ............................................................................................. 142
32. Other liabilities ............................................................................................................ 143
33. Share capital and treasury shares ................................................................................. 144
34. Other reserves ............................................................................................................. 145
35. Employee benefits ........................................................................................................ 146
36. Related party transactions ........................................................................................... 149
37. Commitments .............................................................................................................. 152
38. Contingencies .............................................................................................................. 155
39. Fair value of assets and liabilities .................................................................................. 156
40. Financial risk management objectives and policies ......................................................... 173
41. Capital management .................................................................................................... 187
42. Segment information ................................................................................................... 189
43. Dividends .................................................................................................................... 194
44. Events occurring after the reporting period ................................................................... 195
45. Authorisation of financial statements for issue .............................................................. 195
Appendices
Appendix A-1 Consolidated statement of comprehensive income in one statement
Illustrating the analysis of expense by nature ................................................. 196
Appendix A-2 Hedge accounting ......................................................................................... 198
Appendix A-3 Agreements for the construction of real estate .............................................. 205
Appendix A-4 Defined benefit plans ..................................................................................... 209
Appendix B

Comparison between FRS and IFRS ................................................................ 220

Co. Reg. No 123456789Z

XYZ Holdings (Singapore) Limited


and its subsidiaries
Illustrative financial statements
for the financial year ended 31 December 2014
The names of people and corporations included as illustrations are fictitious. Any resemblance to
any person or business is purely coincidental.

XYZ Holdings (Singapore) Limited and its subsidiaries

General information
Gneral information

Directors
Ang Beng Choo Chairman
De Silva Elizabeth Frances Chief Executive Officer
Goh Hock Inn
Jee Kim Leng
Musa Nasir Osman
Pek Que Ru
See Tong Tong

Company secretary

SGX 1207.1

Lee Yiew Hong

Registered office
[Address, telephone number, facsimile number and electronic mail address (if any)]

SGX 1207.2

Solicitors
Laura & Co. LLP

Bankers
Good Bank Limited
South Bank Limited
CPA Bank Limited

Share registrar

SGX 1207.3

[Address]

Auditor

SGX 713.1

Ernst & Young LLP


One Raffles Quay
North Tower, Level 18
Singapore 048583
Partner in charge: Alex Yang (Date of appointment: since financial year ended 31 December
2013)

XYZ Holdings (Singapore) Limited | 1

XYZ Holdings (Singapore) Limited and its subsidiaries

Directors report
Diectors report

The directors are pleased to present their report to the members together with the audited
consolidated financial statements of XYZ Holdings (Singapore) Limited (the Company) and its
subsidiaries (collectively, the Group) and the balance sheet and statement of changes in equity
of the Company for the financial year ended 31 December 2014.

CA 201.6A

1.

CA 201.6A.a
CA 201.6.a

Directors

CA 201.5

The directors of the Company in office at the date of this report are:
Ang Beng Choo
De Silva Elizabeth Frances (appointed on 2 February 2014)
Goh Hock Inn
Jee Kim Leng
Musa Nasir Osman
Pek Que Ru
See Tong Tong
In accordance with Articles 93 and 94 of the Companys Articles of Association, Jee Kim
Leng, Pek Que Ru and See Tong Tong retire and, being eligible, offer themselves for reelection.

2.

Arrangements to enable directors to acquire shares and debentures

CA 201.6A.g
CA 201.6.f

Except as described in paragraph five below, neither at the end of nor at any time during
the financial year was the Company a party to any arrangement whose objects are, or one
of whose objects is, to enable the directors of the Company to acquire benefits by means
of the acquisition of shares or debentures of the Company or any other body corporate.

3.

Directors interests in shares and debentures

CA 201.6A.h
CA 201.6.g

The following directors, who held office at the end of the financial year, had, according to
the register of directors shareholdings required to be kept under section 164 of the
Singapore Companies Act, Chapter 50, an interest in shares and share options of the
Company and related corporations (other than wholly-owned subsidiaries) as stated
below:
Direct interest

Name of director

At the
beginning of
financial year
or date of
appointment

At the end of
financial year

340,000

Deemed interest
At the
beginning of
financial year
or date of
appointment

At the end of
financial year

345,000

2,100,000

2,100,000

5,000

10,000

50,000

60,000

43,000

60,000

Ordinary shares of the Company


Goh Hock Inn
De Silva Elizabeth Frances
Share options of the Company
Goh Hock Inn
De Silva Elizabeth Frances

XYZ Holdings (Singapore) Limited | 2

XYZ Holdings (Singapore) Limited and its subsidiaries

Directors report
3.

Directors interests in shares and debentures (continued)

Direct interest

Name of director

At the
beginning of
financial year
or date of
appointment

At the end of
financial year

Deemed interest
At the
beginning of
financial year
or date of
appointment

At the end of
financial year

Ordinary shares of 1 each of the


holding company (Good Group
(International) Ltd)
Goh Hock Inn
De Silva Elizabeth Frances

10,000

10,000

25,000

25,000

There was no change in any of the above-mentioned interests in the Company between
the end of the financial year and 21 January 2015.

SGX 1207.7

Except as disclosed in this report, no director who held office at the end of the financial
year had interests in shares, share options, warrants or debentures of the Company, or of
related corporations, either at the beginning of the financial year, or date of appointment
if later, or at the end of the financial year.

4.

Directors contractual benefits

CA 201.8

Except as disclosed in the financial statements, since the end of the previous financial
year, no director of the Company has received or become entitled to receive a benefit by
reason of a contract made by the Company or a related corporation with the director, or
with a firm of which the director is a member, or with a company in which the director has
a substantial financial interest.

5.

Options

CA 201.11.b and
11B

At an Extraordinary General Meeting held on 23 December 2009, shareholders approved


the Senior Executive Option Plan and the General Employee Share Option Plan for the
granting of non-transferable options that are settled by physical delivery of the ordinary
shares of the Company, to eligible senior executives and employees respectively.

SGX 853

The committee administering the employee share option plans comprise three directors,
Musa Nasir Osman, Pek Que Ru and See Tong Tong.

SGX 852.1.a

During the financial year:


The Company has granted 37,000 share options under the Senior Executive Option
Plan. These options expire on 30 June 2019 and are exercisable if and when the
Groups earnings per share amount increases by 12% within three years from the date
of grant.
The Company has also granted 163,000 share options under the General Employee
Share Option Plan. These options expire on 30 June 2018 and are exercisable if the
employee remains in service for three years from the date of grant and that certain
market conditions as detailed in Note 35 to the financial statements are met.
75,000 treasury shares were reissued at a weighted average exercise price of S$1.08
each, upon the exercise of options granted pursuant to the employee share option
plans.

XYZ Holdings (Singapore) Limited | 3

CA 201.11.b-d

CA 201.11.b-d

CA 201.12.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Directors report
5.

Options (continued)
Details of all the options to subscribe for ordinary shares of the Company pursuant to the
employee share option plans as at 31 December 2014 are as follows:
Expiry date

Exercise price (S$)

Number of options

31 December 2015

1.05

45,000

30 November 2016

1.18

55,000

1 January 2017

1.22

100,000

31 December 2018

1.26

125,000

30 June 2019

1.30

200,000

Total

525,000

Details of the options to subscribe for ordinary shares of the Company granted to
directors of the Company pursuant to the Senior Executive Option Plan are as follows:
Options
granted
during
financial
year

Aggregate
options granted
since
commencement
of plan to end of
financial year

Goh Hock Inn

15,000

105,000

(35,000)

60,000

De Silva Elizabeth Frances

22,000

75,000

(15,000)

60,000

37,0001

180,000

(50,000)

120,000

Name of director

Total

CA 201.12.b

Aggregate options
exercised since
commencement of
plan to end of
financial year

SGX 852.1.b.i

Aggregate
options
outstanding as
at end of
financial year

These options are exercisable between the periods from 30 June 2017 to 30 June 2019
at the exercise price of S$1.30 if the vesting conditions are met.
Since the commencement of the employee share option plans till the end of the financial
year:

SGX 852.2

No options have been granted to the controlling shareholders of the Company and their
associates

SGX 852.1.b.ii

No participant other than the two directors mentioned above has received 5% or more
of the total options available under the plans

SGX 852.1.b.iii

No options have been granted to directors and employees of the holding company and
its subsidiaries

SGX 852.c.i
SGX 852.1.c. ii

No options that entitle the holder to participate, by virtue of the options, in any share
issue of any other corporation have been granted

CA 201.11

No options have been granted at a discount

SGX 852.1.d

XYZ Holdings (Singapore) Limited | 4

XYZ Holdings (Singapore) Limited and its subsidiaries

Directors report
6.

Audit committee

CA 201B.9

The audit committee (AC) carried out its functions in accordance with section 201B (5) of
the Singapore Companies Act, Chapter 50, including the following:
Reviewed the audit plans of the internal and external auditors of the Group and the
Company, and reviewed the internal auditors evaluation of the adequacy of the
Companys system of internal accounting controls and the assistance given by the
Group and the Companys management to the external and internal auditors
Reviewed the quarterly and annual financial statements and the auditors report on the
annual financial statements of the Group and the Company before their submission to
the board of directors
Reviewed effectiveness of the Group and the Companys material internal controls,
including financial, operational and compliance controls and risk management via
reviews carried out by the internal auditor
Met with the external auditor, other committees, and management in separate
executive sessions to discuss any matters that these groups believe should be
discussed privately with the AC
Reviewed legal and regulatory matters that may have a material impact on the financial
statements, related compliance policies and programmes and any reports received
from regulators
Reviewed the cost effectiveness and the independence and objectivity of the external
auditor
Reviewed the nature and extent of non-audit services provided by the external auditor
Recommended to the board of directors the external auditor to be nominated,
approved the compensation of the external auditor, and reviewed the scope and results
of the audit
Reported actions and minutes of the AC to the board of directors with such
recommendations as the AC considered appropriate
Reviewed interested person transactions in accordance with the requirements of the
Singapore Exchange Securities Trading Limiteds Listing Manual
The AC, having reviewed all non-audit services provided by the external auditor to the
Group, is satisfied that the nature and extent of such services would not affect the
independence of the external auditor. The AC has also conducted a review of interested
person transactions.
The AC convened four meetings during the year with full attendance from all members,
except for one where a member was absent. The AC has also met with internal and
external auditors, without the presence of the Companys management, at least once a
year.
Further details regarding the AC are disclosed in the Report on Corporate Governance.

XYZ Holdings (Singapore) Limited | 5

SGX 1207.6.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Directors report
7.

Auditor
Ernst & Young LLP have expressed their willingness to accept reappointment as auditor.
On behalf of the board of directors:

____________________________

___________________________

Ang Beng Choo

De Silva Elizabeth Frances

Director

Director

CA 201.5

27 February 2015

Commentary:

Section 201B (5) of the Companies Act requires a description of the nature and extent of the
functions performed by the audit committee pursuant to section 201B (5). If the nature and
extent of the functions are described in the Report on Corporate Governance and the Directors
Report makes reference to the Report on Corporate Governance instead, the directors must
ensure that the Report on Corporate Governance describes the functions pursuant to section
201B (5) of the Companies Act.

XYZ Holdings (Singapore) Limited | 6

CA 201B.5

XYZ Holdings (Singapore) Limited and its subsidiaries

Statement by directors
Statement by directors

We, Ang Beng Choo and De Silva Elizabeth Frances, being two of the directors of XYZ Holdings
(Singapore) Limited, do hereby state that, in the opinion of the directors,
(i)

the accompanying balance sheets , consolidated income statement , consolidated


statement of comprehensive income, statements of changes in equity, and consolidated
cash flow statement together with notes thereto are drawn up so as to give a true and
fair view of the state of affairs of the Group and of the Company as at 31 December
2014 and the results of the business, changes in equity and cash flows of the Group and
the changes in equity of the Company for the year ended on that date, and

CA 201.15.a
CA 201.15.b

(ii)

at the date of this statement, there are reasonable grounds to believe that the Company
will be able to pay its debts as and when they fall due.

CA 201.15.c

On behalf of the board of directors:

___________________________

___________________________

Ang Beng Choo

De Silva Elizabeth Frances

Director

Director

27 February 2015

Commentary:

FRS 1 uses the terms statement of financial position and statement of cash flows. However, an
entity is not obliged to use these terminologies.
In this illustration, the Group has chosen to use the terms balance sheet and cash flow statement.
If an entity has chosen to use the terms introduced by FRS 1, the entity should make reference to
the new terms used in its financial statements.

In this illustration, the Group has chosen to present its comprehensive income in two linked
statements. If an entity has chosen to present its comprehensive income in one single statement,
the reference to consolidated income statement should be removed.

Presentation of the statement of changes in equity for the Company when consolidated financial
statements are presented is optional. In this illustration, the Company has chosen to present the
statement of changes in equity for the Company together with the consolidated financial
statements and balance sheet of the Company. Accordingly, the statement by directors includes
the directors opinion on whether the statement of changes in equity is drawn up so as to give a
true and fair view of the changes in equity of the Company. This applies to the auditors opinion
expressed in the auditors report as well.

XYZ Holdings (Singapore) Limited | 7

FRS 1.10

XYZ Holdings (Singapore) Limited and its subsidiaries

Independent auditors report


For the financial year ended 31 December 2014
Independent auditors report

Independent Auditors Report to the Members of XYZ Holdings (Singapore) Limited

SSA 700.22,
CA 207.1

Report on the Financial Statements

SSA 700.39

We have audited the accompanying financial statements of XYZ Holdings (Singapore) Limited (the
Company) and its subsidiaries (collectively, the Group) set out on pages 10 to 195, which comprise the
balance sheets of the Group and the Company as at 31 December 2014, the statements of changes in
equity of the Group and the Company and the consolidated income statement , consolidated
statement of comprehensive income and consolidated cash flow statement of the Group for the year
then ended, and a summary of significant accounting policies and other explanatory information.

SSA 700.23

Managements Responsibility for the Financial Statements

SSA 700.25

Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore
Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls
sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised
use or disposition; and transactions are properly authorised and that they are recorded as necessary to
permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain
accountability of assets.

SSA 700.26

Auditors Responsibility

SSA 700.28

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.

SSA 700.29 and


30

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entitys preparation of
financial statements that give a true and fair view in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.

SSA 700.31

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.

SSA 700.33

Opinion

SSA 700.34

In our opinion, the consolidated financial statements of the Group and the balance sheet and statement
of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act
and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the
Group and of the Company as at 31 December 2014 and the results, changes in equity and cash flows of
the Group and the changes in equity of the Company for the year ended on that date.

SSA 700.35
CA 207.2.a

Report on Other Legal and Regulatory Requirements

SSA 700.38

In our opinion, the accounting and other records required by the Act to be kept by the Company and by
those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in
accordance with the provisions of the Act.

CA 207.2.b

___________________________
Ernst & Young LLP

SSA 700.40

Public Accountants and


Chartered Accountants
Singapore

SSA 700.42
SSA 700.41

27 February 2015

XYZ Holdings (Singapore) Limited | 8

XYZ Holdings (Singapore) Limited and its subsidiaries

Independent auditors report


For the financial year ended 31 December 2014

Commentary:

Please refer to commentary no. 1 of the statement by directors.

Please refer to commentary no. 2 of the statement by directors.

Please refer to commentary no. 3 of the statement by directors.

XYZ Holdings (Singapore) Limited | 9

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated income statement


For the financial year ended 31 December 2014
(Illustrating the analysis of expenses by function)
2014
Note

$000

2013
(Restated)
$000

FRS 1.81.b and 103

Continuing operations
Revenue

136,720

142,571

Cost of sales

(104,271)

(111,820)

FRS 1.103

Gross profit

32,449

30,751

FRS 1.103

Other items of income


Interest income

FRS 1.103

Dividend income from investment securities


Other income

FRS 1.82.a and 103

430

327

FRS 18.35.b.iii

526

406

FRS 18.35.b.v

1,511

886

Other items of expense


Marketing and distribution
Research and development
Administrative expenses

(4,895)

(4,195)

(320)

(327)

FRS 1.103
FRS 1.103, FRS 38.126

(20,266)

(18,952)

FRS 1.103

Finance costs

(1,715)

(1,512)

FRS 1.82.b

Other expenses

(1,471)

(724)

FRS 1.103

128

FRS 1.82.c

Share of results of joint ventures

151

Share of results of associates


Profit before tax from continuing operations
Income tax expense

657

328

7,057

7,116

10

(1,557)

(1,687)

5,500

5,429

Profit from continuing operations, net of tax

FRS 1.82.c
FRS 1.85
FRS 1.82.d, FRS 12.77
FRS 1.85

Discontinued operation
Loss from discontinued operation, net of tax

11

Profit for the year

(544)

(188)

FRS 1.82.e, FRS 105.33.a


& 33A

4,956

5,241

FRS 1.81A.a

5,320

5,029

FRS 105.33.d

Attributable to:
Owners of the Company
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax

(544)

Profit for the year attributable to owners of the Company

(188)

FRS 105.33.d

4,776

4,841

Profit from continuing operations, net of tax

180

400

Loss from discontinued operation, net of tax

180

400

FRS 1.81B.i

FRS 1.81B.ii

Non-controlling interests

Profit for the year attributable to non-controlling interests


Earnings per share from continuing operations attributable
to owners of the Company (cents per share)
Basic

12(a)

22.98

21.81

FRS 33.66 and 67A

Diluted

12(a)

22.73

21.58

FRS 33.66 and 67A

Basic

12(b)

20.63

21.00

FRS 33.66 and 67A

Diluted

12(b)

20.43

20.78

FRS 33.66 and 67A

Earnings per share (cents per share)

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 10

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated statement of comprehensive income


For the financial year ended 31 December 2014

Consolidated statement of comprehensive income

2014
$000

Profit for the year

2013
(Restated)
$000

4,956

5,241

1,250

2,404

FRS 1.82.f

Other comprehensive income:


Items that will not be reclassified to profit or loss
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates

FRS 1.82A.b

62

10

1,312

2,414

274

110

FRS 107.20.a.ii

Items that may be reclassified subsequently to profit or loss


Net fair value gains on available-for-sale financial assets

FRS 16.77.f

FRS 1.82A.a

Net fair value changes on available-for-sale financial assets


reclassified to profit or loss

(100)

(12)

FRS 107.20.a.ii

Foreign currency translation

(181)

(82)

FRS 21.52.b

(7)

16

Other comprehensive income for the year, net of tax

1,305

2,430

FRS 1.81A.b

Total comprehensive income for the year

6,261

7,671

FRS 1.81A.c

6,091

7,211

FRS 1.81B.b.ii

170

460

FRS 1.81B.b.i

6,261

7,671

Attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
Attributable to:
Owners of the Company
Total comprehensive income from continuing operations,
net of tax
Total comprehensive income from discontinued operation,
net of tax
Total comprehensive income for the year attributable to
owners of the Company

6,585
(494)
6,091

7,379
(168)
7,211

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 11

FRS 105.33.d
FRS 105.33.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated statement of comprehensive income


For the financial year ended 31 December 2014

Commentary:
Complete set of financial statements
FRS 1.10

Under FRS 1, a complete set of financial statements comprises:


(a) A statement of financial position as at the end of the period*
(b) A statement of profit or loss and other comprehensive income for the period
(c) A statement of changes in equity for the period
(d) A statement of cash flows for the period*
(e) Notes, comprising a summary of significant accounting policies and other explanatory
information
(f) Comparative information in respect of the preceding period**
(g) A statement of financial position as at the beginning of the earliest comparative period when an
entity applies an accounting policy retrospectively or makes a retrospective restatement of
items in its financial statements, or when it reclassifies items in its financial statements***
*

FRS 1 replaces the term balance sheet with statement of financial position, and cash flow
statement with statement of cash flows. However, an entity is not obliged to use these new
titles.

**

An entity shall present, as a minimum, two statements of financial position, two statements of
profits or loss and other comprehensive income, two separate statements of profit or loss (if
presented), two statements of cash flows and two statements of changes in equity, and related
notes. This shall include comparative information for narrative and descriptive information if it
is relevant to understanding the current periods financial statements.

*** In such cases, a complete set of financial statements will include three statements of financial
position.

FRS 1.10

FRS 1.38 and 38A

FRS 1.10 and 39

Presentation of statement of profit or loss and other comprehensive income and analysis of expenses

An entity can present a single statement of profit or loss and other comprehensive income, with
profit or loss and other comprehensive income in two sections or as two linked statements.

FRS 1.81A

When an entity present a single statement of profit or loss and other comprehensive income, with
profit or loss and other comprehensive income in two sections, the sections shall be presented
together, with the profit or loss section presented first followed directly by the other comprehensive
income section. When an entity present the profit or loss section in a separate statement of profit or
loss, the separate statement of profit or loss shall immediately precede the statement of
comprehensive income, which shall begin with profit or loss.
An entity shall present an analysis of expenses using a classification based on either the nature of
expenses or their function within the entity, whichever provides information that is reliable and more
relevant. The main consideration in choosing an appropriate analysis for disclosure purposes should
be the entitys accounting system and management reporting system.

FRS 1.99

In this illustration, the format adopted is two linked statements with analysis of expenses by their
function within the entity. An illustration of a statement of comprehensive income in a single
statement with analysis of expenses by their nature is provided in Appendix A-1 Consolidated
statement of comprehensive income in one statement illustrating the analysis of expenses by
nature. Where the former format is adopted (as in the case of this illustration), the entity shall
disclose additional information on the nature of expenses, including depreciation and amortisation as
well as employee benefits expense in the notes.

FRS 1.104

XYZ Holdings (Singapore) Limited | 12

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated statement of comprehensive income


For the financial year ended 31 December 2014

Commentary (continued):
Reporting of continuing and discontinued operations

The separate reporting of continuing and discontinued operations in the statement of


comprehensive income is required only where there are discontinued operations as defined by FRS
105 Non-current Assets Held for Sale and Discontinued Operations.

FRS 105.30 and 33

An entity shall re-present the disclosures required for discontinued operations for prior periods
presented in the financial statements so that the disclosures relate to all operations that have been
discontinued by the end of the reporting period for the latest period presented.

FRS 105.34

On disposal of the disposal group, the gain or loss from discontinued operation presented on the
statement of comprehensive income includes the gain or loss on disposal of the disposal group
constituting the discontinued operation.

FRS 105.33.b.iii

Other additional disclosures

Additional line items, heading and subtotals should be presented on the face of the statement of
comprehensive income, when such presentation is relevant to the understanding of the entitys
financial performance.

Commentary on certain line items illustrated in the statement of comprehensive income

FRS 1.85

Interest income and dividend income


Interest income and dividend income exclude interest income and dividends respectively, from
financial assets at fair value through profit or loss. As disclosed in Note 2.15(a)(i), XYZ Holdings
(Singapore) Limited has made a policy choice to include interest and dividend income in the net gains
or net losses on financial assets at fair value through profit or loss, instead of recognising them
separately.

FRS 107 AGB5.e

Research and development


Research and development costs represent the aggregate amount of research and development
expenditure recognised as an expense during the period, including amortisation of deferred
development cost.

FRS 38.126 and


127

Share of results of associates and joint ventures


Share of results of associates and share of results of joint ventures are presented net of tax and
non-controlling interests in the associates.

FRS 1.IG6

Terminology used

Although FRS 1 uses the terms other comprehensive income, profit or loss and total
comprehensive income, an entity may use other terms to describe the totals as long as the meaning
is clear. For example, an entity may use the term net income to describe profit or loss.

XYZ Holdings (Singapore) Limited | 13

FRS 1.8

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated statement of comprehensive income


For the financial year ended 31 December 2014

Commentary (continued):
Tax effects related to each component of other comprehensive income

FRS 1.91

An entity may present components of other comprehensive income either:


(a) net of related tax effects, as illustrated in the statement of comprehensive income, or
(b) before related tax effects with one amount shown for the aggregate amount of income tax
relating to those components.
Extract of statement of comprehensive income illustrating other comprehensive income presented
at gross before related tax effects:
2014
$000

2013
$000

1,506
75

2,868
12

(269)
1,312

(466)
2,414

350

135

Other comprehensive income:


Items that will not be reclassified to profit or loss
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates
Income tax relating to components of other comprehensive
income
Items that may be reclassified subsequently to profit or loss
Net fair value gains on available-for-sale financial assets
Net fair value changes on available-for-sale financial assets
reclassified to profit or loss
Foreign currency translation
Income tax relating to components of other comprehensive
income
Other comprehensive income for the year, net of tax

(120)
(181)

(15)
(82)

(56)
(7)
1,305

(22)
16
2,430

Either way, the amount of income tax relating to each component of other comprehensive income
must be disclosed either in the statement of comprehensive income or in the notes. In this
illustration, the entity has chosen to disclose the related tax effects in the Note 10 Income tax
expense.

In this illustration, the share of other comprehensive income of associates relates to property
revaluation attributable to owners of the associates, which is an item that will not be reclassified to
profit or loss. If an entity has share of other comprehensive income of associates which relates to
items that may be reclassified subsequently to profit or loss, the item shall be presented under the
group of items that may be reclassified subsequently to profit or loss.

XYZ Holdings (Singapore) Limited | 14

FRS 1.90
FRS 12.81.ab

This page has been left blank intentionally.

XYZ Holdings (Singapore) Limited | 15

XYZ Holdings (Singapore) Limited and its subsidiaries

Balance sheets
As at 31 December 2014
Balance sheets

Note

2014
$'000

Group
31 December
2013
(Restated)
$'000

Company
1 January
2013
(Restated)
$'000

2014
$'000

2013
$'000

Assets
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Land use rights
Investment in subsidiaries
Investment in joint venture
Investment in associates
Deferred tax assets
Other receivables
Investment securities
Current assets
Gross amount due from customers for
contract work-in-progress
Development properties
Inventories
Prepaid operating expenses
Trade and other receivables
Investment securities
Derivatives
Cash and short-term deposits
Assets of disposal group classified as held for
sale

13
14
15
16
17
18
19
20
21
22

30,718
4,645
2,419
5,811
1,674
10,595
470
2,793
4,608
63,733

31,064
3,955
1,333
5,733
1,523
10,321
463
2,778
3,106
60,276

28,155
3,825
1,368
5,730
1,370
10,125
455
2,715
3,630
57,373

1,079
12,147
21
16,753
30,000

603
10,582
26
17,401
28,612

23
24
25

651
2,900
24,020
122
22,852
1,512
170
6,117
58,344

398
2,650
24,400
250
24,967
1,260
105
4,858
58,888

67
2,450
25,300
312
22,095
1,150
95
3,668
55,137

53
338
4,621
5,012

122
350
4,145
4,617

2,270
60,614

58,888

55,137

2,300
7,312

4,617

124,347

119,164

112,510

37,312

33,229

801
300
2,927
1,189

295
210
6,734
2,290

155
150
6,362
2,350

1,447
-

2,115
-

FRS 1.54.l
FRS 20.24
FRS 1.54.n
FRS 1.54.m
FRS 11.42.b
FRS 1.54.k
FRS 1.54.m
FRS 1.54.m

21
22
26
27
11

Total assets

FRS 1.54.a
FRS 1.54.b
FRS 1.54.c
FRS 1.55
FRS 1.55
FRS 1.54.e
FRS 1.54.e
FRS 1.54.o and 56
FRS 1.54.h
FRS 1.54.d

FRS 11.42.a
FRS 1.54.g
FRS 1.54.g
FRS 1.55
FRS 1.54.h
FRS 1.54.d
FRS 1.54.d
FRS 1.54.i
FRS 1.54.j,
FRS 105.38

Equity and liabilities


Current liabilities
Provisions
Deferred capital grants
Income tax payable
Loans and borrowings
Gross amount due to customers for contract
work-in-progress
Trade and other payables
Other liabilities
Derivatives

23
31
32
26

358
17,367
3,659
22
26,623

586
18,934
2,579
31,628

942
18,367
3,067
31,393

470
1,166
3,083

414
446
2,975

Liabilities directly associated with disposal


group classified as held for sale

11

2,071
28,694

31,628

31,393

3,083

2,975

31,920

27,260

23,744

4,229

1,642

1,525
3,488
2,273
13,415
200
20,901

1,841
1,754
1,904
13,188
18,687

1,898
954
1,517
14,290
18,659

226
5,750
5,976

231
5,628
5,859

Total liabilities

49,595

50,315

50,052

9,059

8,834

Net assets

74,752

68,849

62,458

28,253

24,395

33(a)
33(b)

11,090
(159)
54,657
7,058

9,665
51,627
5,657

9,510
48,477
3,031

11,090
(159)
16,700
622

9,665
14,309
421

FRS 1.54.r
FRS 1.54.r
FRS 1.54.r
FRS 1.54.r

11

66,949
1,900
68,849

61,018
1,440
62,458

28,253
28,253

24,395
24,395

FRS 105.38

Non-controlling interests
Total equity

128
72,774
1,978
74,752

Total equity and liabilities

124,347

119,164

112,510

37,312

33,229

28
29
30

Net current assets


Non-current liabilities
Provisions
Deferred capital grants
Deferred tax liabilities
Loans and borrowings
Other payables

Equity attributable to owners of the Company


Share capital
Treasury shares
Retained earnings
Other reserves
Reserve of disposal group classified as held
for sale

28
29
20
30
31

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 16

FRS 1.54.p,
FRS 105.38

FRS 1.54.l
FRS 20.24
FRS 1.54.o and 56
FRS 1.54.m
FRS 1.54.k

FRS 1.54.q

XYZ Holdings (Singapore) Limited and its subsidiaries

Balance sheets
As at 31 December 2014

Commentary:
Complete set of financial statements

Please refer to commentary no. 1 of the consolidated statement of comprehensive income.


An entity shall disclose the amount expected to be recovered or settled after more than twelve

FRS 1.61

months for each asset and liability line item that combines amounts expected to be recovered or
settled:
(a) no more than twelve months after the reporting period, and
(b) more than twelve months after the reporting period.

An entity shall present current and non-current assets, and current and non-current liabilities, as

separate classifications in its balance sheets in accordance with FRS1.66 to FRS 1.67 except when a
presentation based on liquidity provides information that is reliable and more relevant. When that
exception applies, an entity shall present all assets and liabilities in order of liquidity.

XYZ Holdings (Singapore) Limited | 17

FRS 1.60

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Statement of changes in equity

Attributable to owners of the Company

2014
Group

Opening balance at 1 January


2014

Profit for the year

Note

2.2

Equity,
total

Equity
attributable
to owners
of the
Company,
total

Share
capital

Treasury
shares

$000

$000

$000

$000

68,849

66,949

9,665

4,956

4,776

174

174

Retained
earnings

Other
reserves,
total

Fair value
adjustment
reserve

Asset
revaluation
reserve

Statutory
reserve
fund

Foreign
currency
translation
reserve

$000

$000

$000

$000

$000

$000

51,627

5,657

426

4,414

740

4,776

174

174

(344)

Premium
paid on
acquisition
of noncontrolling
interests

Employee
share
option
reserve

Gain or loss
on
reissuance
of treasury
shares

Equity
component of
convertible
redeemable
preference
shares

Reserve of
disposal
group
classified as
held for sale

Noncontrolling
interests

$000

$000

$000

$000

$000

$000

341

80

1,900

180

FRS 1.106A, FRS


1.106.d.ii, FRS 1.82,g
and FRS 107.20.a.II

FRS 1.106A,FRS
1.106.d.ii,
FRS 1.82.g, FRS 16.77.f

FRS 1.106.d.i

Other comprehensive income


Net gain on fair value changes of
available-for-sale financial
assets
Net surplus on revaluation of
freehold land and buildings

Foreign currency translation

1,250

(181)

1,250

(171)

1,250

(171)

1,250

(171)

(10)

Share of other comprehensive


income of associates
Other comprehensive income
for the year, net of tax

62

62

62

62

1,305

1,315

1,315

174

1,312

(171)

(10)

Total comprehensive income for


the year

6,261

6,091

4,776

1,315

174

1,312

(171)

170

XYZ Holdings (Singapore) Limited | 18

FRS 1.106A,FRS
1.106.d.ii, FRS 1.82.g,
FRS 21.52.b
FRS 1.106A, FRS
1.106.d.ii, FRS 1.82.h,
FRS 28.39

FRS 1.106.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Attributable to owners of the Company

2014
Group

Note

Equity,
total

Equity
attributable
to owners
of the
Company,
total

Share
capital

Treasury
shares

Retained
earnings

Other
reserves,
total

Fair value
adjustment
reserve

Asset
revaluation
reserve

Statutory
reserve
fund

Foreign
currency
translation
reserve

Premium
paid on
acquisition
of noncontrolling
interests

Employee
share
option
reserve

Gain or loss
on
reissuance
of treasury
shares

Equity
component of
convertible
redeemable
preference
shares

Reserve of
disposal
group
classified as
held for sale

Noncontrolling
interests

Contributions by and
distributions to owners

FRS 1.106.d.iii

Shares issued for acquisition of a


subsidiary

33(a)

Share issuance expense

33(a)

1,475
(50)

1,475
(50)

1,475
(50)

Grant of equity-settled share


options to employees

35

245

245

Purchase of treasury shares

33(b)

(254)

(254)

Treasury shares reissued


pursuant to employee share
option plans

33(b)

Dividends on ordinary shares

43

Total contributions by and


distributions to owners

Changes in ownership interests in


subsidiaries
Acquisition of subsidiary
Acquisition of non-controlling
interests without a change in
control

81

81

FRS 1.106.d.iii

FRS 32.39

245

245

FRS 102.50

FRS 32.33

65

FRS 102.50,
FRS 32.33

(254)

95
-

(1,613)

(1,613)

(116)

(116)

1,425

(159)

(14)

(79)

(1,613)

FRS 1.106.d.iii

(1,613)

231

166

65

FRS 1.106.d.iii

558

FRS 1.106.d.iii
17

558

17

(800)

(150)

(150)

(150)

(650)

Total changes in ownership


interests in subsidiaries

(242)

(150)

(150)

(150)

(92)

FRS 1.106.d.iii

Total transactions with owners


in their capacity as owners

(358)

(266)

1,425

(150)

166

65

(92)

FRS 1.106.d.iii

(159)

(1,613)

81

XYZ Holdings (Singapore) Limited | 19

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Attributable to owners of the Company

2014
Group

Note

Equity,
total

Equity
attributable
to owners
of the
Company,
total

Share
capital

Treasury
shares

Retained
earnings

Other
reserves,
total

Fair value
adjustment
reserve

Asset
revaluation
reserve

Statutory
reserve
fund

Foreign
currency
translation
reserve

Premium
paid on
acquisition
of noncontrolling
interests

Employee
share
option
reserve

Gain or loss
on
reissuance
of treasury
shares

Equity
component of
convertible
redeemable
preference
shares

Reserve of
disposal
group
classified as
held for sale

Noncontrolling
interests

Others
Reserve attributable to disposal
group classified as held for
sale

(128)

(128)

Expiry of employee share options

30

(30)

Transfer to statutory reserve


fund

(163)

163

163

Total Others

(133)

(128)

163

74,752

72,774

54,657

7,058

600

5,598

903

Closing balance at 31 December


2014

11

11,090

(159)

(515)

(150)

(30)
(30)

477

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 20

128

FRS 105.38

FRS 102.50

FRS 1.106.d.iii

128

65

80

128

1,978

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Attributable to owners of the Company

2013
Group

Opening balance at 1 January 2013


Profit for the year

Note

2.2

Equity,
total

Equity
attributable
to owners of
the Company,
total

Share
capital

Retained
earnings

Other
reserves,
total

Fair value
adjustment
reserve

$000

$000

$000

$000

$000

$000

$000

62,458

61,018

9,510

48,477

3,031

328

2,000

613

5,241

4,841

4,841

Asset
revaluation
reserve

Statutory
reserve
fund
$000

Foreign
currency
translation
reserve

Employee
share
option
reserve

$000

$000

(202)
-

Equity
component of
convertible
redeemable
preference
shares
$000

Noncontrolling
interests
$000

292

1,440

400

FRS 1.106.d.i

Other comprehensive income


Net gain on fair value changes of available-forsale financial assets

Net surplus on revaluation of freehold land and


buildings

Foreign currency translation


Share of other comprehensive income of
associates

98

2,404

(82)

98

2,404

(142)

98

2,404

(142)

98

2,404

10

10

10

10

Other comprehensive income for the year, net of


tax

2,430

2,370

2,370

98

2,414

Total comprehensive income for the year

7,671

7,211

4,841

2,370

98

2,414

(142)

FRS 1.106A, FRS


1.106.d.ii, FRS 1.82.g
and FRS 107.20.a.II

FRS 1.106A, FRS


1.106.d.ii,FRS 1.82.g,
FRS 16.77.f

60

(142)

60

(142)

460

XYZ Holdings (Singapore) Limited | 21

FRS 1.106A, FRS


1.106.d.ii, FRS
1.82.g, FRS 21.52.b
FRS 1.106A, FRS
1.106.d.ii, FRS
1.82.h, FRS 28.39

FRS 1.106.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Attributable to owners of the Company

2013
Group

Note

Equity,
total

Equity
attributable
to owners of
the Company,
total

Share
capital

Retained
earnings

Other
reserves,
total

Fair value
adjustment
reserve

$000

$000

$000

$000

$000

$000

Asset
revaluation
reserve
$000

Statutory
reserve
fund
$000

Foreign
currency
translation
reserve

Employee
share
option
reserve

$000

$000

Equity
component of
convertible
redeemable
preference
shares
$000

Noncontrolling
interests
$000

Contributions by and distributions to owners


Grant of equity-settled share options to
employees
Exercise of employee share options
Dividends on ordinary shares
Equity component of redeemable preference
shares
Total transactions with owners in their capacity
as owners

FRS 1.106.d.iii
35
33(a)
43

150

150

150

150

FRS 102.50

72

72

155

(83)

(83)

FRS 102.50

FRS 1.106.d.iii

(1,582)
80
(1,280)

(1,582)
80
(1,280)

155

(1,582)
(1,582)

80

80

FRS 32.28

147

67

80

FRS 1.106.d.iii

(18)

FRS 102.50

FRS 1.106.d.iii

80

1,900

Others
Expiry of employee share options

(18)

Transfer to statutory reserve fund

(127)

127

127

Total others

(109)

109

127

68,849

66,949

9,665

5,657

426

4,414

740

Closing balance at 31 December 2013

18

51,627

(344)

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 22

(18)
341

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Retained earnings

Other reserves,
total

Employee share
option reserve

Gain or loss on
reissuance of
treasury shares

Equity component
of convertible
redeemable
preference shares

$'000

$'000

$'000

$'000

$'000

2014

Company

Note

Opening balance at 1 January 2014


Profit for the year, representing total comprehensive income for
the year

Equity, total

Share capital

Treasury shares

$'000

$'000

$'000

24,395

9,665

14,309

421

341

80

3,974

3,974

FRS 1.106.d.i ,FRS


1.106.a

1,475

1,475

FRS 1.106.d.iii

Contributions by and distributions to owners

FRS 1.106.d.iii

Shares issued for acquisition of a subsidiary

33(a)

Share issuance expense

33(a)

Grant of equity-settled share options to employees

35

Expiry of employee share options


Purchase of treasury shares

33(b)

Treasury shares reissued pursuant to employee share option plans


Dividends on ordinary shares
Total transactions with owners in their capacity as owners

Closing balance at 31 December 2014

FRS 32.39

245

(50)

245

245

FRS 102.50

30

(30)

(30)

FRS 102.50

FRS 32.33

65

FRS 102.50, FRS 32.33

(254)
81

43

(50)

(254)
95

(14)

(79)

(1,613)

(1,613)

FRS 1.106.d.iii

(116)

1,425

(159)

(1,583)

201

136

65

FRS 1.106.d.iii

11,090

(159)

16,700

622

477

65

80

28,253

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 23

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

2013

Company

Note

Opening balance at 1 January 2013


Profit for the year, representing total comprehensive income for
the year

Equity, total

Share capital

Treasury shares

Retained earnings

Other reserves,
total

$'000

$'000

$'000

$'000

$'000

23,226

9,510

2,449

Employee share
option reserve

Gain or loss on
reissuance of
treasury shares

Equity component
of convertible
redeemable
preference shares

$'000

$'000

$'000

13,424

292

292

2,449

Contributions by and distributions to owners


Grant of equity-settled share options to employees

FRS 1.106.d.i , FRS


1.106.a

FRS 1.106.d.iii

35

150

150

150

FRS 102.50

33(a)

72

155

(83)

(83)

FRS 102.50

18

(18)

(18)

FRS 102.50

80

(1,582)

Total transactions with owners in their capacity as owners

(1,280)

155

Closing balance at 31 December 2013

24,395

9,665

Exercise of employee share options


Expiry of employee share options
Equity component of redeemable preference shares
Dividends on ordinary shares

43

80

80

(1,582)

FRS 1.106.d.iii

(1,564)

129

49

80

FRS 1.106.d.iii

14,309

421

341

80

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 24

FRS 32.28

XYZ Holdings (Singapore) Limited and its subsidiaries

Statements of changes in equity


For the financial year ended 31 December 2014

Commentary:
Analysis of other comprehensive income for each component of equity in the statement of changes in
equity

FRS 1 Presentation of Financial Statements requires an analysis of other comprehensive income for
each component of equity to be presented either in the statement of changes in equity or in the notes
to the financial statements.
In this illustration, the Group has chosen to present an analysis of other comprehensive income for
each component of equity in the statement of changes in equity.

Statement of changes in equity for the company

Presentation of the statement of changes in equity for the Company when consolidated financial
statements are presented is optional. Information relating to the equity items presented in the
Companys balance sheet may be presented in the notes to the financial statements instead.

XYZ Holdings (Singapore) Limited | 25

FRS 1.106.d.ii
FRS 1.106A

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated cash flow statement


For the financial year ended 31 December 2014
2014

2013
(Restated)

$'000

$'000

Consolidated cash flow statement

Note

FRS 7.18.b

Operating activities
Profit before tax from continuing operations
Loss before tax from discontinued operation

7,057
11

(551)
6,506

Profit before tax, total

7,116
(193)
6,923

Adjustments for:

FRS 7.20.b and c

Amortisation of deferred capital grant

29

(239)

(180)

Amortisation of intangible assets

15

220

252

Amortisation of land use rights

16

132

130

Depreciation of property, plant and equipment

13

3,043

2,838

Grant of equity-settled share options to employees

35

245

150

Net fair value gains on investment properties

14

(489)

(129)

Net fair value gains on held for trading investment securities

(135)

(95)

Net fair value gains on derivatives

(43)

(56)

Net fair value gains on available-for-sale financial assets (transferred from


equity on disposal of investment securities)

(120)

(15)

Net gain on remeasuring previously held equity interest in associates to fair


value on business combination

140

17

235

Impairment loss on property, plant and equipment

13

500

Impairment loss on intangible assets

15

200

Impairment loss on investment securities

22

198

210

Fair value adjustment of contingent consideration for a business


combination

Impairment loss on trade receivables


Net loss/(gain) on disposal of property, plant and equipment
Finance costs

135

115

76

(120)

1,715

1,512

Dividend income from investment securities

(526)

(406)

Interest income

(430)

(327)

Loss recognised on re-measurement to fair value less costs to sell

11

450

Provisions

(144)

105

Share of results of joint venture

(151)

(128)

Share of results of associates

(657)

(328)

Unrealised exchange (gain)/loss

(240)

Total adjustments
Operating cash flows before changes in working capital

120

4,115

3,648

10,621

10,571

Changes in working capital

FRS 7.20.a

Increase in development property

(250)

(200)

Increase in gross amount due from customers for contract work-in-progress

(253)

(331)

Decrease in gross amount due to customers for contract work-in-progress

(228)

Decrease/(increase) in inventories
Decrease in trade and other receivables
Decrease in prepaid operating expenses
Decrease in trade and other payables
Increase/(decrease) in other liabilities
Total changes in working capital
Cash flows from operations
Interest received

FRS 7.28

942
2,245
128
(1,562)

(356)
(1,575)
904
62
(1,864)

630

(496)

1,662

(3,856)

12,283

6,715

430

327

FRS 7.31

Interest paid

(1,834)

(1,550)

Income taxes paid

(5,682)

(3,571)

FRS 7.35

5,197

1,741

FRS 7.10

Net cash flows from operating activities

XYZ Holdings (Singapore) Limited | 26

FRS 7.31

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated cash flow statement


For the financial year ended 31 December 2014

Note

2014

2013
(Restated)

$'000

$'000

Investing activities
Net cash inflow on acquisition of a subsidiary

FRS 7.21

17

Dividend income from investment securities


Proceeds from disposal of investment securities
Proceeds from government grants

29

Proceeds from disposal of property, plant and equipment


Purchase of investment securities

217

FRS 7.39

526

406

FRS 7.31

328

278

FRS 7.16.d

2,040

1,030

FRS 20.28

6,867

1,559

FRS 7.16.b

(2,025)

(588)
(4,358)

Purchase of property, plant and equipment

13

(8,640)

Subsequent expenditure on investment properties

14

(500)

Additions to intangible assets

15

Net cash flows generated from/(used in) investing activities

(200)

(200)

(1,387)

(1,873)

Financing activities
Acquisition of non-controlling interests
Dividends paid on ordinary shares

(800)

43

(1,613)

33(b)

Proceeds from re-issuance of treasury shares

33(b)

Proceeds from exercise of employee share options


Proceeds from loans and borrowings
17

Repayment of loans and borrowings

(1,582)

(254)
95

FRS 7.16.a
FRS 7.10

Net increase in cash and cash equivalents


Effect of exchange rate changes on cash and cash equivalents
27

FRS 7.17.b

FRS 7.17.a

72

FRS 7.17.a

3,000

FRS 7.17.c

(50)

(132)

(1,305)

1,358

2,505

1,226

(50)

Cash and cash equivalents at 1 January

FRS 7.31

(135)

Net cash flows (used in)/from financing activities

FRS 7.42A

4,259
(2,807)

Repayment of obligations under finance leases

Cash and cash equivalents at 31 December

FRS 7.16.a
FRS 7.16.a

FRS 7.21

17

Purchase of treasury shares

Share issuance expense

FRS 7.16.c

FRS 7.17.d
FRS 7.17.e
FRS 7.10

35

FRS 7.28

3,414

2,153

FRS 7.45

5,869

3,414

FRS 7.45

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

XYZ Holdings (Singapore) Limited | 27

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated cash flow statement


For the financial year ended 31 December 2014

Commentary:
Presentation of consolidated cash flow statement using direct method

In this illustration, the consolidated cash flow statement is presented using indirect method whereby
profit or loss is adjusted for the effects of non-cash transactions, deferrals, accruals and investing or
financing cash flows. FRS 7.18 allows entities to report cash flows from operating activities using
either the direct method or indirect method. The cash flow from operating activities prepared using
the direct method is illustrated below:

FRS 7.App A

Group
2014
$'000

FRS 7.18

2013
$'000

Operating activities
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest paid
Income taxes paid
Net cash flows from/(used in) operating activities

XXX
(XXX)
XXX
(XXX)
(XXX)
XXX

XXX
(XXX)
XXX
(XXX)
(XXX)
(XXX)

The cash flow from financing and investing activities under the direct method are identical to that
prepared under indirect method.
Disposal of subsidiary

In this illustration, there is no disposal of subsidiary or other business units during the financial year.
If there is such disposal, an entity should disclose:
(a)
(b)
(c)
(d)

FRS 7.40.a-d

The total disposal consideration;


The portion of the disposal consideration discharged by means of cash and cash equivalents;
The amount of cash and cash equivalents in the subsidiary or business unit disposed of; and
The amount of the assets and liabilities other than cash and cash equivalents in the subsidiary or
business unit disposed of, summarised by each major category.

An investment entity, as defined in FRS 110 Consolidated Financial Statements, need not apply (c)
and (d) above to an investment in subsidiary that is required to be measured at fair value through
profit or loss.

FRS 7.40A

Illustrative note disclosure:


The company disposed of XXX Limited, a wholly owned subsidiary, on 30 November 2014 at its
carrying value. The disposal consideration was fully settled in cash.

FRS 7.40.b

The value of assets and liabilities of XXX Limited recorded in the consolidated financial
statements as at 30 November 2014, and the cash flow effect of the disposal were:

FRS 7.40.d

Property, plant and equipment


Trade and other receivables
Inventories
Cash and cash equivalents
Trade and other payables
Income tax payable
Carrying value of net assets
Total consideration
Cash and cash equivalents of the subsidiary
Net cash inflow on disposal of a subsidiary

$000
XXX
XXX
XXX
XXX
XXX
(XXX)
(XXX)

FRS 7.40.c

XXX
XXX
(XXX)
XXX

XYZ Holdings (Singapore) Limited | 28

FRS 7.40.a and b


FRS 7.40.c
FRS 7.39

XYZ Holdings (Singapore) Limited and its subsidiaries

Consolidated cash flow statement


For the financial year ended 31 December 2014

Commentary (continued):
Contingent consideration for business combination

In this illustration, there is no payment of contingent consideration for business combination during
the year. For illustrative disclosure of contingent consideration for business combination in the year
when the amount is paid and its impact on the presentation in the statement of cash flows, please
refer to commentary no.1 of Note 32 Other liabilities.

Foreign currency translation differences

Foreign currency translation differences that arise on translation of foreign currency cash and cash
equivalents should be reported in the consolidated cash flow statement in order to reconcile opening
and closing balances of cash and cash equivalents, separately from operating, financing and investing
cash flows.

XYZ Holdings (Singapore) Limited | 29

FRS 7.28

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
1.

Corporate information
XYZ Holdings (Singapore) Limited (the Company) is a limited liability company
incorporated and domiciled in Singapore and is listed on the Singapore Exchange. The
immediate and ultimate holding company is Good Group (International) Ltd.

FRS 1.138.a and c


FRS 24.13
CA 201.10

The registered office and principal place of business of the Company is located at Level
18, One Raffles Quay, North Tower, 048583, Singapore.

FRS 1.138.a

The principal activity of the Company is investment holding. The principal activities of the
subsidiaries are disclosed in Note 17 to the financial statements.

FRS 1.138.b

Commentary:
Disclosures required by FRS 1.138

The following information may be provided in the notes to the financial statements or
disclosed elsewhere in information published with the financial statements:
-

the domicile and legal form of the entity, its country of incorporation and the address of
its registered office (or principal place of business, if different from the registered
office);

a description of the nature of the entitys operations and its principal activities; and

the name of the parent and ultimate parent of the Group.

If the entity changes its name during the financial year, the change shall be disclosed.

FRS 1.138

FRS 1.51.a

Illustrative disclosure where the entity changes its name during the financial year:
With effect from [insert effective date of change], the name of the company was
changed from [XXX] to [XXX].
Disclosures of name of the ultimate controlling party

2.
2.1

FRS 24 requires an entity to disclose the name of the entitys parent and, if different, the
ultimate controlling party. The ultimate controlling party can be either an entity or a person.

FRS 24.13

FRS 1.117

Summary of significant accounting policies


Basis of preparation
The consolidated financial statements of the Group and the balance sheet and
statement of changes in equity of the Company have been prepared in accordance with
Singapore Financial Reporting Standards (FRS).

FRS 1.16, FRS


1.51.b and FRS
1.112.a
SGX 1207.5.d

The financial statements have been prepared on the historical cost basis except as
disclosed in the accounting policies below.

FRS 1.117.a

The financial statements are presented in Singapore Dollars (SGD or $) and all values
in the tables are rounded to the nearest thousand ($000), except when otherwise
indicated.

XYZ Holdings (Singapore) Limited | 30

FRS 1.51.d and e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

2.
2.1

Summary of significant accounting policies (continued)


Basis of preparation (continued)
Commentary:
Going concern uncertainty

When preparing financial statements, management shall make an assessment of an


entitys ability to continue as a going concern. Where the effect of the judgement made in
relation to the entitys ability to continue as a going concern has significant effect on the
amounts recognised in the financial statements, the judgement made should be disclosed.

FRS 1.25
FRS 1.122

Financial statements shall be prepared on a going concern basis unless management


either intends to liquidate the entity or to cease trading, or has no realistic alternative but
to do so. When management is aware, in making its assessment, of material uncertainties
related to events or conditions that may cast significant doubt upon the entitys ability to
continue as a going concern, those uncertainties shall be disclosed.

FRS 1.25

Illustrative disclosure where the ability of the company to continue as a going concern is
dependent on the holding company undertaking to provide continuing financial support to
the company to enable it to continue as a going concern:
The Company incurred a net loss of $XXX (2013: $XXX) during the financial year
ended 31 December 2014 and as at that date, the Companys current and total
liabilities exceeded its current and total assets by $XXX (2013: $XXX) and $XXX
(2013: $XXX) respectively. These factors indicate the existence of a material
uncertainty which may cast significant doubt about the Companys ability to continue
as a going concern. The ability of the Company to continue as a going concern
depends on the holding company undertaking to provide continuing financial support
to enable the Company to continue as a going concern.
If the Company is unable to continue in operational existence for the foreseeable
future, the Company may be unable to discharge its liabilities in the normal course of
business and adjustments may have to be made to reflect the situation that assets
may need to be realised other than in the normal course of business and at amounts
which could differ significantly from the amounts at which they are currently recorded
in the balance sheet. In addition, the Company may have to reclassify non-current
assets and liabilities as current assets and liabilities. No such adjustments have been
made to these financial statements.
Functional and presentation currency

When the presentation currency is different from the functional currency of the Company,
that fact shall be stated, together with disclosure of the functional currency and the
reasons for using a different presentation currency.

XYZ Holdings (Singapore) Limited | 31

FRS 21.53

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year
except in the current financial year, the Group has adopted all the new and revised
standards which are effective for annual financial periods beginning on or after 1
January 2014. The adoption of these standards did not have any effect on the financial
performance or position of the Group and the Company except as discussed below.
FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint
Ventures
The adoption of FRS 111 has resulted in the Group having to revise its method of
accounting for its joint arrangement. Investment in jointly controlled entity had been
previously consolidated proportionately. Under FRS 111, this arrangement is classified
as joint venture and is to be equity accounted.
The change in accounting policy has been applied in accordance with the transitional
provision in FRS 111. The initial investment was measured as the aggregate of the
carrying amounts of the assets and liabilities that the Group previously proportionately
consolidated. The effects of adoption of FRS 111 and FRS 28 are as follows:
Impact on statement of profit or loss (increase/(decrease)) in profit:
Group
As at 31
December
2013
$000
Other income

(214)

Administrative expenses

63

Share of profit of a joint venture

151

Net impact on profit before/after tax

Impact on equity (increase/(decrease)) in net equity:


Group
As at 31
December
2013
$000
Investment property
Investment in joint venture
Total non-current assets

As at 1
January
2013
$000

(1,449)

(1,411)

1,523

1,370

74

41

(66)

(56)

Trade and other receivables

(454)

(410)

Total assets

Cash and cash equivalents

(446)

(425)

Loans and borrowings

240

230

Trade and other payables

206

195

Total liabilities

446

425

Net impact on equity

XYZ Holdings (Singapore) Limited | 32

FRS 8.28.b
FRS 8.28.d
FRS 111.C2

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Impact on cash flows statements (increase/(decrease)) in cash flows:
Group
As at 31
December
2013
$000
Operating

(10)

Investing

Financing

20

Net increase in cash and cash equivalents

10

Commentary:
Alternative simplified disclosures
Following are illustrative disclosure when management concluded that the adoption of new
FRSs and INT FRSs does not have any impact on the financial statements.
The accounting policies adopted are consistent with those of the previous financial year
except in the current financial year, the Group has adopted all the new and revised
standards which are effective for annual financial periods beginning on or after 1
January 2014. The adoption of these standards did not have any effect on the financial
statements.

FRSs effective for annual period beginning on or after 1 January 2014


The following FRS and INT FRS are effective for the annual period beginning on or after 1
January 2014:

FRS 27 Separate Financial Statements

FRS 28 Investments in Associates and Joint Ventures

FRS 110 Consolidated Financial Statements

FRS 111 Joint Arrangements

FRS 112 Disclosure of Interests in Other Entities

Amendments to FRS 32 Offsetting of Financial Assets and Financial Liabilities

Amendments to FRS 36 Recoverable Amount Disclosure for Non-financial Assets

Amendments to FRS 39 Novation of Derivatives and Continuation of Hedge


Accounting

INT FRS 121 Levies

FRS 114 Regulatory Deferral Accounts

XYZ Holdings (Singapore) Limited | 33

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

FRS 8.28.f requires disclosure of effect of application of a new standard or amendment


for the current period and each prior period presented to the extent practicable. FRS
110.C2A and FRS 111.C1B partly relaxes this requirement. It is stated that an entity may
only present the quantitative information required under FRS 8.28.f for the annual period
immediately preceding the first annual period for which FRS 110 and FRS 111 is applied.
An entity may also present this information for the current period or for the earlier
comparative periods, but it is not required to do so. In view of this exemption, an entity is
not required to disclose the impact of transition to FRS 110 and FRS 111 for the current
period or for an earlier period than the immediately preceding period. The Group has
opted to provide the quantitative disclosures of the effect of the application of FRS 110
and FRS 111 only for the immediately preceding period. i.e., period ended 31 December
2013 and not for the current period.

FRS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires the
disclosure of the amount of the adjustment for the current period and each prior period
(to the extent practicable) upon initial application of a Standard or an Interpretation. In
this illustration, it is assumed that the adoption of the new and revised standards does not
have any impact on the financial statements.
Following are illustrative disclosure of changes in accounting policies on adoption of the
new and revised standards.
FRS 110 Consolidated Financial Statements
The following is an illustrative disclosure of the impending changes in accounting policy on
adoption of FRS 110 for de facto control.
Upon application of FRS 110, the Group concluded that it has control over ABC Ltd
which was previously accounted for as an associated company.
The Group acquired 47% of ownership interest in ABC Ltd in 2005 and there was no
change in the Groups ownership in ABC Ltd since then. The remaining 53% of the
ordinary shares of ABC Ltd are owned by thousands of shareholders, which none of
the shareholders hold more than 1 per cent of the voting rights individually.
In assessing whether the Group has control over an investee where the Group holds
less than a majority of voting rights, the Group considers factors such as the size of
the Groups holding of voting rights relative to the size and dispersion of holdings of
other vote holders as well as any additional facts and circumstances that indicate the
Group has, or does not have, the current ability to direct the relevant activities of the
investee, including the voting patterns at the investees previous shareholders
meetings.
The change in accounting policy has been applied retrospectively in accordance with
the transitional positions in FRS 110. The assets, liabilities and non-controlling
interests in ABC Ltd are measured as if ABC Ltd had been consolidated from the date
when the Group obtained control in 2005, by applying the requirements of FRS 103
(issued 2004). The effects of adoption of the financial statements are as follows :

XYZ Holdings (Singapore) Limited | 34

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

FRS 110 Consolidated Financial Statements (continued)


(a) De facto control (continued):
Group
As at 31
December
2013

As at 1
January
2013

(Restated)

(Restated)

$000

$000

(XXX)

(XXX)

Property, plant and equipment

XXX

XXX

Investment properties

XXX

XXX

Trade and other receivables

XXX

XXX

Cash and short-term deposits

XXX

XXX

Trade and other payables

XXX

XXX

Income tax payable

XXX

XXX

Provisions

XXX

XXX

Loans and borrowings

XXX

XXX

Deferred tax liabilities

XXX

XXX

Impact on net assets

XXX

XXX

Non-controlling interests

XXX

XXX

Others reserves

XXX

XXX

Impact on equity

XXX

XXX

(Decrease)/increase in:
Consolidated balance sheet
Investment in associate

XYZ Holdings (Singapore) Limited | 35

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

FRS 110 Consolidated Financial Statements (continued)


(a) De facto control (continued):
Group
2013
(Restated)
$000
Increase/(decrease) in:
Consolidated income statement
Revenue

XXX

Cost of sales

XXX

Interest income

XXX

Other income

XXX

Marketing and distribution

XXX

Administrative expenses

XXX

Share of results of associates

(XXX)

Finance costs

XXX

Income tax expense

XXX

Profit for the year

XXX

Profit for the year attributable to


Owners of the Company

Non-controlling interests

XXX

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Consolidated statement of comprehensive income


Net surplus on revaluation of freehold land and
buildings
Foreign currency translation

XXX
XXX

Share of other comprehensive income of associates

(XXX)

Income tax effects

XXX

Other comprehensive income for the year, net of tax

XXX

Total comprehensive income for the year

XXX

Total comprehensive income for the year attributable


to
Owners of the Company
Non-controlling interests

XXX

XYZ Holdings (Singapore) Limited | 36

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

FRS 110 Consolidated Financial Statements (continued)


In this illustration, the Group does not have potential voting rights in its investee.
The following is an illustrative change in accounting policy when the Group has currently
exercisable potential voting rights in its investee which are not substantive:
(b) Potential voting rights
Upon application of FRS 110, the Group concluded that it does not have control over
JJJ Ltd which was previously accounted for as a subsidiary.
The Group holds 33.33% of voting rights in JJJ Ltd. In addition to its equity
instruments, the Group also holds debt instruments that are convertible into ordinary
shares of JJJ Ltd at any time for a fixed price. If the debt were converted, the Group
would hold 60% of the voting rights of the investee.
In reassessing whether the Group have control over an investee, the Group considers
the voting rights and potential voting rights that it holds, as well as the rights and
potential voting rights held by others. Potential voting rights are only considered if
they are substantive.
Upon adoption of FRS 110, the Group concluded that it does not have power over JJJ
Ltd as the potential voting rights are not substantive as the conversion option is
deeply out of the money. Accordingly, the Group accounts for JJJ Ltd as an associate
using the equity method. The change in accounting policy has been applied
retrospectively in accordance with the transitional provisions in FRS 110. The retained
interest in JJJ Ltd is measured at the amount at which it would have been measured if
the requirements of FRS 110 had been effective when the Group became involved with
JJJ Ltd. The effects of the adoption on the financial statements are as follows:
Group
As at 31
December
2013

As at 1
January
2013

(Restated)

(Restated)

$000

$000

Increase/(decrease) in:
Consolidated balance sheet
Investment in associate

XXX

XXX

Property, plant and equipment

(XXX)

(XXX)

Investment property

(XXX)

(XXX)

Trade and other receivables

(XXX)

(XXX)

Cash and cash equivalents

(XXX)

Trade and other payables

(XXX)

(XXX)

Current tax liabilities

(XXX)

(XXX)

Provisions

(XXX)

(XXX)

Loans and borrowings

(XXX)

(XXX)

Deferred tax liabilities

(XXX)

(XXX)

Impact on net assets

(XXX)

(XXX)

(XXX)

XYZ Holdings (Singapore) Limited | 37

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

FRS 110 Consolidated Financial Statements (continued)


(b) Potential voting rights (continued)
Group
2014
$000
(Decrease)/increase in:
Consolidated income statement
Revenue

(XXX)

Cost of sales

(XXX)

Interest income

(XXX)

Other income

(XXX)

Marketing and distribution

(XXX)

Administrative expenses

(XXX)

Share of results of associates

XXX

Finance costs

(XXX)

Income tax expenses

(XXX)

Profit for the year

(XXX)

Profit for the year attributable to


Owners of the Company

Non-controlling interests

(XXX)

Basic earnings per share (cents)

Diluted earnings per share (cents)

(Decrease)/increase in:
Consolidated statement of comprehensive income
Net surplus on revaluation of freehold land and
buildings

(XXX)

Foreign currency translation

(XXX)

Share of other comprehensive income of associates

XXX

Income tax effects


Other comprehensive income for the year, net of
tax

(XXX)

Total comprehensive income for the year

(XXX)

(XXX)

Total comprehensive income for the year


attributable to
Owners of the Company
Non-controlling interests

(XXX)

XYZ Holdings (Singapore) Limited | 38

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.2

Summary of significant accounting policies (continued)


Changes in accounting policies (continued)
Commentary (continued):

Amendments to FRS 32 Offsetting of Financial Assets and Financial Liabilities


The amendments to FRS 32 clarify that rights of set-off must not only be legally
enforceable in the normal course of business, but must also not contingent on a future
event and must be enforceable in the event of bankruptcy or insolvency of all the
counterparties to the contract. The Group currently offset certain balances with the same
counterparty as the Group has legal rights to set off the amounts and intends to settle on a
net basis.
These balances do not meet the offsetting criteria as the local bankruptcy law in the
counterparty jurisdiction overrides netting contracts. Accordingly, trade and other
receivables increased by $XXX and trade and other payables increased by $XXX
respectively.

In this illustration, the Group measures the assets and liabilities and non-controlling
interests in the investee, ABC Ltd as if that investee had been consolidated from the date
when the Group obtained control of that investee. If measuring the investees assets,
liabilities and non-controlling interests retrospectively is impracticable, the deemed
acquisition date shall be the beginning of the earliest period for which retrospective
application is practicable, which may be the current period.

FRS 110.C4.c.i

FRS 110 allows an entity to apply either FRS 103 (2008) or FRS 103 (issued in 2004). In
this illustration, the Group applied the requirements of FRS 103 (issued 2004).
Alternatively, the Group may apply FRS 103 (issued 2008).

FRS 110.C4B

In this illustration, the Group measures the retained interest in the investee, JJJ Ltd at the
amount at which it would have been measured if the requirements of FRS 110 had been
effective when the Group became involved with that investee. If measurement of the
retained interest is impracticable, the Group shall recognise any difference between the
previously recognised amount of the assets, liabilities and non-controlling interest and the
carrying amount of the Groups involvement with the investee as an adjustment to equity
for that period. In addition, the Group shall provide comparative information and
disclosures of the circumstance that led to the condition that makes retrospective
application impracticable and from when the change in accounting policy has been applied.

FRS 110.C5

XYZ Holdings (Singapore) Limited | 39

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.3

Summary of significant accounting policies (continued)


Standards issued but not yet effective
The Group has not adopted the following standards that have been issued but not yet
effective:
Description

Amendments to FRS 19 Defined Benefit Plans: Employee


Contributions

Effective for annual periods


beginning on or after

1 July 2014

Improvements to FRSs (January 2014)


(a) Amendments to FRS 102 Share Based Payment

1 July 2014

(b) Amendments to FRS 103 Business Combinations

1 July 2014

(c) Amendments to FRS 108 Operating Segments


(d) Amendments to FRS 113 Fair Value Measurement

1 July 2014

(e) Amendments to FRS 16 Property, Plant and


Equipment and FRS 38 Intangible Assets

1 July 2014

(f) Amendments to FRS 24 Related Party Disclosures

1 July 2014

Improvements to FRSs (February 2014)


(a) Amendments to FRS 103 Business Combinations

1 July 2014

(b) Amendments to FRS 113 Fair Value Measurement

1 July 2014

The directors expect that the adoption of the standards above will have no material
impact on the financial statements in the period of initial application.

Commentary:
Standards issued but not yet effective

FRS 8 requires an entity to:


(a) disclose those standards or interpretations that have been issued which are not yet
effective; and
(b) provide known or reasonably estimable information to assess the possible impact that
the application of such FRSs will have on the entitys financial statements in the
period of initial application.
Therefore, the Group has listed those standards and interpretations that are issued but
not yet effective and relevant to the Group. For example, IFRS 14 Regulatory Deferral
Accounts is not relevant and has been excluded.
If a Company does not have any share based payment, Amendments to FRS 102 Share
Based Payments is not relevant and can be excluded from the list

XYZ Holdings (Singapore) Limited | 40

FRS 8.30, 31

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.3

Summary of significant accounting policies (continued)


Standards issued but not yet effective (continued)
Commentary:
Standards issued but not yet effective

The following are IFRSs that have been issued by International Accounting Standards
Board (IASB) but have not been adopted as FRS in Singapore:

IFRS 9 Financial Instruments, effective for annual periods beginning on or after 1


January 2018

IFRS 15 Revenue Recognition, effective for annual periods beginning on or after 1


January 2017

Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets,
effective for annual periods beginning on or after 1 July 2016

Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture,


effective for annual periods beginning on or after 1 January 2016

Amendments to FRS 27 Separate Financial Statements, effective for annual periods


beginning on or after 1 January 2016

If any of the above IFRSs are adopted as FRSs before the financial statements for the year
ended 31 December 2014 are authorised for issue, Note 2.3 should be updated to:
(a) include the new standards; and
(b) provide known or reasonably estimable information to assess the possible impact that
the application of such FRSs will have on the entitys financial statements in the
period of initial application.

XYZ Holdings (Singapore) Limited | 41

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.

Summary of significant accounting policies (continued)


Notes to users:
The summary of significant accounting policies in this illustration are based on assumed
circumstances of XYZ Holdings (Singapore) Limited and may not be relevant to all entities. Each
entity should customise the significant accounting policies disclosed according to the specific
circumstances relevant to the entity.

2.4

Basis of consolidation and business combinations


a)

Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries as at the end of the reporting period. The
financial statements of the subsidiaries used in the preparation of the
consolidated financial statements are prepared for the same reporting date as
the Company. Consistent accounting policies are applied to like transactions
and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses
resulting from intra-group transactions and dividends are eliminated in full.
Subsidiaries are consolidated from the date of acquisition, being the date on
which the Group obtains control, and continue to be consolidated until the date
that such control ceases.

b)

FRS 110.4
FRS
110.Appendix A
FRS 110.B92
FRS 110.19 and
B87

FRS 110.B86.c

FRS 110.20 and


B88

Losses within a subsidiary are attributed to the non-controlling interest even if


that results in a deficit balance.

FRS 110.B94

A change in the ownership interest of a subsidiary, without a loss of control, is


accounted for as an equity transaction. If the Group loses control over a
subsidiary, it:

FRS 110.23
FRS 110.B98

de-recognises the assets (including goodwill) and liabilities of the


subsidiary at their carrying amounts at the date when control is lost;

de-recognises the carrying amount of any non-controlling interest;

de-recognises the cumulative translation differences recorded in equity;

recognises the fair value of the consideration received;

recognises the fair value of any investment retained;

recognises any surplus or deficit in profit or loss;

re-classifies the Groups share of components previously recognised in


other comprehensive income to profit or loss or retained earnings, as
appropriate.

Business combinations and goodwill


Business combinations are accounted for by applying the acquisition method.
Identifiable assets acquired and liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are recognised as expenses in the periods in which
the costs are incurred and the services are received.

XYZ Holdings (Singapore) Limited | 42

FRS 103.4
FRS 103.10 and
18
FRS 103.53

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.

Summary of significant accounting policies (continued)

2.4 Basis of consolidation and business combinations (continued)


b)

Business combinations and goodwill (continued)


Any contingent consideration to be transferred by the acquirer will be
recognised at fair value at the acquisition date. Subsequent changes to the fair
value of the contingent consideration which is deemed to be an asset or
liability, will be recognised in profit or loss.
The Group elects for each individual business combination, whether noncontrolling interest in the acquiree (if any), that are present ownership
interests and entitle their holders to a proportionate share of net assets in the
event of liquidation, is recognised on the acquisition date at fair value, or at
the non-controlling interests proportionate share of the acquirees identifiable
net assets. Other components of non-controlling interests are measured at
their acquisition date fair value, unless another measurement basis is required
by another FRS.

FRS 103.39, 40
and 58

FRS 103.19

Any excess of the sum of the fair value of the consideration transferred in the
business combination, the amount of non-controlling interest in the acquiree
(if any), and the fair value of the Groups previously held equity interest in the
acquiree (if any), over the net fair value of the acquirees identifiable assets
and liabilities is recorded as goodwill. The accounting policy for goodwill is set
out in Note 2.9(a). In instances where the latter amount exceeds the former,
the excess is recognised as gain on bargain purchase in profit or loss on the
acquisition date.

FRS 103.32

Goodwill is initially measured at cost. Following initial recognition, goodwill is


measured at cost less any accumulated impairment losses.

FRS 103.B63.a

For the purpose of impairment testing, goodwill acquired in a business


combination is, from the acquisition date, allocated to the Groups cashgenerating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
The cash-generating units to which goodwill have been allocated is tested for
impairment annually and whenever there is an indication that the cashgenerating unit may be impaired. Impairment is determined for goodwill by
assessing the recoverable amount of each cash-generating unit (or group of
cash-generating units) to which the goodwill relates.

XYZ Holdings (Singapore) Limited | 43

FRS 103.34

FRS 36.80

FRS 36.90

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.4

Summary of significant accounting policies (continued)


Basis of consolidation and business combinations (continued)
Commentary:
Investment entities

FRS 110 provides exception to the consolidation requirement for entities that meet the

definition of an investment entity. The exception to consolidation requires investment


entities to account for subsidiaries at fair value through profit or loss in accordance with
FRS 39 Financial Instrument: Recognition and Measurement.
Please refer to commentary no.9 in Note 17 Investment in subsidiaries for disclosure
requirements.

Reporting date of subsidiary

The financial statements of the parent and its subsidiaries used in the preparation of the
consolidated financial statements shall be prepared as of the same reporting date. When
the end of the reporting period of the parent is different from that of a subsidiary, the
subsidiary prepares, for consolidation purposes, additional financial statements as of the
same date as the financial statements of the parent, unless it is impracticable to do so.
Where it is impracticable to do so, the parent may use the financial statements of a
subsidiary prepared as of a reporting date different from that of the parent, provided
adjustments are made for the effects of significant transactions or events that occur
between that date and the date of the parents financial statements, and the difference
between the reporting dates of the subsidiary and parent is no more than three months. In
addition, the length of the reporting periods and any difference in the reporting dates shall
be the same from period to period.

FRS 110.B93

When the financial statements of a subsidiary used in the preparation of consolidated


financial statements are as of a date or for a period that is different from that of the
consolidated financial statements, an entity shall disclose the date of the end of the
reporting period of the financial statements of that subsidiary and the reason for using a
different date or period.

FRS 112.11

Business combinations involving entities under common control

FRS 110.B92

In this illustration, there is no business combination involving entities under common


control. Where a business combination involves entities or businesses under common
control, it is outside the scope of FRS 103 and may be accounted for using the pooling of
interest method or the acquisition method (when the transaction has substance from the
perspective of the reporting entity).
Illustrative accounting policy where the pooling of interest method is applied:
Business combinations involving entities under common control are accounted for by
applying the pooling of interest method which involves the following:

The assets and liabilities of the combining entities are reflected at their carrying
amounts reported in the consolidated financial statements of the controlling
holding company.
No adjustments are made to reflect the fair values on the date of combination,
or recognise any new assets or liabilities.
No additional goodwill is recognised as a result of the combination.
Any difference between the consideration paid/transferred and the equity
acquired is reflected within the equity as merger reserve.
The statement of comprehensive income reflects the results of the combining
entities for the full year, irrespective of when the combination took place.

Comparatives are restated to reflect the combination as if it had occurred from the
beginning of the earliest period presented in the financial statements or from the date
the entities had come under common control, if later.

XYZ Holdings (Singapore) Limited | 44

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.4

Summary of significant accounting policies (continued)


Basis of consolidation and business combinations (continued)
Commentary (continued):
Business combinations achieved in stages

In this illustration, there is no business combinations achieved in stages.


Illustrative accounting policy where there is business combinations achieved in stages
In business combinations achieved in stages, previously held equity interests in the
acquiree are remeasured to fair value at the acquisition date and any corresponding
gain or loss is recognised in profit or loss.

FRS 103.42

Contingent liabilities recognised in a business combination

In this illustration, there is no contingent liabilities recognised in a business combination.


Illustrative accounting policy where there is contingent liabilities assumed in the business
combination:
A contingent liability recognised in a business combination is initially measured at its
fair value. Subsequently, it is measured at the higher of:

The amount that would be recognised in accordance with the accounting policy for
provisions set out in Note 2.21; or

The amount initially recognised less, when appropriate, cumulative amortisation


recognised in accordance with guidance for revenue recognition.

FRS 103.56

If there is no contingent consideration recognised in a business combination, the


accounting policy is not required.

Measurement of non-controlling interest

FRS 103 provides acquirers with the option of measuring non-controlling interest arising
in a business combination that are present ownership interests and entitle their holders to
a proportionate share of net assets of the subsidiary in the event of liquidation at either:
-

Fair value; or

The non-controlling interests proportionate interest in the acquirees identifiable net


assets.

FRS 103.19

The option is elected for each individual business combination and does not constitute an
accounting policy choice for similar transactions. Selecting the option will require
management to carefully consider their future intentions regarding transactions with noncontrolling interest, since the two options, combined with the revisions to accounting for
changes in ownership interest of a subsidiary will potentially result in significantly
different amounts of goodwill and equity.
Goodwill

FRS 36 Impairment of Assets permits annual impairment test for goodwill and intangible
assets with indefinite useful lives to be performed at any time during the year provided it
is at the same time each year. Different goodwill and intangible assets may be tested at
different times.

In this illustration, the Group does not have goodwill which forms cash generating unit in
which part of the operation within that cash generating unit is disposed of.

FRS 36.96 and


10

Illustrative accounting policy for goodwill which forms cash generating unit in which part
of the operation within that cash generating unit is disposed of:
Where goodwill forms part of a cash-generating unit and part of the operation within
that cash-generating unit is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is
measured based on the relative fair values of the operations disposed of and the
portion of the cash-generating unit retained.

XYZ Holdings (Singapore) Limited | 45

FRS 36.86

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.5

Summary of significant accounting policies (continued)


Transactions with non-controlling interests
Non-controlling interest represents the equity in subsidiaries not attributable, directly
or indirectly, to owners of the Company.
Changes in the Companys ownership interest in a subsidiary that do not result in a loss
of control are accounted for as equity transactions. In such circumstances, the carrying
amounts of the controlling and non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiary. Any difference between the
amount by which the non-controlling interest is adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to owners
of the Company.

2.6

FRS 110.Appendix
A
FRS 110.22

FRS 110.23
FRS 110.B96

Foreign currency
The financial statements are presented in Singapore Dollars, which is also the
Companys functional currency. Each entity in the Group determines its own functional
currency and items included in the financial statements of each entity are measured
using that functional currency.
a)

b)

FRS 1.51.d

Transactions and balances


Transactions in foreign currencies are measured in the respective functional
currencies of the Company and its subsidiaries and are recorded on initial
recognition in the functional currencies at exchange rates approximating those
ruling at the transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the end of
the reporting period. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as
at the dates of the initial transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the exchange rates at the date
when the fair value was measured.

FRS 21.21

Exchange differences arising on the settlement of monetary items or on


translating monetary items at the end of the reporting period are recognised in
profit or loss.

FRS 21.28

FRS 21.23

Consolidated financial statements


For consolidation purpose, the assets and liabilities of foreign operations are
translated into SGD at the rate of exchange ruling at the end of the reporting
period and their profit or loss are translated at the exchange rates prevailing at
the date of the transactions. The exchange differences arising on the
translation are recognised in other comprehensive income. On disposal of a
foreign operation, the component of other comprehensive income relating to
that particular foreign operation is recognised in profit or loss.

FRS 21.39

FRS 21.48

Commentary:
Partial disposal of foreign operation

In this illustration, the Group does not have partial disposal of foreign operation.
Illustrative accounting policy for foreign currency for partial disposal of foreign
operation.
In the case of a partial disposal without loss of control of a subsidiary that
includes a foreign operation, the proportionate share of the cumulative
amount of the exchange differences are re-attributed to non-controlling
interest and are not recognised in profit or loss.

XYZ Holdings (Singapore) Limited | 46

FRS 21.48C

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.6

Summary of significant accounting policies (continued)


Foreign currency (continued)
Commentary (continued):
Partial disposal of foreign operation (continued)

For partial disposals of associates or jointly controlled entities that are


foreign operations, the proportionate share of the accumulated exchange
differences is reclassified to profit or loss.

Net investment in foreign operations

In this illustration, the Group does not have exchange differences arising from
monetary items that form part of the Groups net investment in foreign
operation.
Illustrative accounting policy for exchange differences arising from monetary
items that form part of the Groups net investment in foreign operation.
Exchange differences arising on monetary items that for part of the Groups
net investment in foreign operations are recognised initially in other
comprehensive income and accumulated under foreign currency translation
reserve in equity. The foreign currency translation reserve is reclassified
from equity to profit or loss of the Group on disposal of the foreign
operation.

2.7

FRS 21.32 and 48

Property, plant and equipment


All items of property, plant and equipment are initially recorded at cost. Subsequent to
recognition, property, plant and equipment other than freehold land and buildings are
measured at cost less accumulated depreciation and any accumulated impairment
losses.
Freehold land and buildings are measured at fair value less accumulated depreciation
on buildings and impairment losses recognised after the date of the revaluation.
Valuations are performed with sufficient regularity to ensure that the carrying amount
does not differ materially from the fair value of the freehold land and buildings at the
end of the reporting period.
Any revaluation surplus is recognised in other comprehensive income and accumulated
in equity under the asset revaluation reserve, except to the extent that it reverses a
revaluation decrease of the same asset previously recognised in profit or loss, in which
case the increase is recognised in profit or loss. A revaluation deficit is recognised in
profit or loss, except to the extent that it offsets an existing surplus on the same asset
carried in the asset revaluation reserve.
Any accumulated depreciation as at the revaluation date is eliminated against the gross
carrying amount of the asset and the net amount is restated to the revalued amount of
the asset. The revaluation surplus included in the asset revaluation reserve in
respect of an asset is transferred directly to retained earnings on retirement or
disposal of the asset.

FRS 16.15 and 16


FRS 16.30

FRS 16.31 and


73.a

FRS 16.39

FRS 16.40

FRS 16.35.b

FRS 16.41

Freehold land has an unlimited useful life and therefore is not depreciated.
Depreciation is computed on a straight-line basis over the estimated useful lives of the
assets as follows:
-

Buildings: 40 years
Plant and equipment: 3 to 15 years
Furniture and fixtures: 5 to 20 years

XYZ Holdings (Singapore) Limited | 47

FRS 16.73.b and c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.7

Summary of significant accounting policies (continued)


Property, plant and equipment (continued)
Assets under construction included in plant and equipment are not depreciated as
these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment
when events or changes in circumstances indicate that the carrying value may not be
recoverable.
The residual value, useful life and depreciation method are reviewed at each financial
year-end, and adjusted prospectively, if appropriate.
An item of property, plant and equipment is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in profit or loss in the year the asset is
derecognised.

FRS 36.9

FRS 16.51
FRS 16.61
FRS 16.67
FRS 16.68

Commentary:
Revaluation of property, plant and equipment

2.8

When an item of property, plant and equipment is revalued, any accumulated depreciation
at the date of the revaluation may instead be restated proportionately with the change in
the gross carrying amount of the asset so that the carrying amount of the asset after
revaluation equals its revalued amount. This method is often used when an asset is
revalued by means of applying an index to its depreciated replacement cost.

Alternatively, the entity may adopt a policy to make an annual transfer of the revaluation
surplus to retained earnings as the asset is used. In such a case, the amount of the
surplus transferred would be the difference between depreciation based on the revalued
carrying amount of the asset and depreciation based on the assets original cost.

FRS 16.35.a

FRS 16.41

Investment properties
Investment properties are properties that are either owned by the Group or leased
under a finance lease that are held to earn rentals or for capital appreciation, or both,
rather than for use in the production or supply of goods or services, or for
administrative purposes, or in the ordinary course of business. Investment properties
comprise completed investment properties and properties that are being constructed
or developed for future use as investment properties. Properties held under operating
leases are classified as investment properties when the definition of an investment
property is met.

FRS 40.5

Investment properties are initially measured at cost, including transaction costs.

FRS 40.20

Subsequent to initial recognition, investment properties are measured at fair value.


Gains or losses arising from changes in the fair values of investment properties are
included in profit or loss in the year in which they arise.

FRS 40.33

Investment properties are derecognised when either they have been disposed of or
when the investment property is permanently withdrawn from use and no future
economic benefit is expected from its disposal. Any gains or losses on the retirement or
disposal of an investment property are recognised in profit or loss in the year of
retirement or disposal.

XYZ Holdings (Singapore) Limited | 48

FRS 40.8.e
FRS 40.6

FRS 40.35

FRS 40.66
FRS 40.69

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.8

Summary of significant accounting policies (continued)


Investment properties (continued)
Commentary:
Investment properties

Judgement is needed to determine whether a property qualifies as investment property.


When classification is difficult, the entity should disclose the criteria developed by the
entity so that it can exercise that judgement consistently in accordance with the definition
of investment property.

FRS 40.14 and 75.c

Alternatively, the entity may adopt the cost model which is to measure investment
properties at cost less accumulated depreciation and accumulated impairment losses. In
these circumstances, disclosure about the cost basis and depreciation rates would be
required. This option is not available if the entity accounts for property interest held under
an operating lease as investment property.

FRS 40.30 and 56

In addition, for any investment properties recorded at cost, FRS 40 requires disclosure
about the fair value, including disclosures about the methods and significant assumptions
used to determine the fair value. Therefore, companies would still need to determine the
fair value of the investment properties. In the exceptional cases when an entity cannot
measure the fair value of investment properties reliably, it shall disclose:

FRS 40.79.e

FRS 40.34

(a) a description of the investment properties;


(b) an explanation of why fair value cannot be measured reliably; and
(c) if possible, the range of estimate within which fair value is highly likely to lie.

If an owner-occupied property becomes an investment property that will be carried at fair


value, the entity shall treat any difference at that date between the carrying amount of
the property in accordance with FRS 16 and its fair value in the same way as a revaluation
in accordance with FRS 16.

XYZ Holdings (Singapore) Limited | 49

FRS 40.61

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

2.
2.9

Summary of significant accounting policies (continued)


Intangible assets
Intangible assets acquired separately are measured initially at cost. Following initial
acquisition, intangible assets are carried at cost less any accumulated amortisation and
any accumulated impairment losses. Internally generated intangible assets,
excluding capitalised development costs, are not capitalised and expenditure is
reflected in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.

FRS 38.24
FRS 38.33
FRS 38.74

FRS 38.88

Intangible assets with finite useful lives are amortised over the estimated useful lives
and assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortisation period and the amortisation method are reviewed at
least at each financial year-end. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset is accounted
for by changing the amortisation period or method, as appropriate, and are treated as
changes in accounting estimates.

FRS 38.97 and


118.b
FRS 36.9

Intangible assets with indefinite useful lives or not yet available for use are tested for
impairment annually , or more frequently if the events and circumstances indicate
that the carrying value may be impaired either individually or at the cash-generating
unit level. Such intangible assets are not amortised. The useful life of an intangible
asset with an indefinite useful life is reviewed annually to determine whether the useful
life assessment continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.

FRS 36.10.a

Gains or losses arising from de-recognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset and
are recognised in profit or loss when the asset is derecognised.

FRS 38.113

a)

FRS 36.9
FRS 38.107
FRS 38.109

Brands
The brands were acquired in business combinations. The useful lives of the
brands are estimated to be indefinite because based on the current market
share of the brands, management believes there is no foreseeable limit to the
period over which the brands are expected to generate net cash inflows for the
Group.

b)

FRS 38.104

FRS 38.118.a
FRS 38.122.a

Research and development costs


Research costs are expensed as incurred. Deferred development costs arising
from development expenditures on an individual project are recognised as an
intangible asset when the Group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset will
generate future economic benefits, the availability of resources to complete
and the ability to measure reliably the expenditures during the development.

XYZ Holdings (Singapore) Limited | 50

FRS 38.54
FRS 38.57

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.9

Summary of significant accounting policies (continued)


Intangible assets (continued)
b)

Research and development costs (continued)


Following initial recognition of the deferred development costs as an intangible
asset, it is carried at cost less accumulated amortisation and any accumulated
impairment losses. Amortisation of the intangible asset begins when
development is complete and the asset is available for use. Deferred
development costs have a finite useful life and are amortised over the period
of expected sales from the related project (ranging from 4 to 8 years) on a
straight line basis.

c)

FRS 38.74

FRS 38.118.a and b

Club membership
Club membership was acquired separately and is amortised on a straight line
basis over its finite useful life of 10 years.

FRS 38.118.a and b

Commentary:
Intangible assets

2.10

Alternatively, the entity may adopt the revaluation model which is to measure intangible
assets at fair value less accumulated amortisation and accumulated impairment losses.
This option is only available if the fair value can be determined by reference to an active
market.

Please refer to commentary no.6 of Note 2.4(b) Business combinations and goodwill.

FRS 38.75

Land use rights


Land use rights are initially measured at cost. Following initial recognition, land use
rights are measured at cost less accumulated amortisation. The land use rights are
amortised on a straight-line basis over the lease term of 50 years.

Commentary:
Land use rights

Long-term land-use rights are leases under the definition of FRS 17. In this illustration, it
is assumed that the lease does not transfer substantially all the risks and rewards
incidental to ownership of the land. Therefore, the lease is an operating lease and the
payments made on acquiring the land-use right represent prepaid lease payments.

XYZ Holdings (Singapore) Limited | 51

FRS 17.8

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.11

2.12

Summary of significant accounting policies (continued)


Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset
may be impaired. If any indication exists, or when an annual impairment testing for an
asset is required, the Group makes an estimate of the assets recoverable amount.

FRS 36.9

An assets recoverable amount is the higher of an assets or cash-generating units fair


value less costs of disposal and its value in use and is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets. Where the carrying amount of an asset or
cash-generating unit exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.

FRS 36.18 and 22

Impairment losses of continuing operations are recognised in profit or loss, except for
assets that are previously revalued where the revaluation was taken to other
comprehensive income. In this case, the impairment is also recognised in other
comprehensive income up to the amount of any previous revaluation.

FRS 36.60

A previously recognised impairment loss is reversed only if there has been a change in
the estimates used to determine the assets recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of the asset is
increased to its recoverable amount. That increase cannot exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been
recognised previously. Such reversal is recognised in profit or loss unless the asset is
measured at revalued amount, in which case the reversal is treated as a revaluation
increase.

FRS 36.114

FRS 36.59

FRS 36.117
FRS 36.119

Subsidiaries
A subsidiary is an investee that is controlled by the Group. The Group controls an
investee when it is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the
investee.
In the Companys separate financial statements, investments in subsidiaries are
accounted for at cost less impairment losses.

FRS 110.6

FRS 27.17.c

Commentary:
Subsidiaries

Alternatively, the entity may choose to account for its investment in subsidiary in
accordance with FRS 39. The same accounting must be applied for all investments in
subsidiaries. When an entity accounts for a subsidiary at fair value in accordance with FRS
39, this treatment continues when the subsidiary is subsequently classified as held for
sale.

XYZ Holdings (Singapore) Limited | 52

FRS 27.10.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.13

Summary of significant accounting policies (continued)


Joint arrangements
A joint arrangement is a contractual arrangement whereby two or more parties have
joint control. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require the
unanimous consent of the parties sharing control.
A joint arrangement is classified either as joint operation or joint venture, based on the
rights and obligations of the parties to the arrangement.
To the extent the joint arrangement provides the Group with rights to the assets and
obligations for the liabilities relating to the arrangement, the arrangement is a joint
operation. To the extent the joint arrangement provides the Group with rights to the
net assets of the arrangement, the arrangement is a joint venture.
a)

FRS 111.4
FRS 111.7

FRS 111.14

FRS 111.15
FRS 111.16

Joint operations
The Group recognises in relation to its interest in a joint operation,

FRS 111.20

(a) its assets, including its share of any assets held jointly;
(b) its liabilities, including its share of any liabilities incurred jointly;
(c) its revenue from the sale of its share of the output arising from the joint

operation;
(d) its share of the revenue from the sale of the output by the joint operation; and
(e) its expenses, including its share of any expenses incurred jointly.

The Group accounts for the assets, liabilities, revenues and expenses relating to its
interest in a joint operation in accordance with the accounting policies applicable to
the particular assets, liabilities, revenues and expenses.

FRS 111.21

b) Joint ventures
The Group recognises its interest in a joint venture as an investment and accounts
for the investment using the equity method. The accounting policy for investment
in joint venture is set out in Note 2.14.

FRS 112.21.b.i

Commentary:
Sales and contributions of assets to a joint operation

In this illustration, sales and contributions of assets to a joint operation are not significant.
Illustrative accounting policy for sales and contributions of assets to a joint operation
When the Group enters into transaction involving a sale or contribution of assets with
a joint operation in which it is a joint operator, the Group recognises gains or losses
resulting from such a transaction only to the extent of the interests held by the other
parties of the joint operation.

FRS 111.B34

Purchases of assets from a joint operation

In this illustration, purchases of assets from a joint operation are not significant.
Illustrative accounting policy for purchases of assets from a joint operation
When the Group enters into a transaction involving purchase of assets with a joint
operation in which it is a joint operator, the Group does not recognise its share of the
gains and losses until it resells those assets to a third party. When such transactions
provide evidence of a reduction in the net realisable value of the assets to be
purchased or of an impairment loss of those assets, the Group recognises it share of
those losses.

XYZ Holdings (Singapore) Limited | 53

FRS 111.B36
FRS 111.B37

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.14

Summary of significant accounting policies (continued)


Joint ventures and associates
An associate is an entity over which the Group has the power to participate in the
financial and operating policy decisions of the investee but does not have control or
joint control of those policies.

FRS 28.3

The Group account for its investments in associates and joint ventures using the equity
method from the date on which it becomes an associate or joint venture.

FRS 28.16
FRS 28.32

On acquisition of the investment, any excess of the cost of the investment over the
Groups share of the net fair value of the investees identifiable assets and liabilities is
accounted as goodwill and is included in the carrying amount of the investment. Any
excess of the Groups share of the net fair value of the investees identifiable assets
and liabilities over the cost of the investment is included as income in the
determination of the entitys share of the associate or joint ventures profit or loss in
the period in which the investment is acquired.

FRS 28.32

Under the equity method, the investment in associates or joint ventures are carried in
the balance sheet at cost plus post-acquisition changes in the Groups share of net
assets of the associates or joint ventures. The profit or loss reflects the share of results
of the operations of the associates or joint ventures. Distributions received from joint
ventures or associates reduce the carrying amount of the investment. Where there has
been a change recognised in other comprehensive income by the associates or joint
venture, the Group recognises its share of such changes in other comprehensive
income. Unrealised gains and losses resulting from transactions between the Group
and associate or joint venture are eliminated to the extent of the interest in the
associates or joint ventures.

FRS 28.10

When the Groups share of losses in an associate or joint venture equals or exceeds its
interest in the associate or joint venture, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the associate
or joint venture.

FRS 28.38

After application of the equity method, the Group determines whether it is necessary to
recognise an additional impairment loss on the Groups investment in associate or joint
ventures. The Group determines at the end of each reporting period whether there is
any objective evidence that the investment in the associate or joint venture is impaired.
If this is the case, the Group calculates the amount of impairment as the difference
between the recoverable amount of the associate or joint venture and its carrying value
and recognises the amount in profit or loss.

FRS 28.40

The financial statements of the associates and joint ventures are prepared as the same
reporting date as the Company. Where necessary, adjustments are made to bring the
accounting policies in line with those of the Group.

FRS 28.33 and 44


FRS 28.35

XYZ Holdings (Singapore) Limited | 54

FRS 28.28

FRS 28.42

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.14

Summary of significant accounting policies (continued)


Joint ventures and associates (continued)
Commentary:
Loss of significant influence or joint control

In this illustration, loss of significant influence over associate or joint control over joint
venture is not significant to the Group.
Illustrative accounting policy upon loss of significant influence over associate or joint
control over joint venture:
Upon loss of significant influence or joint control over the associate or joint venture,
the Group measures the retained interest at fair value. Any difference between the fair
value of the aggregate of the retained interest and proceeds from disposal and the
carrying amount of the investment at the date the equity method was discontinued is
recognised in profit or loss.

FRS 28.22

Changes in ownership interest

In this illustration, changes in ownership interest without loss of significant influence or


joint control is not significant to the Group.
Illustrative accounting policy upon changes in ownership interest:
If the Groups ownership interest in an associate or a joint venture is reduced, but the
Group continues to apply the equity method, the Group reclassifies to profit or loss the
proportion of the gain or loss that had previously been recognised in other
comprehensive income relating to that reduction in ownership interest if that gain or
loss would be required to be reclassified to profit or loss on the disposal of the related
assets or liabilities.

FRS 28.25

Joint ventures and associates

The interest in an associate or a joint venture is the carrying amount of the investment in
the associate or joint venture under the equity method together with any long-term
interests that, in substance, form part of the investors net investment in the associate or
joint venture. For example, an item for which settlement is neither planned nor likely to
occur in the foreseeable future is, in substance, an extension of the entitys investment in
that associate or joint venture. Such items may include preference shares and long-term
receivables or loans but do not include trade receivables, trade payables or any long-term
receivables for which adequate collateral exists, such as secured loans.

The financial statements of the associate or joint venture are prepared as of the same
reporting date as the Company unless it is impracticable to do so. When the financial
statements of an associate or joint venture used in applying the equity method are
prepared as of a different reporting date from that of the Company, adjustments are made
for the effects of significant transactions or events that occur between that date and the
reporting date of the Company. In any case, the difference between the end of the
reporting period of the associate or joint venture and that of the investor shall be no more
than three months. The length of the reporting periods and any difference between the
ends of the reporting periods shall be the same from period to period.
When the financial statements of an associate or joint venture used in applying the equity
method are as of a reporting date or for a period that is different from that of the
Company, the reporting date of the financial statements of the associate or joint venture
and the reason for using a different reporting date or different period shall be disclosed.

XYZ Holdings (Singapore) Limited | 55

FRS 28.38

FRS 28.33
FRS 28.34

FRS 112.22.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.15

Summary of significant accounting policies (continued)


Financial instruments
a)

FRS 107.21

Financial assets
Initial recognition and measurement
Financial assets are recognised when, and only when, the Group becomes a
party to the contractual provisions of the financial instrument. The Group
determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value,
plus, in the case of financial assets not at fair value through profit or loss,
directly attributable transaction costs.

FRS 39.14

FRS 39.43

Subsequent measurement
The subsequent measurement of financial assets depends on their
classification as follows:
i)

Loans and receivables


Non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market are classified as loans and
receivables. Subsequent to initial recognition, loans and receivables are
measured at amortised cost using the effective interest method, less
impairment. Gains and losses are recognised in profit or loss when the
loans and receivables are derecognised or impaired, and through the
amortisation process.

ii)

FRS 39.9
FRS 39.46.a
FRS 39.56
FRS 107.AGB5.e

Available-for-sale financial assets


Available-for-sale financial assets include equity and debt securities.
Equity investments classified as available-for-sale are those, which are
neither classified as held for trading nor designated at fair value through
profit or loss. Debt securities in this category are those which are
intended to be held for an indefinite period of time and which may be
sold in response to needs for liquidity or in response to changes in the
market conditions.
After initial recognition, available-for-sale financial assets are
subsequently measured at fair value. Any gains or losses from changes
in fair value of the financial assets are recognised in other
comprehensive income, except that impairment losses, foreign
exchange gains and losses on monetary instruments and interest
calculated using the effective interest method are recognised in profit or
loss. The cumulative gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss as a
reclassification adjustment when the financial asset is de-recognised.
Investments in equity instruments whose fair value cannot be reliably
measured are measured at cost less impairment loss.

FRS 107.AGB5.b
FRS 39.9

FRS 39.46
FRS 39.55.b
FRS 107.AGB5.e

FRS 39.46.c

De-recognition
A financial asset is derecognised where the contractual right to receive cash
flows from the asset has expired. On de-recognition of a financial asset in
its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that had been
recognised in other comprehensive income is recognised in profit or loss.

XYZ Holdings (Singapore) Limited | 56

FRS 39.17.a
FRS 39.26

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.15

Summary of significant accounting policies (continued)


Financial instruments (continued)
b)

Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a
party to the contractual provisions of the financial instrument. The Group
determines the classification of its financial liabilities at initial recognition.

FRS 39.14

All financial liabilities are recognised initially at fair value plus in the case of
financial liabilities not at fair value through profit or loss, directly attributable
transaction costs.

FRS 39.43

Subsequent measurement
After initial recognition, financial liabilities that are not carried at fair value
through profit or loss are subsequently measured at amortised cost using the
effective interest method. Gains and losses are recognised in profit or loss
when the liabilities are derecognised, and through the amortisation process.

FRS 39.56
FRS 107.B5.e

De-recognition
A financial liability is de-recognised when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange
or modification is treated as a de-recognition of the original liability and the
recognition of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.

FRS 39.39
FRS 39.40 and 41

Commentary:
Transfers between fair value hierarchy

In this illustration, transfers between levels of the fair value hierarchy are not common for
the Group.
Illustrative accounting policy for transfers between levels of the fair value hierarchy.
Transfers between levels of the fair value hierarchy are deemed to have occurred on
the date of the event or change in circumstances that caused the transfers.
The policy for determining the timing of transfers between levels of the fair include the
following:
(a) The date of the event or change in circumstances that caused the transfer
(b) the beginning of the reporting period
(c) the end of the reporting period
The policy about the timing of recognising transfers shall be the same for transfers into
levels as for transfers out of the levels.

XYZ Holdings (Singapore) Limited | 57

FRS 113.95

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.15

Summary of significant accounting policies (continued)


Financial instruments (continued)
Commentary (continued):
Regular way purchases and sales

In this illustration, the Group does not have regular way purchases and sales of financial
assets.
Illustrative accounting policy for regular way purchase and sale of a financial asset:
All regular way purchases and sales of financial assets are recognised or derecognised
on the trade date i.e. the date that the Group commits to purchase or sell the asset.
Regular way purchases or sales are purchases or sales of financial assets that require
delivery of assets within the period generally established by regulation or convention
in the marketplace concerned.

FRS 39.9
FRS 39.38

Alternatively, regular way purchases and sales can be accounted for on settlement dates.
Financial assets and financial liabilities at fair value through profit or loss

In this illustration, financial assets and financial liabilities at fair value through profit or
loss which are classified as held for trading are not significant to the Group.
Illustrative accounting policies for financial assets at fair value through profit or loss which
are classified as held for trading (if significant):
Financial assets at fair value through profit or loss include financial assets held for
trading. Financial assets are classified as held for trading if they are acquired for the
purpose of selling or repurchasing in the near term. This category includes derivative
financial instruments entered into by the Group. Derivatives, including separated
embedded derivatives are also classified as held for trading.

FRS 39.9

Subsequent to initial recognition, financial assets at fair value through profit or loss
are measured at fair value. Any gains or losses arising from changes in fair value of the
financial assets are recognised in profit or loss. Net gains or net losses on financial
assets at fair value through profit or loss include exchange differences, interest and
dividend income.

FRS 39.46
FRS 39.55.a
FRS 107.AGB5.e

Derivatives embedded in host contracts are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not closely related
to those of the host contracts and the host contracts are not measured at fair value
with changes in fair value recognised in profit or loss. These embedded derivatives are
measured at fair value with changes in fair value recognised in profit or loss.
Reassessment only occurs if there is a change in the terms of the contract that
significantly modifies the cash flows that would otherwise be required.

FRS 39.11

INT FRS 109.7

Illustrative accounting policies for financial liabilities at fair value through profit or loss
which are classified as held for trading (if significant):
Financial liabilities at fair value through profit or loss include financial liabilities held
for trading. Financial liabilities are classified as held for trading if they are acquired
for the purpose of selling in the near term. This category includes derivative financial
instruments entered into by the Group that are not designated as hedging instruments
in hedge relationships. Separated embedded derivatives are also classified as held for
trading unless they are designated as effective hedging instruments.

FRS 39.9
FRS 39.47.a

Subsequent to initial recognition, financial liabilities at fair value through profit or loss
are measured at fair value. Any gains or losses arising from changes in fair value of the
financial liabilities are recognised in profit or loss.

FRS 39.47

XYZ Holdings (Singapore) Limited | 58

FRS 39.55.b
FRS 107.B5.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.15

Summary of significant accounting policies (continued)


Financial instruments (continued)
Commentary (continued):
Heldto-maturity investments

In this illustration, held-to-maturity investments are not significant to the Group.


Illustrative accounting policies for held-to-maturity investments (if significant):
Non-derivative financial assets with fixed or determinable payments and fixed maturity
are classified as held-to-maturity when the Group has the positive intention and ability
to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity
investments are measured at amortised cost using the effective interest method, less
impairment. Gains and losses are recognised in profit or loss when the held-tomaturity investments are derecognised or impaired, and through the amortisation
process.

FRS 39.9
FRS 39.46.b
FRS 39.56
FRS 107.AGB5.e

Financial assets or financial liabilities designated as at fair value through profit or loss

In this illustration, no financial instrument has been designated as financial assets or


financial liabilities at fair value through profit or loss. The following disclosures of
accounting policies apply if there is any financial asset or financial liability designated as at
fair value through profit or loss:
(a)
(b)
(c)

FRS 107.AGB5.a

The nature of the financial assets or financial liabilities the entity has designated as
at fair value through profit or loss;
The criteria for so designating such financial assets or financial liabilities on initial
recognition; and
How the entity has satisfied the conditions in paragraph 9, 11A or 12 of FRS 39 for
such designation. For instruments designated as at fair value through profit or loss
in accordance with FRS 39.9.b.i, that disclosure includes a narrative description of
the circumstances underlying the measurement or recognition inconsistency that
would otherwise arise. For instruments designated as at fair value through profit or
loss in accordance with paragraph FRS 39.9.b.ii, that disclosure includes a narrative
description of how designation at fair value through profit or loss is consistent with
the entitys documented risk management or investment strategy.

Net gain or loss on financial assets at fair value through profit or loss

Alternatively, interest and dividend income may be recognised separately.

XYZ Holdings (Singapore) Limited | 59

FRS 107.AGB5.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.15

Summary of significant accounting policies (continued)


Financial instruments (continued)
Commentary (continued):
De-recognition of financial assets

In this illustration, there is no transfer of financial asset.


Illustrative accounting policy when the entity transfers its financial asset:
A financial asset (or, where applicable a part of a financial asset or part of a group of
similar financial asset) is de-recognised when:
(a)

The Group transfers the contractual rights to receive the cash flows of the
financial asset; or

FRS 39.18.a

(b)

The Group retains the contractual rights to receive the cash flows of the financial
asset, but assumes a contractual obligation to pay the cash flows to one or more
recipients in a past-through arrangement; or

FRS 39.18.b and


19

(c)

The Group has transferred its rights to receive cash flows from the asset and
either has transferred substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.

FRS 39.20

Where the Group has transferred its rights to receive cash flows from an asset and has
neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the extent of the Groups
continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset, is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could
be required to repay.
Where continuing involvement takes the form of a written and/or purchased option on
the transferred asset, the extent of the Groups continuing involvement is the amount
of the transferred asset that the group may repurchase, except that in the case of a
written put option on an asset measured at fair value, the extent of the Groups
continuing involvement is limited to the lower of the fair value of the transferred asset
and the option exercise price.
If the Group have transfers of financial assets that are not derecognised in their entirety
or transfers of financial assets that are derecognised in their entirety but retains
continuing involvement, please refer to disclosure requirements of paragraphs 42A to
42H and AGB 29 to AGB 39 of FRS 107.

XYZ Holdings (Singapore) Limited | 60

FRS 39.20.c.ii
FRS 39.30.a

FRS 39.30.b and


c

FRS 107.42A
42H
FRS 107.AGB 29
AGB 39

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.16

Summary of significant accounting policies (continued)


Impairment of financial assets

FRS 107.21

The Group assesses at each reporting date whether there is any objective evidence that
a financial asset is impaired.

FRS 39.58

a)

Financial assets carried at amortised cost


For financial assets carried at amortised cost, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not
individually significant. If the Group determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar
credit risk characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be recognised are not included in a
collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets
carried at amortised cost has been incurred, the amount of the loss is
measured as the difference between the assets carrying amount and the
present value of estimated future cash flows discounted at the financial assets
original effective interest rate. If a loan has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective
interest rate. The carrying amount of the asset is reduced through the use of
an allowance account. The impairment loss is recognised in profit or loss.
When the asset becomes uncollectible, the carrying amount of impaired
financial asset is reduced directly or if an amount was charged to the
allowance account, the amounts charged to the allowance account are written
off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on
financial assets has been incurred, the Group considers factors such as the
probability of insolvency or significant financial difficulties of the debtor and
default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed to the
extent that the carrying amount of the asset does not exceed its amortised
cost at the reversal date. The amount of reversal is recognised in profit or loss.

b)

FRS 39.64

FRS 39.63

FRS 39.AG84

FRS 107.AGB5.d

FRS 107.AGB5.f

FRS 39.65

Financial assets carried at cost


If there is objective evidence (such as significant adverse changes in the
business environment where the issuer operates, probability of insolvency or
significant financial difficulties of the issuer) that an impairment loss on
financial assets carried at cost had been incurred, the amount of the loss is
measured as the difference between the assets carrying amount and the
present value of estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment losses are not
reversed in subsequent periods.

XYZ Holdings (Singapore) Limited | 61

FRS 39.66
FRS 107.AGB5.f

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.16

Summary of significant accounting policies (continued)


Impairment of financial assets (continued)
c)

Available-for-sale financial assets


In the case of equity investments classified as available-for-sale, objective
evidence of impairment include (i) significant financial difficulty of the issuer or
obligor, (ii) information about significant changes with an adverse effect that
have taken place in the technological, market, economic or legal environment
in which the issuer operates, and indicates that the cost of the investment in
equity instrument may not be recovered; and (iii) a significant or prolonged
decline in the fair value of the investment below its costs.
If an available-for-sale financial asset is impaired, an amount comprising the
difference between its acquisition cost (net of any principal repayment and
amortisation) and its current fair value, less any impairment loss previously
recognised in profit or loss, is transferred from other comprehensive income
and recognised in profit or loss. Reversals of impairment losses in respect of
equity instruments are not recognised in profit or loss; increase in their fair
value after impairment are recognised directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is
assessed based on the same criteria as financial assets carried at amortised
cost. However, the amount recorded for impairment is the cumulative loss
measured as the difference between the amortised cost and the current fair
value, less any impairment loss on that investment previously recognised in
profit or loss. Future interest income continues to be accrued based on the
reduced carrying amount of the asset, using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment
loss. The interest income is recorded as part of finance income. If, in a
subsequent year, the fair value of a debt instrument increases and the
increases can be objectively related to an event occurring after the impairment
loss was recognised in profit or loss, the impairment loss is reversed in profit
or loss.

FRS 39.59 and


61
FRS 107.AGB5.f

FRS 39.67 and


68

FRS 39.69

FRS 39.AG93

FRS 39.70

Commentary:
Financial assets that are the subject of renegotiated terms

When the terms of financial assets that would otherwise be past due or impaired have
been renegotiated, the entity shall disclose the accounting policy for financial assets that
are the subject of renegotiated terms.

FRS 107.AGB5.g

Impairment of financial assets carried at amortised cost

When there is an impairment loss, the carrying amount of the asset may be reduced either
directly or through the use of an allowance account.

FRS 39.63

Determination of significant or prolonged decline in fair value of financial instruments

The determination of what is significant or prolonged depends on the circumstances at


the end of the reporting period. This requires judgement and so it varies among entities.

XYZ Holdings (Singapore) Limited | 62

FRS 39.59 and


61

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.17

Summary of significant accounting policies (continued)


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 amount 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 Groups cash management.

2.18

FRS 7.46
FRS 7.6
FRS 7.8

Construction contracts
The Group principally operates fixed price contracts. Contract revenue and contract
costs are recognised as revenue and expenses respectively by reference to the stage of
completion of the contract activity at the end of the reporting period (the percentage
of completion method), when the outcome of a construction contract can be estimated
reliably.

FRS 11.22
FRS 11.25

When the outcome of a construction contract cannot be estimated reliably (principally


during early stages of a contract), contract revenue is recognised only to the extent of
contract costs incurred that are likely to be recoverable and contract costs are
recognised as expense in the period in which they are incurred.

FRS 11.32

An expected loss on the construction contract is recognised as an expense immediately


when it is probable that total contract costs will exceed total contract revenue.

FRS 11.36
FRS 11.22
FRS 11.32

In applying the percentage of completion method, revenue recognised corresponds to


the total contract revenue (as defined below) multiplied by the actual completion rate
based on the proportion of total contract costs (as defined below) incurred to date and
the estimated costs to complete.

FRS 11.30.a

Commentary:
Stage of completion

2.19

The stage of completion of a contract may be determined in a variety of ways. The entity
uses the method that measures reliably the work performed. Depending on the nature of
the contract, other acceptable methods include surveys of work performed and
completion of a physical proportion of the contract work.

FRS 11.9

Development properties
Development properties are properties acquired or being constructed for sale in the
ordinary course of business, rather than to be held for the Groups own use, rental or
capital appreciation.
Development properties are held as inventories and are measured at the lower of cost
and net realisable value.

FRS 2.6.a and b

FRS 2.9

Non-refundable commissions paid to sales or marketing agents on the sale of real


estate units are expensed when incurred.
Net realisable value of development properties is the estimated selling price in the
ordinary course of business, based on market prices at the reporting date and
discounted for the time value of money if material, less the estimated costs of
completion and the estimated costs necessary to make the sale.
The costs of development properties recognised in profit or loss on disposal are
determined with reference to the specific costs incurred on the property sold and an
allocation of any non-specific costs based on the relative size of the property sold.

XYZ Holdings (Singapore) Limited | 63

FRS 2.6 and 36.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.19

Summary of significant accounting policies (continued)


Development properties (continued)
Commentary:
Sale of completed development property and pre-completion contracts for sale of development
property

In this illustration, the Group does not have any sale of completed development property
and pre-completion contracts for sale of development property.
For illustration of accounting policies relating to sale of completed development property
and pre-completion contracts for sale of development property, please refer to Appendix
A-3 Agreements for the construction of real estate.

Alternatively, the Group can capitalise commission paid on real estate as an asset and
amortise it as the entity expects to recognise the related revenue.
Illustrative accounting policy for capitalisation of commission paid on real estate contracts.
Non-refundable commissions paid to sales or marketing agents on the sale of real
estate units are capitalised and amortised to profit or loss as the Group expects to
recognise the related revenue.

2.20

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:

FRS 2.9, 10 and


36.a

Raw materials: purchase costs on a first-in first-out basis.

FRS 2.25

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 first-in first-out basis.

FRS 2.12 and 13

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.

FRS 2.6 and 36.a

Commentary:
Cost formulas

Alternatively, the costs may be assigned by using the weighted average cost formula. An
entity shall use the same cost formula for all inventories having a similar nature and use to
the entity. For inventories with a different nature or use, different cost formulas may be
justified.

XYZ Holdings (Singapore) Limited | 64

FRS 2.25

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.21

Summary of significant accounting policies (continued)


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.

FRS 37.14

FRS 37.59
FRS 37.45-47
FRS 37.60

Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or
service provided. Initial recognition is based on historical experience. The initial
estimate of warranty-related costs is revised annually.

Commentary:

In this illustration, the Group does not have any decommissioning liability or restructuring
provision.
Provision for de-commissioning costs
Illustrative accounting policy for de-commissioning liability when the related asset is
measured using the cost model:
The provision for de-commissioning costs arose on construction of a manufacturing
facility for the production of fire retardant materials. De-commissioning costs are
provided at the present value of expected costs to settle the obligation using
estimated cash flows and are recognised as part of the cost of that particular asset.
The cash flows are discounted at a current pre-tax rate that reflects the risks specific
to the de-commissioning liability. The unwinding of the discount is expensed as
incurred and recognised in profit or loss as a finance cost. The estimated future costs
of decommissioning are reviewed annually and adjusted as appropriate. Changes in
the estimated future costs or in the discount rate applied are added to or deducted
from the cost of the asset.

FRS 16.16.c
FRS 37.45
FRS 37.47
INT FRS 101.8
FRS 37.59
INT FRS 101.5

Restructuring provision
Illustrative accounting policy for restructuring provisions:
Restructuring provisions are only recognised when general recognition criteria for
provisions are fulfilled. Additionally, the Group needs to follow a detailed formal
plan about the business or part of the business concerned, the location and number
of employees affected, a detailed estimate of the associated costs and appropriate
time-line. The people affected have a valid expectation that the restructuring is
being carried out or the implementation has been initiated already.

XYZ Holdings (Singapore) Limited | 65

FRS 37.71
FRS 37.72

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

2.
2.22

Summary of significant accounting policies (continued)


Government grants
Government grants are recognised when there is reasonable assurance that the grant
will be received and all attaching conditions will be complied with. Where the grant
relates to an asset, the fair value is recognised as deferred capital grant on the balance
sheet and is amortised to profit or loss over the expected useful life of the relevant
asset by equal annual instalments.
Where loans or similar assistance are provided by governments or related institutions
with an interest rate below the current applicable market rate, the effect of this
favourable interest is regarded as additional government grant.

FRS 20.39.a
FRS 20.7
FRS 20.23 and 24

FRS 20.10A

Commentary:
Government grants related to an asset

Alternatively, government grants related to an asset may be presented in the balance


sheet by deducting the grant in arriving at the carrying amount of the asset.

FRS 20.24

In this illustration, it is assumed that the Group did not receive non-monetary government
grants. If an entity receives non-monetary government grant, the asset and the grant may
be accounted for either at fair value or at nominal amount.

FRS 20.23

Government grants related to income

2.23

Government grant shall be recognised in profit or loss on a systematic basis over the
periods in which the entity recognises as expenses the related costs for which the grants
are intended to compensate. Grants related to income may be presented as a credit in
profit or loss, either separately or under a general heading such as Other income.
Alternatively, they are deducted in reporting the related expenses.

FRS 20.12
FRS 20.29

Financial guarantee

FRS 107.21

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.

FRS 39.9

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.

FRS 39.43

XYZ Holdings (Singapore) Limited | 66

FRS 39.47.c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.24

Summary of significant accounting policies (continued)


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.

2.25

FRS 23.8

FRS 23.17
FRS 23.22
FRS 23.8
FRS 23.5

FRS 107.21

Convertible redeemable preference shares


Convertible redeemable preference shares are separated into liability and equity
components based on the terms of the contract.
On issuance of the convertible redeemable preference shares, the fair value of the
liability component is determined using a market rate for an equivalent non-convertible
bond. This amount is classified as a financial liability measured at amortised cost (net
of transaction costs) until it is extinguished on conversion or redemption in accordance
with the accounting policy set out in Note 2.15(b).
The remainder of the proceeds is allocated to the conversion option that is recognised
and included in shareholders equity. Transaction costs are deducted from equity, net
of associated income tax. The carrying amount of the conversion option is not
remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the
convertible redeemable preference shares based on the allocation of proceeds to the
liability and equity components when the instruments are initially recognised.

FRS 32.28
FRS 32.32

FRS 32.31

FRS 32.38

Commentary:
Convertible instruments with embedded derivative

In this illustration, the convertible preference shares are classified as compound financial
instruments with liability and equity components based on the terms of the contract.
Illustrative accounting policy if the convertible instruments are classified as hybrid
instruments with embedded derivative:
Convertible loan with conversion option are accounted for as financial liability with an
embedded equity conversion derivative based on the terms of the contract.
On issuance of convertible loans, the embedded option is recognised at its fair value as
derivative liability with subsequent changes in fair value recognised in profit or loss.
The remainder of the proceeds is allocated to the liability component that is carried at
amortised cost until the liability is extinguished on conversion or redemption.
When an equity conversion option is exercised, the carrying amounts of the liability
component and the equity conversion option are derecognised with a corresponding
recognition of share capital.

XYZ Holdings (Singapore) Limited | 67

FRS 39.AG28

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.26

Summary of significant accounting policies (continued)


Employee benefits
a)

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.

b)

FRS 19.51

Employee share option plans


Employees of the Group receive remuneration in the form of share options as
consideration for services rendered. The cost of these equity-settled share
based payment transactions with employees is measured by reference to the
fair value of the options at the date on which the options are granted which
takes into account market conditions and non-vesting conditions. This cost
is recognised in profit or loss, with a corresponding increase in the employee
share option reserve, over the vesting period. The cumulative expense
recognised at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Groups best estimate of the
number of options that will ultimately vest. The charge or credit to profit or
loss for a period represents the movement in cumulative expense recognised
as at the beginning and end of that period and is recognised in employee
benefits expense.

FRS 102.16

FRS 102.21A
FRS 102.10
FRS 102.19-21

The employee share option reserve is transferred to retained earnings upon


expiry of the share option.

Commentary:
Employee leave entitlement

In this illustration, it is assumed that employee leave entitlement is not significant and is
not included in the list of significant accounting policies.
Illustrative accounting policy for employee leave entitlement (if significant):
Employee entitlements to annual leave are recognised as a liability when they are
accrued to the employees. The undiscounted liability for leave expected to be settled
wholly before twelve months after the end of the reporting period is recognised for
services rendered by employees up to the end of the reporting period. The liability for
leave expected to be settled beyond twelve months from the end of the reporting
period is determined using the projected unit credit method. The net total of service
costs, net interest on the liability and remeasurement of the liability are recognised in
profit or loss.

XYZ Holdings (Singapore) Limited | 68

FRS 19.13

FRS 19.155
FRS 19.156

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.26

Summary of significant accounting policies (continued)


Employee benefits (continued)
Commentary:
Termination benefit

In this illustration, the Group does not provide any termination benefit to its employees.
Illustrative accounting policy for termination benefit:
Termination benefits are employee benefits provided in exchange for the termination
of an employees employment as a result of either an entitys decision to terminate an
employees employment before the normal retirement date or an employees decision
to accept an offer of benefits in exchange for the termination of employment.

FRS 19.8

A liability and expense for a termination benefits is recognised at the earlier of when
the entity can no longer withdraw the offer of those benefits and when the entity
recognises related restructuring costs. Initial recognition and subsequent changes to
termination benefits are measured in accordance with the nature of the employment
benefits, short-term employee benefits, or other long-term employee benefits.

FRS 19.165
FRS 19.169

Defined benefit plan

In this illustration, the Group does not have any defined benefit plans. For illustration of
change in accounting policies relating to Revised FRS 19 Employee Benefits for defined
benefit plan, please refer to Appendix A-4 Defined benefit plans.

Modification or cancellation of employee share option plan

In this illustration, there is no modification or cancellation of employee share option plan.


Illustrative accounting policy for modification or cancellation of employee share option
plan:
Where the terms of an equity-settled transaction award are modified, the minimum
expense recognised is the expense as if the terms had not been modified, if the original
terms of the award are met. An additional expense is recognised for any modification
that increases the total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee as measured at the date of modification.

FRS 102.28, B42-44

Where the employee share option plan is cancelled, it is treated as if it vested on the
date of cancellation, and any expense that otherwise would have been recognised for
services received over the remaining vesting period is recognised immediately. This
includes any award where non-vesting conditions within the control of either the entity
or the employee are not met. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the
cancelled and new awards are treated as if they were a modification of the original
award, as described in the previous paragraph. All cancellations of equity-settled
transaction awards are treated equally.

FRS 102.28

XYZ Holdings (Singapore) Limited | 69

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.26

Summary of significant accounting policies (continued)


Employee benefits (continued)
Commentary (continued):
Cash-settled share-based payment transactions

In this illustration, the employee share option plans are equity-settled share-based
payment transactions. Cash-settled share-based payment transactions are not illustrated.
Illustrative accounting policy for cash-settled share-based payment transactions:
The cost of a cash-settled share-based payment transaction is measured initially at
fair value at the grant date. This fair value is recognised in profit or loss over the
vesting period with recognition of a corresponding liability. Until the liability is settled,
it is remeasured at each reporting date with changes in fair value recognised in profit
or loss.

FRS 102.30
FRS 102.32
FRS 102.33

Measurement of unidentifiable goods or services

In situations where equity instruments are issued and some or all of the goods or services
received by the entity as consideration cannot be specifically identified, the unidentified
goods or services received (or to be received) are measured as the difference between the
fair value of the share-based payment transaction and the fair value of any identifiable
goods or services received at the grant date. This is then capitalised or expensed as
appropriate.

FRS 102.13A

Vesting and non-vesting conditions

Vesting condition are conditions that determine whether the entity receives the services
that entitle the counterparty to receive cash, other assets or equity instruments of the
entity under a share-based payment arrangement.

FRS 102.App A

Vesting conditions are limited to two types:

FRS 102.App A

Service condition (e.g., requires counterparty to complete a specified period of


service); and

Performance condition (e.g., require the counterparty to complete a specified period of


service and specified performance target to be met, for example, a target profit or EPS
of the entity, or a target share price of the entitys equity instruments).

Any condition that is neither a service condition nor a performance condition would be
regarded as a non-vesting condition. Examples of non-vesting conditions are:
-

A requirement to make monthly savings during the vesting period

A requirement for a commodity index to reach a minimum level

Restrictions on the transfer of vested equity instruments

An agreement not to work for a competitor after the award has vested

Non-vesting conditions are to be taken into account when estimating the fair value of the
equity instruments granted.
Transfer of share option reserve

The transfer of the employee share option reserve to retained earnings upon expiry of the
option is not mandatory. Alternatively, the employee share option reserve may be kept as
a separate reserve upon expiry of the option.

XYZ Holdings (Singapore) Limited | 70

FRS 102.IG24 and


BC171B

FRS 102.21

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.27

Summary of significant accounting policies (continued)


Leases
a)

As lessee
Finance leases which transfer to the Group substantially all the risks and
rewards incidental to ownership of the leased item, are capitalised at the
inception of the lease at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments. Any initial direct costs are also
added to the amount capitalised. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are
charged to profit or loss. Contingent rents, if any, are charged as expenses in
the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated
useful life of the asset and the lease term, if there is no reasonable certainty
that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term. The aggregate benefit of incentives
provided by the lessor is recognised as a reduction of rental expense over the
lease term on a straight-line basis.

b)

FRS 17.20

FRS 17.25

FRS 17.27

FRS 17.33
INT FRS 15.5

As lessor
Leases where the Group retains substantially all the risks and rewards of
ownership of the asset are classified as operating leases. Initial direct costs
incurred in negotiating an operating lease are added to the carrying amount of
the leased asset and recognised over the lease term on the same bases as
rental income. The accounting policy for rental income is set out in Note
2.29(c). Contingent rents are recognised as revenue in the period in which
they are earned.

2.28

FRS 17.8

FRS 17.8
FRS 17.52

Non-current assets held for sale and discontinued operations


Non-current assets and disposal groups classified as held for sale are measured at the
lower of their carrying amount and fair value less costs to sell. Non-current assets and
disposal groups are classified as held for sale if their carrying amounts will be
recovered principally through a sale transaction rather than through continuing use. A
component of the Group is classified as a discontinued operation when the criteria to
be classified as held for sale have been met or it has been disposed of and such a
component represents a separate major line of business or geographical area of
operations or is part of a single coordinated plan to dispose of a separate major line of
business or geographical area of operations.

FRS 105.15

Property, plant and equipment and intangible assets once classified as held for sale are
not depreciated or amortised.

FRS 105.25

XYZ Holdings (Singapore) Limited | 71

FRS 105.6
FRS 105.32

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.29

Summary of significant accounting policies (continued)


Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will
flow to the Group and the revenue can be reliably measured, regardless of when the
payment is made. Revenue is measured at the fair value of consideration received or
receivable, taking into account contractually defined terms of payment and excluding
taxes or duty.

a)

Sale of goods
Revenue from sale of goods is recognised upon the transfer of significant risk
and rewards of ownership of the goods to the customer, usually on delivery of
goods. Revenue is not recognised to the extent where there are significant
uncertainties regarding recovery of the consideration due, associated costs or
the possible return of goods.

b)

FRS 18.14

Rendering of services
Revenue from the installation of fire prevention equipment is recognised by
reference to the stage of completion at the end of the reporting period. Stage
of completion is determined by reference to labour hours incurred to date as a
percentage of total estimated labour hours for each contract. Where the
contract outcome cannot be measured reliably, revenue is recognised to the
extent of the expenses recognised that are recoverable.

c)

FRS 18.14, 20 and 29


FRS 18.35.a
FRS 18.9

FRS 18.20

FRS 18.26

Rental income
Rental income arising from operating leases on investment properties is
accounted for on a straight-line basis over the lease terms. The aggregate
costs of incentives provided to lessees are recognised as a reduction of rental
income over the lease term on a straight-line basis.

FRS 17.50
INT FRS 15.5

Commentary:
Revenue

In this illustration, revenue from interest income and dividend income is not significant to
the Group.
Illustrative accounting policy for interest income and dividend income (if significant):
Interest income
Interest income is recognised using the effective interest method.

FRS 18.30.a

Dividend income
Dividend income is recognised when the Groups right to receive payment is
established.

XYZ Holdings (Singapore) Limited | 72

FRS 18.30.c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.30

Summary of significant accounting policies (continued)


Taxes
a)

b)

Current income tax


Current income tax assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted at the end of the reporting period, in
the countries where the Group operates and generates taxable income.

FRS 12.46

Current income taxes are recognised in profit or loss except to the extent that
the tax relates to items recognised outside profit or loss, either in other
comprehensive income or directly in equity. Management periodically
evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes
provisions where appropriate.

FRS 12.58 and 61A

Deferred tax
Deferred tax is provided using the liability method on temporary differences at
the end of the reporting period between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all temporary differences, except:
-

Where the deferred tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and

In respect of taxable temporary differences associated with investments in


subsidiaries, associates and interests in joint ventures, where the timing of
the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable
future.

Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and unused tax losses, to the extent
that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised except:

FRS 12.22.c

FRS 12.39

FRS 12.34

Where the deferred tax asset relating to the deductible temporary


difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss;
and

FRS 12.24

In respect of deductible temporary differences associated with


investments in subsidiaries, associates and interests in joint ventures,
deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can
be utilised.

FRS 12.44

XYZ Holdings (Singapore) Limited | 73

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.30

Summary of significant accounting policies (continued)


Taxes (continued)
b)

c)

Deferred tax (continued)


The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at the
end of each reporting period and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to
be recovered.

FRS 12.56

Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the end of each reporting period.

FRS 12.47

Deferred tax relating to items recognised outside profit or loss is recognised


outside profit or loss. Deferred tax items are recognised in correlation to the
underlying transaction either in other comprehensive income or directly in
equity and deferred tax arising from a business combination is adjusted against
goodwill on acquisition.

FRS 12.58, 61A and


66

FRS 12.37

Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax
except:
-

Where the sales tax incurred on a purchase of assets or services is not


recoverable from the taxation authority, in which case the sales tax is
recognised as part of the cost of acquisition of the asset or as part of the
expense item as applicable; and

Receivables and payables that are stated with the amount of sales tax
included.

XYZ Holdings (Singapore) Limited | 74

FRS 18.8

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
2.
2.31

Summary of significant accounting policies (continued)


Share capital and share issuance expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity.
Incremental costs directly attributable to the issuance of ordinary shares are deducted
against share capital.

2.32

Treasury shares
The Groups own equity instruments, which are reacquired (treasury shares) are
recognised at cost and deducted from equity. No gain or loss is recognised in profit or
loss on the purchase, sale, issue or cancellation of the Groups own equity instruments.
Any difference between the carrying amount of treasury shares and the consideration
received, if reissued, is recognised directly in equity. Voting rights related to treasury
shares are nullified for the Group and no dividends are allocated to them respectively.

2.33

FRS 32.37

FRS 32.33

Contingencies
A contingent liability is:
a)

a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Group; or

b)

a present obligation that arises from past events but is not recognised because:
(i)

It is not probable that an outflow of resources embodying economic


benefits will be required to settle the obligation; or

(ii)

The amount of the obligation cannot be measured with sufficient


reliability.

FRS 37.10

A contingent asset is a possible asset that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group,
except for contingent liabilities assumed in a business combination that are present
obligations and which the fair values can be reliably determined.

XYZ Holdings (Singapore) Limited | 75

FRS 37.27 and 31


FRS 103.23

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
3.

Significant accounting judgements and estimates


The preparation of the Groups consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the
end of each reporting period. Uncertainty about these assumptions and estimates could
result in outcomes that require a material adjustment to the carrying amount of the asset
or liability affected in the future periods.

Commentary:
Alternative simplified disclosures
Following are illustrative disclosure when management concluded that there are no significant
judgements made in applying accounting policies and no estimation uncertainty that have a
significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial period.
The preparation of the Groups consolidated financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of the
revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the
end of reporting period. Uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the asset or
liability affected in the future periods. Management is of the opinion that there is no
significant judgement made in applying accounting policies and no estimation uncertainty
that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial period.

3.1

Judgements made in applying accounting policies


In the process of applying the Groups accounting policies, management has made the
following judgements which have the most significant effect on the amounts recognised
in the consolidated financial statements:

a)

Impairment of available-for-sale equity investments


The Group records impairment charges on available-for-sale equity
investments when there has been a significant or prolonged decline in the
fair value below their cost. The determination of what is significant or
prolonged requires judgement. In making this judgement, the Group
evaluates, among other factors, historical share price movements and the
duration and extent to which the fair value of an investment is less than its
cost.

XYZ Holdings (Singapore) Limited | 76

FRS 1.122

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
3.
3.1

Significant accounting judgements and estimates (continued)


Judgements made in applying accounting policies (continued)
Commentary (continued):
Judgements made in applying accounting policies (continued)

In this illustration, it is assumed that these are the judgements made in applying
accounting policies that has the most significant effect on the amounts recognised in the
financial statements.
Illustrative disclosures of other judgements made in applying accounting policies:
Determination of lease classification
The Group has entered into commercial property leases on its investment properties.
The Group evaluated the terms and conditions of the arrangements and assessed that
the lease term does not constitute a substantial portion of the economic life of the
commercial property and the minimum lease payment is not substantially all of the fair
value of the leased asset. The Group determined that it retains all the significant risks
and rewards of ownership of these properties and so accounts for the contracts as
operating leases.
Determination of functional currency
The Group measures foreign currency transactions in the respective functional
currencies of the Company and its subsidiaries. In determining the functional
currencies of the entities in the Group, judgement is required to determine the
currency that mainly influences sales prices for goods and services and of the country
whose competitive forces and regulations mainly determines the sales prices of its
goods and services. The functional currencies of the entities in the Group are
determined based on managements assessment of the economic environment in
which the entities operate and the entities process of determining sales prices.
Management has assessed that prices are mainly denominated and settled in the
respective local currency of the entities of the Group. In addition, most of the entities
cost base is mainly denominated in their respective local currency. Therefore,
management concluded that the functional currency of the entities of the Group is
their respective local currency.
Consolidation of structured entities
In February 2013, the Group and a third party partner formed an entity to acquire
land and construct and operate a fire equipment safety facility. The Group holds a
20% equity interest in this entity. However, the Group has majority representation on
the entitys board of directors and is required to approve all major operational
decisions. The operations, once they commence, will be solely used by the Group.
Based on these facts and circumstances, management concluded that the Group
controls this entity and, therefore, consolidates the entity in its financial statements.
Additionally, the Group is effectively guaranteeing the returns to the third party. The
shares of the third party partner are recorded as a long term loan and return on
investment is recorded as interest expense.

XYZ Holdings (Singapore) Limited | 77

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
3.
3.2

Significant accounting judgements and estimates (continued)


Key sources of estimation uncertainty (continued)

FRS 1.125

The key assumptions concerning the future and other key sources of estimation
uncertainty at the end of the reporting period are discussed below. The Group based its
assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising beyond the
control of the Group. Such changes are reflected in the assumptions when they occur.

a)

Fair value of unquoted available-for-sale financial assets


The fair values of unquoted available-for-sale financial assets are
determined using valuation techniques including the discounted cash flow
model. The inputs to these models are derived from observable market data
where possible, but where this is not feasible, a degree of judgement is
required in establishing fair values. The assumptions applied in
determination of the valuation of these unquoted available-for-sale
financial assets and a sensitivity analysis are described in more detail in
Note 39.
The carrying amount of the unquoted available-for-sale financial assets as at
31 December 2014 is $1,702,000 (2013: $1,008,000).

b)

Impairment of intangible assets


As disclosed in Note 15 to the financial statements, the recoverable amounts
of the cash generating units which goodwill and brands have been allocated to
are determined based on value in use calculations. The value in use
calculations are based on a discounted cash flow models. The recoverable
amount is most sensitive to the discount rate used for the discounted cash flow
model as well as the expected future cash inflows and the growth rate used for
extrapolation purposes. The key assumptions applied in the determination of
the value in use including a sensitivity analysis, are disclosed and further
explained in Note 15 to the financial statements.
The carrying amount of the intangible assets as at 31 December 2014 is
$1,789,000 (2013: $495,000).

c)

Revaluation of investment properties and property, plant and equipment


The Group carries its investment properties and property, plant and equipment
at fair value, with changes in fair values being recognised in profit or loss and
other comprehensive income respectively. The Group engaged real estate
valuation experts to assess fair value as at 31 December 2014. The fair values
of investment properties and property, plant and equipment are determined by
independent real estate valuation experts using recognised valuation
techniques. These techniques comprise both the Yield Method and the
Discounted Cash Flow Method. The key assumptions used to determine the fair
value of these investment properties and property, plant and equipment and
sensitivity analysis are provided in Note 39.
The carrying amounts of the investment properties and property, plant and
equipment carried at fair value as at 31 December 2014 are $4,645,000
(2013: $3,955,000) and $15,165,000 (2013: $14,300,000) respectively.

XYZ Holdings (Singapore) Limited | 78

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
3.
3.2

Significant accounting judgements and estimates (continued)


Key sources of estimation uncertainty (continued)

FRS 1.125

Commentary:
Key sources of estimation uncertainty

In this illustration, it is assumed that these are the key assumptions and estimation
uncertainty that have a significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial year.
Illustrative disclosures of other key sources of estimation uncertainty:
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it is
probable that taxable profit will be available against which the losses can be utilised.
Significant management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the timing and level of future taxable
profits together with future tax planning strategies. In determining the timing and
level of future taxable profits together with future tax planning strategies, the Group
assessed the probability of expected future cash inflows based on expected revenues
from existing orders and contracts for the next 10 years.
Where taxable profits are expected in the foreseeable future, deferred tax assets are
recognised on the unused tax losses. The carrying value of recognised tax losses at
31 December 2014 was $XXX (2013: $XXX) and the unrecognised tax losses at 31
December 2014 was $XXX (2013: $XXX).
If the Group was able to recognise all unrecognised deferred tax assets, profit would
increase by $XXX (2013:$XXX).
Construction contracts
The Group recognises contract revenue by reference to the stage of completion of
the contract activity at the end of each reporting period, when the outcome of a
construction contract can be estimated reliably. The stage of completion is
measured by reference to the proportion that contract costs incurred for work
performed to date to the estimated total contract costs. Significant assumptions are
required to estimate the total contract costs and the recoverable variation works
that affect the stage of completion. In making these estimates, management has
relied on past experience and knowledge of the project engineers. The carrying
amounts of assets and liabilities arising from construction contracts at the end of
each reporting period are disclosed in Note X to the financial statements. If the
estimated total contract cost had been 5% higher than management estimate, the
carrying amount of the assets and liabilities arising from construction contracts
would have been $XXX (2013: $XXX) lower and $XXX (2013: $XXX) higher
respectively.
Provision for decommissioning
As part of the identification and measurement of assets and liabilities for the
acquisition of XXX Limited in 2014, the Group has recognised a provision for
decommissioning obligations associated with a factory owned by XXX Limited. In
determining the fair value of the provision, assumptions and estimates are made in
relation to discount rates, the expected cost to dismantle and remove plant from the
site and the expected timing of those costs. The carrying amount of the provision as
at 31 December was $XXX (2013: $XXX). If the estimated pre-tax discount rate
used in the calculation had been XX% higher than managements estimate, the
carrying amount of the provision would have been $XXX (2013: $XXX) lower.

XYZ Holdings (Singapore) Limited | 79

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

3.
3.2

Significant accounting judgements and estimates (continued)


FRS 1.125

Key sources of estimation uncertainty (continued)


Commentary (continued):
Key sources of estimation uncertainty (continued)
Development costs
Development costs are capitalised in accordance with the accounting policy in Note
X. Initial capitalisation of costs is based on managements judgement that
technological and economic feasibility is confirmed, usually when a product
development project has reached a defined milestone according to an established
project management model. In determining the amounts to be capitalised,
management makes assumptions regarding the expected future cash generation of
the project, discount rates to be applied and the expected period of benefits. As at
31 December 2014, the carrying amount of development costs capitalised at the
end of the reporting period was $XXX (2013: $XXX). If the expected future cash
generation of the project had been 20% lower than managements estimate, the
carrying amount of development costs would have been $XXX (2013: $XXX) lower.
Impairment of loans and receivables
The Group assesses at the end of each reporting period whether there is any
objective evidence that a financial asset is impaired. Factors such as the probability
of insolvency or significant financial difficulties of the debtor and default or
significant delay in payments are objective evidence of impairment. In determining
whether there is objective evidence of impairment, the Group considers whether
there is observable data indicating that there have been significant changes in the
debtors payment ability or whether there have been significant changes with
adverse effect in the technological, market, economic or legal environment in which
the debtor operates in.
Where there is objective evidence of impairment, the amount and timing of future
cash flows are estimated based on historical loss experience for assets with similar
credit risk characteristics. The carrying amount of the Groups loans and receivables
at the end of the reporting period is disclosed in Note 21 to the financial statements.
If the present value of estimated future cash flows decrease by 10% from
managements estimates, the Groups allowance for impairment will increase by
$XXX (2013: increase by $XXX).
Estimation of net realisable value for development property
Inventory property is stated at the lower of cost and net realisable value (NRV).
NRV in respect of development property under construction is assessed with
reference to market prices at the reporting date for similar completed property less
estimated costs to complete construction and less an estimate of the time value of
money to the date of completion. The carrying amount of the development property
stated at net realisable value as at 31 December 2014 was $XXX (2013: $XXX). If
the estimated costs to complete construction increase by 20% from managements
estimate, the carrying amount of development property stated would reduce by
$XXX (2013: $XXX).

XYZ Holdings (Singapore) Limited | 80

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
4.

Revenue

Group

Sale of goods
Construction revenue

5.

2014

2013

$000

$000

105,827

104,455

30,893

38,116

136,720

142,571

FRS 18.35.b.i
FRS 11.39.a

Interest income
Group
2014

2013

$000

$000

355

255

FRS 107.20.a.iv

- Available-for-sale financial assets

48

47

FRS 107.20.a.ii

- Held-to-maturity investment

27

25

FRS 107.20.a.iii

430

327

FRS 107.20.a.b

Interest income from:


- Loans and receivables

Included in interest income from loans and receivables is interest of $98,000 (2013:
$92,000) from an impaired loan to a fellow subsidiary (Note 21).

6.

FRS 107.20.d

Other income
Group
2014

2013

$000

$000

Amortisation of deferred capital grants (Note 29)

239

180

FRS 20.39

Rental income from investment properties (Note 14)

345

291

FRS 40.75.f.i

Net gain from fair value adjustment of investment properties (Note 14)

489

129

FRS 40.76.d

120

FRS 1.98.c

135

95

FRS 107.20.a.i

43

56

FRS 107.20.a.i

120

15

FRS 107.20.a.ii

Net gain on disposal of property, plant and equipment


Net fair value gains on financial instruments:
- Held for trading investment securities
- Derivatives
- Available-for-sale financial assets (transferred from equity on
disposal of investment securities)
Gain on remeasurement of investment in associate to fair value upon
business combination achieved in stages (Note 17(d))

140

1,511

886

XYZ Holdings (Singapore) Limited | 81

FRS 103.B64.p.ii

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
7.

Finance costs
Group
2014

2013

$000

$000

1,640

1,506

- Obligations under finance leases

75

30

- Convertible redeemable preference shares

62

59

1,777

1,595

30

10

- Plant and equipment (Note 13)

(57)

(60)

FRS 23.26.a

- Development property (Note 24)

(35)

(33)

FRS 23.26.a

Interest expense on:


- Bank loans, bonds and bank overdrafts

Provisions discount adjustment (Note 28)

FRS 107.20.a.v

FRS 107.20.a.v
FRS 107.20.b

Less: interest expense capitalised in:

Total finance costs

8.

1,715

1,512

Other expenses

The following items have been included in arriving at other expenses:


Group

Net loss on disposal of property, plant and equipment

2014

2013

$000

$000

76

FRS 1.98.c

500

FRS 1.98.a

72

65

Fair value adjustment of contingent consideration of business


combination (Note 17)

235

Net foreign exchange loss

136

145

Impairment loss on property, plant and equipment (Note 13)


Direct operating expenses arising from investment properties (Note 14)

Impairment loss on financial assets :


- Trade receivables (Note 21)
- Loan to a fellow subsidiary (Note 21)
- Available-for-sale investment securities (Note 22)

FRS 40.75.f.ii

FRS 1.97
FRS 21.52.a
FRS 107.20.e

135

115

100

FRS 107.20.e
FRS 107.20.e
FRS 24.18.d

198

210

FRS 107.20.e

XYZ Holdings (Singapore) Limited | 82

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
9.

Profit before tax from continuing operations


The following items have been included in arriving at profit before tax from continuing
operations:

FRS 1.97 and 104

Group

Audit fees:
- Auditors of the Company
- Other auditors

2014

2013

$000

$000

400

400

50

50

250

250

Non-audit fees:
- Auditors of the Company
- Other auditors

SGX 1207.6a

SGX 1207.6a

30

30

3,043

2,838

FRS 1.104

Amortisation of intangible assets (Note 15)

220

252

FRS 1.104

Transactions costs incurred in a business combination

300

Employee benefits expense (Note 35)

20,502

19,024

FRS 1.104

Inventories recognised as an expense in cost of sales (Note 25)

80,567

82,122

FRS 2.36.d

484

387

Utility charges

1,428

1,486

FRS 1.97 and 104

Transportation charges

2,450

2,584

FRS 1.97 and 104

325

228

FRS 1.97 and 104

Depreciation of property, plant and equipment

Operating lease expense (Note 37(b))

Legal and other professional fees

FRS 1.97

FRS 17.35.c

Commentary:
Separate disclosure of income and expenses

FRS 107.20.b only requires total income (calculated using the effective interest method) for
financial assets that are not at fair value through profit or loss to be disclosed.

FRS 107.20.b

In this illustration, we have illustrated interest income aggregated by categories of financial


asset. Although this level of aggregation is optional, when items of income and expense are
material, their nature and amount should be disclosed separately.

FRS 1.97

When items of income and expense are material, their nature and amount should be disclosed
separately. Circumstances that would give rise to the separate disclosure of items of income
and expense include:

FRS 1.97 and 98

(a) Write-downs of inventories to net realisable value or of property, plant and equipment to
recoverable amount, as well as reversals of such write-downs;
(b) Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring;
(c) Disposals of items of property, plant and equipment;
(d) Disposals of investments;
(e) Discontinued operations;
(f) Litigation settlements; and
(g) Other reversals of provisions.

XYZ Holdings (Singapore) Limited | 83

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
9.

Profit before tax from continuing operations (continued)


Commentary (continued):

An entity shall disclose the fee income and expense (other than amounts included in
determining the effective interest rate) arising from financial assets or financial liabilities that
are not at fair value through profit or loss and trust and other fiduciary activities that result in
the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans, and
other institutions, either on the face of the financial statements or in the notes.

FRS 107.20.c

Classes of financial instruments

FRS 107 specifies a number of disclosure requirements on the following topics to be


provided by class of financial instruments:
-

Impairment losses;

FRS 107.20.e

Reconciliation of change in allowance account for credit losses if an entity chooses


under FRS 39 to have a separate allowance account;

FRS 107.16

Credit risk;

FRS 107.36

Fair value of financial instruments;

FRS 107.25

Accounting policy for recognising any difference between fair value at initial
recognition and the amount that would be determined at that date using valuation
technique and the aggregate difference yet to be recognised in profit or loss; and

FRS 107.28

Transfers of financial assets that are not derecognised in their entirety.

FRS 107.42D

FRS 107 requires an entity to group financial instruments into classes that are
appropriate to the nature of information disclosed and that take into account the
characteristics of those financial instruments. These classes are determined by the
reporting entity and are distinct (usually lower in level) from the categories of financial
instruments (e.g., available-for-sale financial asset, loans and receivables) specified in
FRS 39.

FRS 107.6

In determining classes of financial instruments, an entity shall, at a minimum:

FRS 107.B2

Distinguish instruments measured at amortised cost from those measured at fair


value

Treat as a separate class or classes those financial instruments outside the scope of
FRS 107

The entity is also required to provide sufficient information to permit reconciliation of


the classes of financial instruments to the line items presented in the balance sheet.

These expense items have been disclosed separately as they are considered to be material in
the assumed scenario due to their size or nature.

FRS 107.B1

FRS 107.6

FRS 1.97

Reclassification adjustments

In this illustration, the entity has chosen to disclose the reclassification adjustments and
current year gain or loss in the notes. An entity may choose to present this information in the
statement of comprehensive income itself.

FRS 1.94

Reclassification adjustments are amounts reclassified to profit or loss in the current period
that were recognised in other comprehensive income in the current or previous periods. Such
amounts must be separately disclosed. For example, when an available-for-sale financial asset
is sold, accumulated amounts previously recognised in fair value adjustment reserve will be
reclassified into profit or loss for the period.

FRS 1.7

XYZ Holdings (Singapore) Limited | 84

FRS 1.92
FRS 1.93

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

10. Income tax expense


Major components of income tax expense
The major components of income tax expense for the years ended 31 December 2014
and 2013 are:
Group
2014

2013

$000

$000

1,422

1,344

FRS12.80.a

91

FRS 12.80.b

Consolidated income statement:


Current income tax continuing operations:
- Current income taxation
- (Over)/under provision in respect of previous years

(50)
1,372

1,435

191

260

Deferred income tax continuing operations (Note 20):


- Origination and reversal of temporary differences
- Benefits from previously unrecognised tax losses

(6)

Income tax attributable to continuing operations


Income tax attributable to discontinued operation (Note 11)

185

252

1,557

1,687

(7)

(5)

1,550

Income tax expense recognised in profit or loss

FRS 12.80.c

(8)

FRS 12.80.f

FRS 12.80.h

1,682

Statement of comprehensive income:


Group

Deferred tax expense related to other comprehensive


income:
- Net gain on fair value changes of available-forsale financial assets
- Net surplus on revaluation of freehold land and
buildings
- Share of other comprehensive income of
associates

Company

2014

2013

2014

2013

$000

$000

$000

$000
FRS 12.81.ab

56

26

256

460

13

325

488

16

16

FRS 16.42

Statement of changes in equity:

Deferred tax expense charged directly to equity:


- Convertible redeemable preference shares

XYZ Holdings (Singapore) Limited | 85

FRS 12.81.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

10. Income tax expense (continued)


Relationship between tax expense and accounting profit
A reconciliation between tax expense and the product of accounting profit multiplied by
the applicable corporate tax rate for the years ended 31 December 2014 and 2013 is as
follows:
Group

Profit before tax from continuing operations


Loss before tax from discontinued operation (Note 11)

2014

2013

$000

$000

7,057

7,116

(551)

(193)

Accounting profit before tax

6,506

6,923

Tax at the domestic rates applicable to profits in the countries where the
Group operates

1,322

1,571

Adjustments:
Non-deductible expenses
Income not subject to taxation
Effect of partial tax exemption and tax relief
Deductions on treasury shares issued pursuant to employee share option
plan
Deferred tax on convertible redeemable preference shares

560

473

(170)

(388)

(35)

(20)

(3)

(4)

(3)

Benefits from previously unrecognised tax losses

(6)

(8)

Deferred tax assets not recognised

46

21

(Over)/under provision in respect of previous years


Share of results of associates
Others
Income tax expense recognised in profit or loss

(50)
(112)

91
(56)

1,550

1,682

The above reconciliation is prepared by aggregating separate reconciliations for each


national jurisdiction.

XYZ Holdings (Singapore) Limited | 86

FRS 12.81.c.i

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
10. Income tax expense (continued)
Commentary:
Presentation of tax reconciliation

Alternatively, an entity may present a numerical reconciliation between the average effective
tax rate (i.e., tax expense/income divided by the accounting profit) and the applicable tax rate,
disclosing also the basis on which the applicable tax rate is computed.

FRS 12.81.c.ii and 86

Income tax rate for tax reconciliation

In explaining the relationship between tax expense/income and accounting profit, an entity
uses an applicable tax rate that provides the most meaningful information to the users of its
financial statements. Often, the most meaningful rate is the domestic rate of tax in the
country in which the entity is domiciled, aggregating the tax rate applied for national taxes
with the rates applied for any local taxes which are computed on a substantially similar level of
taxable profit (tax loss). However, for an entity operating in several jurisdictions, it may be
more meaningful to aggregate separate reconciliations prepared using the domestic rate in
each individual jurisdiction.

Tax deduction for treasury shares transferred under employee share scheme

A Singapore company is granted a tax deduction for the cost incurred in acquiring treasury
shares which are transferred to any person under a stock option scheme or share award
scheme by reason of any office or employment held in Singapore by that person.

Disclosure of nature of expenses that are not deductible for income tax purposes

The nature of :
-

expenses that are not deductible for income tax purposes; and

income not subject to taxation

that give rise to a tax effect should be disclosed if the amount was material in accordance with
FRS 1.29
Illustrative note disclosure on the nature of expenses that are not deductible for income tax
purposes :
The nature of expenses that are not deductible for income tax purposes are as follows:
Group
2014
$000

2013
$000

Transaction costs related to acquisition of a


subsidiary

XXX

Exchange loss arising from revaluation of non-trade


balances

XXX

XXX

Private car expenses

XXX

XXX

Entertainment and transportation expenses incurred


for personal purposes

XXX

XXX

XXX

XXX

XYZ Holdings (Singapore) Limited | 87

FRS 12.85

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
11. Discontinued operation and disposal group classified as held for sale
On 15 May 2014, the Company announced the decision of its board of directors to
dispose of one of its wholly-owned subsidiary, Good Fire Prevention Pte Ltd (GFP), which
was previously reported in the fire prevention equipment and services segment. The
decision is consistent with the Groups strategy to focus on its core electronics and
property businesses and to divest its fire prevention equipment business, which has been
underperforming for the last five years. As at 31 December 2014, the assets and
liabilities related to GFP have been presented in the balance sheet as Assets of disposal
group classified as held for sale and Liabilities directly associated with disposal group
classified as held for sale, and its results are presented separately on profit or loss as
Loss from discontinued operation, net of tax. The disposal of GFP was completed on 15
February 2015 (Note 44).

FRS 105.41.a, b and d

Balance sheet disclosures


The major classes of assets and liabilities of GFP classified as held for sale and the related
asset revaluation reserve as at 31 December are as follows:
Group
2014
$000
Assets:
Property, plant and equipment

1,016

Inventories

190

Trade and other receivables

814

Cash and short-term deposits

250

Assets of disposal group classified as held for sale

2,270

Liabilities:
Trade and other payables

(1,043)
(28)

Deferred tax liabilities


8.5% p.a. fixed rate SGD bank loan due 1 January 2015

(1,000)

Liabilities directly associated with disposal group classified as held for sale

Net liabilities directly associated with disposal group classified as held for sale

(2,071)

199

Reserve:
Asset revaluation reserve

128

XYZ Holdings (Singapore) Limited | 88

FRS 105.38 and 40

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
11. Discontinued operation and disposal group classified as held for sale (continued)
Income statement disclosures
The results of GFP for the years ended 31 December are as follows:

FRS 105.33.b

Group
2014

2013

$000

$000

Revenue

13,152

14,598

FRS 105.33.b.i

Expenses

(12,983)

(14,708)

FRS 105.33.b.i

Profit/(loss) from operations

169

Finance costs

(70)

(110)
(83)

Impairment loss on deferred development costs (Note 15)

(200)

Loss recognised on remeasurement to fair value less costs to sell

(450)

Loss before tax from discontinued operation

(551)

(193)

Taxation:
- Related to loss from ordinary activities of the discontinued operation

- Related to re-measurement to fair value less costs to sell

Loss from discontinued operation, net of tax

(544)

FRS 105.33.b.iii
and 41.c
FRS 105.33.b.i
FRS 105.33.b.ii
FRS 12.81.h.ii
FRS 105.33.b.iii
FRS 12.81.h.i

(188)

Cash flow statement disclosures

FRS 105.33.c

The cash flows attributable to GFP are as follows:


Group

Operating

2014

2013

$000

$000

(1,025)

483

Investing

268

(189)

Financing

(137)

(114)

Net cash (outflows)/inflows

(894)

180

Loss per share disclosures


Group
2014

2013

$000

$000

Loss per share from discontinued operation attributable to owners of


the Company (cents per share)
Basic

(2.35)

(0.82)

FRS 33.68

Diluted

(2.30)

(0.80)

FRS 33.68

The basic and diluted loss per share from discontinued operation are calculated by dividing
the loss from discontinued operation, net of tax, attributable to owners of the Company by
the weighted average number of ordinary shares for basic earnings per share computation
and weighted average number of ordinary shares for diluted earnings per share
computation respectively. These loss and share data are presented in the tables in Note
12(a).

XYZ Holdings (Singapore) Limited | 89

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
11. Discontinued operation and disposal group classified as held for sale (continued)
Immediately before the classification of GFP as a discontinued operation, the recoverable
amount was estimated for certain items of property, plant and equipment and no
impairment loss was identified. Following the classification, an impairment loss of
$450,000 (2013: nil) was recognised to reduce the carrying amount of the assets in the
disposal group to the fair value less costs to sell. This amount was included as part of the
Loss from discontinued operation, net of tax.

Commentary:

FRS 5.5B clarifies that disclosure requirements in other FRSs do not apply to non-current
assets held for sale (or disposal groups) unless those FRSs explicitly refer to those assets and
disposals groups. Disclosure requirements continue to apply for assets and liabilities that are
not within the scope of the measurement requirements of FRS 105, but within the disposal
group.

FRS 105.5B
FRS 105.5B.b

Discontinued operation and disposal group classified as held for sale

These analysis/disclosures are not required for disposal groups that are newly acquired
subsidiaries that meet the criteria to be classified as held for sale on acquisition.

FRS 105.33.b and 39

Alternatively, these analysis/disclosures may be presented on the face of the financial


statements. If so presented for the purposes of the statement of comprehensive income, a
separate section identified as relating to discontinued operations is required.

FRS 105.33.b

An entity should re-present the disclosures in FRS 105.33 for prior periods presented in the
statement of comprehensive income and cash flow statement so that the disclosures relate to
all operations that have been discontinued by the end of the reporting period for the latest
period presented.

FRS 105.34

Loss per share from discontinued operation

In this illustration, loss per share from discontinued operations has been presented in the note.
Alternatively, this information may be presented on the face of the statement of
comprehensive income.

FRS 33.68

12. Earnings per share


a) Continuing operations
Basic earnings per share from continuing operations are calculated by dividing profit
from continuing operations, net of tax, attributable to owners of the Company by the
weighted average number of ordinary shares outstanding during the financial year.

FRS 33.10 and 12

Diluted earnings per share from continuing operations are calculated by dividing profit
from continuing operations, net of tax, attributable to owners of the Company (after
adjusting for interest expense on convertible redeemable preference shares) by the
weighted average number of ordinary shares outstanding during the financial year plus
the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.

FRS 33.31 and 33

The following tables reflect the profit and share data used in the computation of basic
and diluted earnings per share for the years ended 31 December:

XYZ Holdings (Singapore) Limited | 90

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
12. Earnings per share (continued)
a) Continuing operations (continued)
Group

Profit for the year attributable to owners of the Company


Add back: Loss from discontinued operation, net of tax, attributable
to owners of the Company
Profit from continuing operations, net of tax, attributable to owners
of the Company used in the computation of basic earnings per share
from continuing operations
Interest expense on convertible redeemable preference shares
Profit from continuing operations, net of tax, attributable to owners
of the Company used in the computation of diluted earnings per
share

Weighted average number of ordinary shares for basic earnings per


share computation *

2014

2013

$000

$000

4,776

4,841

544

188

5,320

5,029

62

59

5,382

5,088

No. of
shares
000

No. of
shares
000

23,150

23,055

18

15

505

505

23,673

23,575

Effects of dilution :

FRS 33.70.a

FRS 33.12

FRS 33.70.b
FRS 33.70.b

- Share options
- Convertible redeemable preference shares
Weighted average number of ordinary shares for diluted earnings per
share computation *

FRS 33.70.b

* The weighted average number of shares takes into account the weighted average
effect of changes in treasury shares transactions during the year.
325,000 (2013: 200,000) share options granted to employees under the existing
employee share option plans have not been included in the calculation of diluted
earnings per share because they are anti-dilutive.
Since the end of the financial year, senior executives have exercised the options to
acquire 2,000 (2013: nil) ordinary shares. There have been no other transactions
involving ordinary shares or potential ordinary shares since the reporting date and
before the completion of these financial statements.

FRS 33.70.c

FRS 33.70.d

b) Earnings per share computation


The basic and diluted earnings per share are calculated by dividing the profit for the year
attributable to owners of the Company by the weighted average number of ordinary
shares for basic earnings per share computation and dividing the profit for the year
attributable to owners of the Company adjusted for interest expense on convertible
redeemable shares by the weighted average number of ordinary shares for diluted
earnings per share computation respectively. These profit and share data are
presented in the tables in Note 12(a) above.

XYZ Holdings (Singapore) Limited | 91

FRS 33.70.a and b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
12. Earnings per share (continued)
Commentary:
Earnings per share

If the number of ordinary or potential ordinary shares outstanding increases as a result of a


capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the
calculation of basic and diluted earnings per share for all periods presented shall be adjusted
retrospectively. If these changes occur after the end of the reporting period but before the
financial statements are authorised for issue, the per share calculations for current and prior
period presented shall be based on the new number of shares and this fact should be
disclosed. In addition, basic and diluted earnings per share of all periods presented shall be
adjusted for the effects of errors and adjustments resulting from changes in accounting
policies accounted for retrospectively.

In this illustration, it is assumed that the discontinued operation is not attributable to noncontrolling interests.

The objective of diluted earnings per share is consistent with that of basic earnings per share
which is to provide a measure of the interest of each ordinary share in the performance of an
entity while giving effect to all dilutive potential ordinary shares outstanding during the
period. As a result:

FRS 33.64

FRS 33.32

(a) profit or loss attributable to ordinary equity holders of the parent entity is increased by
the after-tax amount of dividends and interest recognised in the period in respect of the
dilutive potential ordinary shares and is adjusted for any other changes in income or
expense that would result from the conversion of the dilutive potential ordinary shares;
and
(b) the weighted average number of ordinary shares outstanding is increased by the weighted
average number of additional ordinary shares that would have been outstanding assuming
the conversion of all dilutive potential ordinary shares.

Potential ordinary shares shall be treated as dilutive only when their conversion to ordinary
shares would decrease earnings per share or increase loss per share from continuing
operations.

FRS 33.41

An entity shall disclose a description of ordinary share transactions or potential ordinary share
transactions, other than those resulted from share capitalisation, bonus issue or share split,
that occur after the end of the reporting period and that would have changed significantly the
number of ordinary shares or potential ordinary shares outstanding at the end of the period if
those transactions had occurred before the end of the reporting period.

FRS 33.70.d

Example of such transactions include:

FRS 33.71

An issue of shares for cash;

An issue of shares when the proceeds are used to repay debt or preference shares
outstanding at the end of the reporting period;

The redemption of ordinary shares outstanding;

The conversion or exercise of potential ordinary shares outstanding at the end of the
reporting period into ordinary shares;

An issue of options, warrants, or convertible instruments; and

The achievement of conditions that would result in the issue of contingently issuable
shares.

Earnings per share amounts are not adjusted for such transactions occurring after the end of
the reporting period because such transactions do not affect the amount of capital used to
produce profit or loss for the period.

XYZ Holdings (Singapore) Limited | 92

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
13. Property, plant and equipment

Group
Cost or valuation:
At 1 January 2013
Additions
Disposals
Revaluation surplus
Elimination of accumulated depreciation on
revaluation
Exchange differences
At 31 December 2013 and 1 January 2014
Additions
Transfer from investment properties (Note 14)
Disposals
Acquisition of a subsidiary (Note 17)
Attributable to discontinued operation
(Note 11)
Revaluation surplus
Elimination of accumulated depreciation on
revaluation
Exchange differences
At 31 December 2014

FRS 1.77 and 78.a

Freehold
land
$000

Buildings

Plant and
equipment

Furniture
and
fixtures

Total

$000

$000

$000

$000

At valuation

At cost

FRS 16.73.a

7,468

1,075

25,079

2,331

35,953

1,160

1,824

1,028

441

4,453

FRS 16.73.e.i

(2,054)

FRS 16.73.e.ii

2,128

740

2,868

FRS 16.73.e.iv

(50)

(30)

(15)

(2,054)

FRS 16.73.d

(120)

(50)

(20)

(185)

10,726

3,574

23,933

2,752

40,985

4,000

1,194

2,008

1,252

8,454

300

300

(3,068)

(1,710)

(1,010)

(310)

1,206

300

(67)

(3,328)
1,111
(377)

FRS 16.35.b
FRS 16.73.e.viii
FRS 16.73.d
FRS 16.73.e.i
FRS 16.73.e.ix

(8,106)

FRS 16.73.e.ii

158

1,269

FRS 16.73.e.iii

(150)

(1,847)

FRS 16.73.e.ii

1,506

FRS 16.73.e.iv

20

10

50

12

(67)
92

11,874

3,291

23,397

4,024

42,586

FRS 16.73.d

6,461

1,337

7,798

FRS 16.73.d

2,558

230

2,838

FRS 16.35.b
FRS 16.73.e.viii

Accumulated depreciation and impairment loss:


At 1 January 2013
Depreciation charge for the year

50

Disposals
Elimination of accumulated depreciation on
revaluation

Exchange differences

8,364

1,557

9,921

FRS 16.73.d

Depreciation charge for the year

115

2,628

300

3,043

FRS 16.73.e.vii

Impairment loss

500

Disposals

(10)

(1,153)

(38)

(245)

(67)

At 31 December 2013 and 1 January 2014

Attributable to discontinued operation


(Note 11)
Elimination of accumulated depreciation on
revaluation

(50)

(615)

(40)

(615)

(50)

FRS 16.35.b

(50)

FRS 16.73.e.viii

(10)

500

FRS 16.73.e.v
FRS 16.73.e.ii

(381)

FRS 16.73.e.ii

(98)

(67)

10

15

10,104

1,764

11,868

At 31 December 2013

10,726

3,574

15,569

1,195

31,064

At 31 December 2014

11,874

3,291

13,293

2,260

30,718

At 31 December 2014

FRS 16.73.e.ii

(1,163)

Exchange differences

FRS 16.73.e.vii

Net carrying amount:

XYZ Holdings (Singapore) Limited | 93

FRS 16.35.b
FRS 16.73.e.viii
FRS 16.73.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
13. Property, plant and equipment (continued)
Furniture
and fixtures

Company

$000
Cost:

FRS 16.73.a

At 1 January 2013

1,166

Additions

221

At 31 December 2013 and 1 January 2014

1,387

Additions

626

At 31 December 2014

2,013

FRS 16.73.d
FRS 16.73.e.i
FRS 16.73.d
FRS 16.73.e.i
FRS 16.73.d

Accumulated depreciation:
At 1 January 2013
Depreciation charge for the year
At 31 December 2013 and 1 January 2014
Depreciation charge for the year
At 31 December 2014

669

FRS 16.73.d

115

FRS 16.73.e.vii

784

FRS 16.73.d

150

FRS 16.73.e.vii

934

FRS 16.73.d

Net carrying amount:


At 31 December 2013

603

At 31 December 2014

1,079

Assets under construction


The Groups plant and equipment included $800,000 (2013: $750,000) which relate to
expenditure for a plant in the course of construction.

FRS 16.74.b

Capitalisation of borrowing costs


The Groups plant and equipment include borrowing costs arising from bank loans
borrowed specifically for the purpose of the construction of a plant and equipment. During
the financial year, the borrowing costs capitalised as cost of plant and equipment
amounted to $57,000 (2013: $60,000). The rate used to determine the amount of
borrowing costs eligible for capitalisation was 4.5% (2013: 5.0%), which is the effective
interest rate of the specific borrowing.

FRS 23.26.a
FRS 23.26 b

Revaluation of freehold land and buildings


The Group engaged Chartered Surveyors Pte Ltd, an independent valuer to determine the
fair value of the freehold land and buildings. The date of the revaluation was 31 December
2014 (2013: 31 December 2013). Details of valuation techniques and inputs used are
disclosed in Note 39.

FRS 16.77.a-b

If the freehold land and buildings were measured using the cost model, the carrying
amounts would be as follows:

FRS 16.77.e

Group
2014

2013

$000

$000

9,560

8,336

2,730

3,048

Freehold land at 31 December:


- Cost and net carrying amount
Buildings at 31 December:
- Cost
- Accumulated depreciation and impairment
- Net carrying amount

(150)
2,580

(200)
2,848

XYZ Holdings (Singapore) Limited | 94

SGX 1207.11

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
13. Property, plant and equipment (continued)
Assets held under finance leases
During the financial year, the Group acquired plant and equipment and furniture and
fixtures with an aggregate cost of $1,028,000 (2013: $95,000) by means of finance
leases. The cash outflow on acquisition of property, plant and equipment amounted to
$7,426,000 (2013: $4,358,000).
The carrying amount of plant and equipment and furniture and fixtures held under finance
leases at the end of the reporting period were $815,000 (2013: $65,000) and $85,000
(2013: $30,000) respectively.

FRS 7.43

FRS 17.31.a

FRS 16.74.a

Leased assets are pledged as security for the related finance lease liabilities.
Assets pledged as security
In addition to assets held under finance leases, the Groups freehold land and buildings
with a carrying amount of $7,822,000 (2013: $6,833,000) are mortgaged to secure the
Groups bank loans (Note 30).

FRS 16.74.a

Impairment of assets
During the financial year, a subsidiary of the Group within the electronic components
segment, XYZ Vietnam Ltd carried out a review of the recoverable amount of its
production equipment because a particular line of specialised electronic component
products had been persistently making losses. An impairment loss of $500,000 (2013:
nil), representing the write-down of these equipment to the recoverable amount was
recognised in Other expenses (Note 8) line item of profit or loss for the financial year
ended 31 December 2014. The recoverable amount of the production equipment was
based on its value in use and the pre-tax discount rate used was 12.4% (2013: 11.2%).

FRS 36.126.a,
130.a-c, e and g

Commentary:
Changes in estimates

In this illustration, there was no change in the useful life of property, plant and equipment of
the Group. Where applicable, an entity should disclose the nature and effect of a change in
accounting estimate that has an effect in the current or subsequent periods.

FRS 8.39
FRS 16.76

Illustrative note disclosure for change in estimated useful life of equipment:


During the financial year, the Group conducted an operational efficiency review on its
production lines. The Group revised the estimated useful lives of some automation
machines from five to eight years, after refurbishments that will enable these automation
machines to remain in production for an additional three years. The revision in estimate
has been applied on a prospective basis from 1 January 2013. The effect of the above
revision on depreciation charge in current and future periods are as follows:

Decrease in depreciation expense

2014
$000

2015
$000

2016
$000

Later
$000

(xxx)

(xxx)

(xxx)

(xxx)

Entities are also encouraged to disclose the following information, which users of financial
statements may find relevant to their needs:
- The carrying amount of temporarily idle property, plant and equipment;
- The gross carrying amount of any fully depreciated property, plant and equipment that is still
in use;
- The carrying amount of property, plant and equipment retired from active use and not
classified as held for sale in accordance with FRS 105; and
- When the cost model is used, the fair value of property, plant and equipment when this is
materially different from the carrying amount.

XYZ Holdings (Singapore) Limited | 95

FRS 16.79

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

13. Property, plant and equipment (continued)


Commentary (continued):

If the amount of borrowing costs eligible for capitalisation have been determined by applying a
capitalisation rate to the expenditures on a qualifying asset because funds used for the
purpose of obtaining the qualifying asset are borrowed generally (rather than specifically), the
capitalisation rate should be the weighted average of the borrowing costs applicable to the
borrowings of the entity that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs
capitalised during a period should not exceed the amount of borrowing costs incurred during
that period.

FRS 23.14 and


26.b

14. Investment properties


Group
2014

2013

$000

$000

3,955

3,825

Balance sheet:

FRS 40.76

At 1 January
Additions (subsequent expenditure)

500

Net gains from fair value adjustments recognised in profit or loss

489

129

FRS 40.76.d

FRS 40.76.f
FRS 40.76.e

Transfer to property, plant and equipment (Note 13)

(300)

Exchange differences
At 31 December

4,645

3,955

324

246

FRS 40.76a

Income statement:
Rental income from investment properties:
- Minimum lease payments
- Contingent rent based on tenants turnover

21

45

345

291

- Rental generating properties

(60)

(55)

FRS 40.75.f.ii

- Non-rental generating properties

(12)

(10)

FRS 40.75.f.iii

(72)

(65)

FRS 17.56.b
FRS 40.75.f.i

Direct operating expenses (including repairs and maintenance) arising


from:

The Group has no restrictions on the realisability of its investment properties and no
contractual obligations to purchase, construct or develop investment property or for
repairs, maintenance or enhancements.

FRS 40.75.g
FRS 40.75.h

Valuation of investment properties


Investment properties are stated at fair value, which has been determined based on
valuations performed as at 31 December 2014 and 31 December 2013. The valuations
were performed by Chartered Surveyors Pte Ltd, an independent valuer with a
recognised and relevant professional qualification and with recent experience in the
location and category of the properties being valued. Details of valuation techniques and
inputs used are disclosed in Note 39.

XYZ Holdings (Singapore) Limited | 96

FRS 40.75.a
FRS 40.75.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
14. Investment properties (continued)
Properties pledged as security
Certain investment properties amounting to $2,145,000 (2013: $2,055,000) are
mortgaged to secure bank loans (Note 30).

FRS 40.75.g

Transfer to property, plant and equipment


On 30 December 2014, the Group transferred one condominium unit that was held as
investment property to owner-occupied property. On that date, the Group has
commenced using the condominium unit for employee accommodation purposes.
The investment properties held by the Group as at 31 December are as follows:
Description and Location

Existing Use

Tenure

Unexpired
lease term

8-storey shopping podium, 3 basements and twin 27-storey


office towers along South Park, Singapore

Shops

Leasehold

983 years

Five condominium units, River Valley, Singapore

Residential

Leasehold

92 years

18-storey office tower along Xujing Road, Qingpu District,


Shanghai

Offices

Leasehold

58 years

SGX 1207.11.b

Commentary
Contractual obligations relating to investment properties

Contractual obligations to purchase, construct or develop investment property or for repairs,


maintenance or enhancements should be disclosed, if applicable.

FRS 40.75.h

Additions to investment properties

FRS 40.76.a and


Additions to investment properties resulting from: i) acquisitions of properties; ii) subsequent
b
expenditure recognised in the carrying amount of an asset; and iii) acquisitions through business
combinations should be disclosed separately.

Valuation of investment properties

When a valuation obtained for investment property is adjusted significantly for the purpose of
the financial statements, for example to avoid double-counting of assets or liabilities that are
recognised as separate assets and liabilities, the entity should disclose a reconciliation between
the valuation obtained and the adjusted valuation included in the financial statements, showing
separately the aggregate amount of any recognised lease obligations that have been added
back, and any other significant adjustments.

If there has been no such valuation performed by an independent valuer, that fact should be
disclosed.

FRS 40.77

FRS 40.75.e

List of properties held for investment

This disclosure is only required for entities listed on the SGX-ST, where the aggregate value for
all properties for development, sale or for investment purposes held by the entity represent
more than 15% of the value of the consolidated net tangible assets, or contribute more than
15% of the consolidated pre-tax operating profit. This disclosure may be included in other parts
of the entitys annual report instead.

XYZ Holdings (Singapore) Limited | 97

SGX 1207.11

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
15. Intangible assets

Group
Deferred
Development
Costs

Goodwill

Brands

Club
Membership

$000

$000

$000

$000

$000

245

240

100

984

1,569

Total

FRS 1.77

Cost:
At 1 January 2013
Additions internal development

200

200

Exchange differences

12

22

250

245

100

1,196

1,791

At 31 December 2013 and 1 January 2014

FRS 38.118.c
FRS 38.118.e.i
FRS 38.118.e.vii
FRS 38.118.c

Additions:
- Internal development

200

200

FRS 38.118.e.i

- Acquisition of a subsidiary (Note 17)

772

500

1,272

FRS 38.118.e.i

Attributable to discontinued operation

(250)

(250)

FRS 38.118.e.ii

Exchange differences

15

14

36

At 31 December 2014

1,037

752

100

1,160

3,049

FRS 38.118.c

FRS 38.118.e.vii

Accumulated amortisation and impairment:


At 1 January 2013

70

131

201

FRS 38.118.c

Amortisation

10

242

252

FRS 38.118.e.vi

Exchange differences

FRS 38.118.e.vii

At 31 December 2013 and 1 January 2014

80

378

458

FRS 38.118.c

Amortisation

10

210

220

Impairment loss

200

200

FRS 38.118.e.vi
FRS 36.130.b
FRS 38.118.e.iv

Attributable to discontinued operation

(250)

(250)

FRS 38.118.e.ii

Exchange differences

At 31 December 2014

90

540

630

At 31 December 2013

250

245

20

818

1,333

At 31 December 2014

1,037

752

10

620

2,419

FRS 38.118.e.vii
FRS 38.118.c

Net carrying amount:

FRS 38.122.b

Brands and deferred development costs


Brands relate to the Gao-Feng, You-Yue and MSAX-Q (acquired in 2013) brand
names for the Groups specialised electronic components that were acquired in business
combinations. As explained in Note 2.9(b)(i), the useful life of these brands is estimated to
be indefinite.
Deferred development costs relate to energy efficiency improvement projects for
analogue electronic components and have an average remaining amortisation period of
four years (2013: five years).
All research costs and development costs not eligible for capitalisation have been
expensed and are recognised in Research and development line item in profit or loss.

XYZ Holdings (Singapore) Limited | 98

FRS 38.122.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
15. Intangible assets (continued)
Amortisation expense
The amortisation of deferred development costs and club membership is included in the
Research and development and Administrative expenses line items in profit of loss
respectively.

FRS 38.118.d

Impairment testing of goodwill and brands


Goodwill acquired through business combinations and brands have been allocated to two
cash-generating units (CGU), which are also the reportable operating segments, for
impairment testing as follows:

FRS 36.80.b

- Electronic components segment


- Property segment
The carrying amounts of goodwill and brands allocated to each CGU are as follows:
Electronic
components
segment

Property
segment

Total

2014

2013

2014

2013

2014

2013

$000

$000

$000

$000

$000

$000

Goodwill

782

255

250

1,037

250

FRS 36.134.a

Brands

752

245

752

245

FRS 36.134.b

The recoverable amounts of the CGUs have been determined based on value in use
calculations using cash flow projections from financial budgets approved by management
covering a five-year period. The pre-tax discount rate applied to the cash flow projections
and the forecasted growth rates used to extrapolate cash flow projections beyond the
five-year period are as follows:
Electronic
components segment

Growth rates
Pre-tax discount rates

FRS 36.130.e. 134.c


and d.iii

Property
segment

2014

2013

2014

2013

5.1%

4.8%

6.1%

5.5%

FRS 36.134.d.iv

11.3%

11.1%

12.3%

12.8%

FRS 36.134.d.v

Key assumptions used in the value in use calculations


The calculations of value in use for both the CGUs are most sensitive to the following
assumptions:
Budgeted gross margins Gross margins are based on average values achieved in the
three years preceding the start of the budget period. These are increased over the budget
period for anticipated efficiency improvements. An increase of 1.5% per annum was
applied for the electronic components segment and 2.2% for the property segment.
Growth rates The forecasted growth rates are based on published industry research and
do not exceed the long-term average growth rate for the industries relevant to the CGUs.

XYZ Holdings (Singapore) Limited | 99

FRS 36.134.d.i

FRS 36.134.d.i and ii

FRS 36.134.d.i,ii and


iv

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
15. Intangible assets (continued)
Impairment testing of goodwill and brands (continued)
Key assumptions used in the value in use calculations (continued)
Pre-tax discount rates Discount rates represent the current market assessment of the
risks specific to each CGU, regarding the time value of money and individual risks of the
underlying assets which have not been incorporated in the cash flow estimates. The
discount rate calculation is based on the specific circumstances of the Group and its
operating segments and derived from its weighted average cost of capital (WACC). The
WACC takes into account both debt and equity. The cost of equity is derived from the
expected return on investment by the Groups investors. The cost of debt is based on the
interest bearing borrowings the Group is obliged to service. Segmentspecific risk is
incorporated by applying individual beta factors. The beta factors are evaluated annually
based on publicly available market data.

FRS 36.134.d.i and ii

Market share assumptions These assumptions are important because, as well as using
industry data for growth rates (as noted above), management assesses how the CGUs
position, relative to its competitors, might change over the budget period. Management
expects the Groups share of the electronics and property markets to be stable over the
budget period.

FRS 36.134.d.i and ii

Sensitivity to changes in assumptions


With regards to the assessment of value in use for the property segment, management
believes that no reasonably possible changes in any of the above key assumptions would
cause the carrying value of the unit to materiality exceed its recoverable amount.
For the electronic components segment, the estimated recoverable amount exceeds its
carrying amount by approximately $200,000 (2013: $150,000) and, consequently, any
adverse change in a key assumption would result in a further impairment loss. The
implication of the key assumption for the recoverable amount is discussed below:
Growth rates Management recognises that the speed of technological change and the
possibility of new entrance can have a significant impact on growth rate assumptions. The
effect of new entrance is not expected to have an adverse impact on the forecasts, but
could yield a reasonably possible alternative to the estimated long-term growth rate of
5.1% (2013: 4.8%). A reduction of 0.8% (2013: 0.9%) in the long-term growth rate would
result in a further impairment.

FRS 36.134.f.i

FRS 36.134.f.ii
FRS 36.134.f.iii

Impairment loss recognised


During the financial year, an impairment loss was recognised to write-down the carrying
amount of deferred development costs attributable to the fire prevention equipment
segment that has been classified as discontinued operation (Note 11). The impairment
loss of $200,000 (2013: nil) has been recognised in profit or loss under the line item loss
from discontinued operation, net of tax.

XYZ Holdings (Singapore) Limited | 100

FRS 36.126.a,
FRS 36.130.a-c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
15. Intangible assets (continued)
Commentary:
Description of intangible assets

The disclosure of a description, the carrying amount and remaining amortisation period are
required for any individual intangible asset that is material to the entitys financial
statements.

FRS 38.122.b

If some or all of the carrying amount of goodwill or intangible assets with indefinite useful
lives is allocated across multiple CGUs (groups of units), and the amount so allocated to each
unit (group of units) is not significant in comparison with the entitys total carrying amount of
goodwill or intangible assets with indefinite useful lives, that fact shall be disclosed, together
with the aggregate carrying amount of goodwill or intangible assets with indefinite useful
lives allocated to those CGUs (group of units). In addition, if the recoverable amounts of any
of those CGUs (group of units) are based on the same key assumption(s) and the aggregate
carrying amount of goodwill or intangible assets with indefinite useful lives allocated to them
is significant in comparison with the entitys total carrying amount of goodwill or intangible
assets with indefinite useful lives, an entity shall disclose that fact, together with:

FRS 36.135

(a)

The aggregate carrying amount of goodwill allocated to those units (groups of units)

(b)

The aggregate carrying amount of intangible assets with indefinite useful lives allocated
to those units (groups of units)

(c)

A description of the key assumption(s)

(d)

A description of managements approach to determining the value(s) assigned to the


key assumption(s), whether those value(s) reflect past experience or, if appropriate,
are consistent with external sources of information, and, if not, how and why they differ
from past experience or external sources if information.

(e)

If a reasonably possible change in the key assumption(s) would cause the aggregate of
the units (groups of units) carrying amounts to exceed the aggregate of their
recoverable amounts:
(i)

The amount by which the aggregate of the units (group of units) recoverable
amounts exceeds the aggregate of their carrying amounts.

(ii)

The value(s) assigned to the key assumption(s).

(iii)

The amount by which the value(s) assigned to the key assumption(s) must change,
after incorporating any consequential effects of the change on the other variables
used to measure recoverable amount, in order for the aggregate of the units
(groups of units) recoverable amounts to be equal to the aggregate of their
carrying amounts.

Recoverable amount of CGU containing goodwill or intangible assets with indefinite lives
determined based on fair value less costs to sell

In this illustration, the recoverable amounts of such CGUs were determined based on value in
use calculations. If an entity uses fair value less costs of disposal to measure the recoverable
amount of CGU and the fair value less costs of disposal is not determined using a quoted
price, the entity should disclose the valuation technique(s) and other information including:
the key assumption used; a description of managements approach to each key assumption
(whether those values reflect past experience or are consistent with external information,
and if not, how and why they differ); the level of fair value hierarchy and the reason(s) for
changing valuation techniques, if there is any change, are required to be provided in the
financial statements.
Illustrative note disclosure:
The recoverable amounts of CGU A, CGU B and CGU C are determined based on fair value
less costs of disposal of the CGUs. To calculate these values, an appropriate multiple was
applied to the maintainable operating earnings of the CGUs. The fair value less costs of
disposal of the CGUs are determined by applying an appropriate market multiple to its
earnings before interest, tax, depreciation and amortisation (EBITDA), which
management believes is sustainable in view of the current and anticipated business
conditions.
XYZ Holdings (Singapore) Limited | 101

FRS 36.134.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
15. Intangible assets (continued)
Commentary (continued):
Recoverable amount of CGU containing goodwill or intangible assets with indefinite lives
determined based on fair value less costs to sell (continued)

Illustrative note disclosure (continued):


The fair value less costs of disposal of CGU A, CGU B and CGU C are estimated based on
current EBITDAs and market multiple of X.XX. The market multiples are calculated based
on the median of comparable companies indications, after adjustments for differences in
risks and growth. The control premium of XX% was calculated based on the investment
climate, industry dynamic and recent comparable transactions. The discount rate of XX%
has been derived based on studies of liquidity discounts and adjusted for the size of the
Company. The fair value derived is categorises under Level 3 of the fair value hierarchy.
If fair value less costs to sell is determined using discounted cash flow projections, the
following information shall also be disclosed:

The period over which management has projected cash flows

The growth rate used to extrapolate cash flow projections

The discount rate(s) applied to the cash flow projections

Provided specified criteria are met, if the most recent detailed calculation made in a
preceding period of the recoverable amount of a CGU (group of units) is used in the
impairment test for that unit (group of units) in the current period, the disclosures required
in the financial statements by paragraphs 134 and 135 relate to the carried forward
calculation of recoverable amount.

FRS 36.136

Forecasted growth rates used to extrapolate cash flow projections beyond the five-year period

The entity is required to disclose the justification if the growth rate used to extrapolate cash
flows projections beyond the period covered by the most recent budgets/forecasts exceeds
the long-term average growth rate for the products, industries, or countries in which the
entity operates.

FRS 36.134.d.iv

Illustrative note disclosure:


The growth rate used to extrapolate the cash flows of the electronics component
segment exceeds the average growth rate for the industry in which the electronics
segment operates by three quarters of a percentage point. Management of the
electronics component segment believes this growth rate is justified based on the
acquisition of XXX Limited that has resulted in the control of an industry patent,
preventing other entities from manufacturing a specialised product for a period of 10
years with the option for renewal after the 10 years period have expired.
Sensitivity to changes in assumptions

If a reasonably possible change in any key assumptions used by management would cause
the carrying values of CGUs to materially exceed the recoverable amounts, an entity should
disclose
-

the amount by which the CGUs recoverable amount exceeds its carrying amount,

the value assigned to the key assumption,

the amount by which the value assigned to the key assumption must change, after
incorporating any consequential effects of that change on the other variables used to
measure recoverable amount, in order for the CGUs recoverable amount to be equal to
its carrying amount.

XYZ Holdings (Singapore) Limited | 102

FRS 36.134.f

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
16. Land use rights
Group
2014

2013

$000

$000

6,500

6,360

Cost:
At 1 January
Exchange differences

220

140

6,720

6,500

767

630

132

130

10

909

767

5,811

5,733

- Not later than one year

137

132

- Later than one year but not later than five years

548

528

5,126

5,073

At 31 December
Accumulated amortisation:
At 1 January
Amortisation for the year
Exchange differences
At 31 December
Net carrying amount
Amount to be amortised:

- Later than five years

The Group has land use rights over two plots of state-owned land in Peoples Republic of
China (PRC) where the Groups PRC manufacturing and storage facilities reside. The land
use rights are not transferable and have a remaining tenure of 43 years (2013: 44 years).

FRS 17.35.a

FRS 17.35.d

17. Investment in subsidiaries


Company

Shares, at cost
Discount on loans to subsidiaries
Issuance of shares for acquisition of subsidiary
Impairment losses

2014

2013

$000

$000

11,132

11,042

540

540

1,475

(1,000)

(1,000)

12,147

10,582

XYZ Holdings (Singapore) Limited | 103

FRS 27.10.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

17. Investment in subsidiaries (continued)


a.

Composition of the Group


The Group has the following investment in subsidiaries.

Name

Principal
place of
business

Principal activities

Proportion (%)
of ownership
interest
2014

2013

FRS 27.43.b
FRS 24.12

Held by the Company:


XYZ Technologies Pte Ltd i

Singapore

Manufacture of electronic
components

100

100

XYZ Investment Pte Ltd i

Singapore

Investment holding

100

100

XYZ Land Pte Ltd i

Singapore

Investment holding

100

100

Good Fire Prevention Pte


Ltd i

Singapore

Installation of fire
prevention equipment
and provision of
installation services

100

100

Held through XYZ Technologies Pte Ltd:


XYZ China Co. Ltd ii

Peoples
Republic
of China

Manufacture of electronic
components

75

75

XYZ Vietnam Ltd ii

Vietnam

Manufacture of electronic
components

100

80

MSAX Sdn Bhd ii

Malaysia

Manufacture of electronic
components

80

-*

XYZ Developers Pte Ltd i

Singapore

Property development

100

100

XYZ Constructors Sdn Bhd ii

Malaysia

Property development

100

100

Lion Land Pte Ltd i

Singapore

Property investment

100

100

Held through XYZ Land Pte Ltd:

SGX 717

Audited by Ernst & Young LLP, Singapore

ii

Audited by member firms of EY Global in the respective countries

* The Group holds 25% ownership interest in MSAX Sdn Bhd in 2013 and account for it as an associate
(Note 19).

XYZ Holdings (Singapore) Limited | 104

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
b.

Interest in subsidiaries with material non-controlling interest (NCI)

FRS 112.12

The Group has the following subsidiaries that have NCI that are material to the
Group.

FRS 112.B10.a

Name of
Subsidiary

Principal
place of
business

Proportion of
ownership
interest held
by noncontrolling
interest

Profit/(Loss)
allocated to
NCI during
the reporting
period
$000

Accumulated
NCI at the
end of
reporting
period
$000

Dividends
paid to
NCI

25%

120

1,220

100

20%

40

400

30

25%

270

1,200

200

$000

31 December 2014:
XYZ China
Co. Ltd
MSAX Sdn
Bhd

Peoples
Republic of
China
Malaysia

31 December 2013:
XYZ China
Co. Ltd

Peoples
Republic of
China

Significant restrictions:
The nature and extent of significant restrictions on the Groups ability to use or
access assets and settle liabilities of subsidiaries with material non-controlling
interests are:

FRS 112.10.b.i
FRS 112.13

Cash and cash equivalents of $49,000 held in Peoples Republic of China are subject
to local exchange control regulations. These regulations places restriction on the
amount of currency being exported other than through dividends.
c.

Summarised financial information about subsidiaries with material NCI


Summarised financial information including goodwill on acquisition and consolidation
adjustments but before intercompany eliminations of subsidiaries with material noncontrolling interests are as follows:
Summarised balance sheets
XYZ China Co Ltd
As at 31
December
2014
$000
Current
Assets
Liabilities
Net current assets
Non-current
Assets
Liabilities
Net non-current assets
Net assets

MSAX Sdn Bhd

As at 31
December
2013
$000

As at 31
December
2014
$000

As at 31
December
2013
$000

5,000
(3,022)

4,800
(3,000)

2,082
(582)

2,652
(1,302)

1,978

1,800

1,500

1,350

522
(198)

830
(366)

886
(386)

720
(120)

324

464

500

600

2,302

2,264

2,000

1,950

XYZ Holdings (Singapore) Limited | 105

FRS 112.12.g
FRS 112.B10.6

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
c.

Summarised financial information about subsidiary with material NCI


Summarised statement of comprehensive income
XYZ China Co Ltd
2014
$000
Revenue

MSAX Sdn Bhd

2013
$000

867

953

2014
$000

2013
$000

554

482

Profit before income tax

260

286

166

145

Income tax expense

(44)

(49)

(28)

(24)

Profit after tax continuing


operations

216

237

138

121

Other comprehensive income

10

(8)

62

(71)

Total comprehensive income

226

229

200

50

Other summarised information


XYZ China Co Ltd
2014
$000

MSAX Sdn Bhd

2013
$000

2014
$000

2013
$000

Net cash flows from


operations

186

235

130

42

Acquisition of significant
Property, Plant and
Equipment

(68)

(778)

(229)

(553)

Commentary:

An entity shall disclose information that enables users of its consolidated financial statements
(a) to understand:
i.

the composition of the group; and

ii. the interest that non-controlling interests have in the groups activities and cash flows;
and
(b) to evaluate:
i.

the nature and extent of significant restrictions on its ability to access or use assets,
and settle liabilities, of the group

ii. the nature of, and changes in, the risks associated with its interests in consolidated
structured entities
iii. the consequences of changes in its ownership interest in a subsidiary that do not result
in a loss of control; and

iv. the consequences of losing control of a subsidiary during the reporting period.

XYZ Holdings (Singapore) Limited | 106

FRS 112.10

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
Commentary (continued):

An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy
the information needs of users, how much emphasis it places on different aspects of the
requirements and how it aggregates the information. It is necessary to strike a balance
between burdening financial statements with excessive detail that may not assist users of
financial statements and obscuring information as a result of too much aggregation.

FRS 112.B2

In this illustration, it is assumed that there was no reversal of impairment loss on investment in
subsidiaries. Where applicable, an entity should disclose the events and circumstances that led
to the reversal of such impairment loss.

FRS 36.130.a

An entity shall disclose the country of incorporation if different from the principal place of
business of the subsidiary.

FRS 112.12.b
FRS 27.17.b.ii

An entity shall disclose the proportion of voting rights if different from the proportion of
ownership interests held.

FRS 112.12.d
FRS 27.17.b.iii

An entity shall disclose:

FRS 112.13

(a) Significant restrictions (e.g. statutory, contractual and regulatory restrictions) on its
ability to access or use the assets and settle the liabilities of the group, such as:
i.

those that restrict the ability of a parent or its subsidiaries to transfer cash or other
assets to (or from) other entities within the group.

ii. guarantee or other requirements that may restrict dividends and other capital
distributions being paid, or loans and advances being made or repaid, to (or from)
other entities within the group.
(b) The nature and extent to which protective rights of non-controlling interests can
significantly restrict the entitys ability to access or use the assets and settle the liabilities
of the group (such as when a parent is obliged to settle liabilities of a subsidiary before
settling its own liabilities, or approval of non-controlling interests is required either to
access the assets or to settle the liabilities of a subsidiary).
(c) The carrying amounts in the consolidated financial statements of the assets and liabilities
to which those restrictions apply.

The summarised financial information presented shall be the amounts before inter-company
eliminations.

XYZ Holdings (Singapore) Limited | 107

FRS 112.B11

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
Commentary (continued):
Nature of the risks associated with an entitys interests in consolidated structured entities
In this illustration, the Group does not consolidate any structured entity. If the Group provides
financial support to consolidated structured entities, please refer to the following disclosure
requirements:
An entity shall disclose the terms of any contractual arrangements that could require the
parent or its subsidiaries to provide financial support to a consolidated structured entity,
including events or circumstances that could expose the reporting entity to a loss (e.g. liquidity
arrangements or credit rating triggers associated with obligations to purchase assets of the
structured entity or provide financial support).

FRS 112.14

If during the reporting period a parent or any of its subsidiaries has, without having a
contractual obligation to do so, provided financial or other support to a consolidated structured
entity (e.g. purchasing assets of or instruments issued by the structured entity), the entity shall
disclose:

FRS 112.15

(a) the type and amount of support provided, including situations in which the parents or its
subsidiaries assisted the structured entity in obtaining financial support; and
(b) the reasons for providing the support.
If during the reporting period a parent or any of its subsidiaries has, without having a
contractual obligation to do so, provided financial or other support to a previously
unconsolidated structured entity and that provision of support resulted in the entity controlling
the structured entity, the entity shall disclose an explanation of the relevant factors in reaching
that decision.

FRS 112.16

An entity shall disclose any current intentions to provide financial or other support to a
consolidated structured entity, including intentions to assist the structured entity in obtaining
financial support.

FRS 112.17

Investment entities
In this illustration, the Company does not meet the definition of an investment entity and
therefore does not apply the exception to consolidation under FRS 110. When a parent
determines that it is an investment entity in accordance with FRS 110, the following disclosures
are required.
(a) Information about significant judgements and assumptions it has made in determining that
it is an investment entity. If the investment entity does not have one or more of the typical
characteristics of an investment entity, it shall disclose its reasons for concluding that it is
nevertheless an investment entity.

FRS 112.9A

(b) When an entity becomes, or ceases to be, an investment entity, it shall disclose the change
of investment entity status and the reasons for the change. In addition, an entity that
becomes an investment entity shall disclose the effect of the change of status on the
financial statements for the period presented including:

FRS 112.9B

- The total fair value, as of the date of change of status, of the subsidiaries that cease to
be consolidated
- The total gain or loss, if any, calculated in accordance with paragraph B101 of FRS 110
- The line item(s) in profit or loss in which the gain or loss is recognised (if not presented
separately)

XYZ Holdings (Singapore) Limited | 108

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
Commentary (continued):
Investment entities (continued)
(c) For each unconsolidated subsidiary, an investment entity shall disclose:

FRS 112.19B

- the subsidiarys name;


- the principal place of business (and country of incorporation if different from the
principal place of business) of the subsidiary; and
- the proportion of ownership interest held by the investment entity and, if different, the
proportion of voting rights held.
(d) If an investment entity is the parent of another investment entity, the parent shall also
provide the disclosures in item (c) above for investments that are controlled by its
investment entity subsidiary. The disclosure may be provided by including, in the financial
statements of the parent, the financial statements of the subsidiary (subsidiaries) that
contain the above information.
(e) The nature and extent of any significant restrictions (e.g. resulting from borrowing
arrangements, regulatory requirements or contractual arrangements) on the ability of an
unconsolidated subsidiary to transfer funds to the investment entity in the form of cash
dividends or to repay loans and advances made to the unconsolidated subsidiary by the
investment entity
(f)

Any current commitments or intentions to provide financial or other support to an


unconsolidated subsidiary, including commitments or intentions to assist the subsidiary in
obtaining financial support.

(g) If, during the reporting period, an investment entity or any of its subsidiaries has, or
without having a contractual obligation to do so, provided financial or other support to an
unconsolidated subsidiary (e.g. purchasing assets of, or instruments issued by, the
subsidiary or assisting the subsidiary in obtaining financial support), the entity shall
disclose:
-

The type and amount of support provided to each unconsolidated subsidiary

The reasons for providing the support

(h) The terms of any contractual arrangements that could require the entity or its
unconsolidated, controlled, structured entity, including events or circumstances that could
expose the reporting entity to a loss (e.g. liquidity arrangements or credit triggers
associated with obligations to purchase assets of the structured entity or to provide
financial support).
(i)

If during the reporting period an investment entity or any of its unconsolidated subsidiaries
has, without having a contractual obligation to do so, provided financial or other support
to an unconsolidated, structured entity that the investment entity did not control, and if
that provision of support resulted in the investment entity controlling the structured
entity, the investment entity shall disclose an explanation of the relevant factors in
reaching the decision to provide that support.

XYZ Holdings (Singapore) Limited | 109

FRS 112.19C

FRS 112.19D.a

FRS 112.19D.b

FRS 112.19E

FRS 112.19F

FRS 112.19G

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
d.

Acquisition of subsidiary
On 18 October 2014 (the acquisition date), the Groups subsidiary company, XYZ
Technologies Pte Ltd (XYZ Technologies) acquired an additional 55% equity interest
in its 25% owned associate, MSAX Sdn Bhd (MSAX), a manufacturer of electronic
components in Malaysia. Upon the acquisition, MSAX became a subsidiary of the
Group.

FRS 103.B64.a-c

The Group has acquired MSAX in order to strengthen its position as a leading
manufacturer of electronic components in the ASEAN region and to enlarge the
range of products it can offer to its clients. The acqusition is also expected to reduce
costs through economies of scale.

FRS 103.B64.d

The Group has elected to measure the non-contolling interest at the non-controlling
interests proportionate share of MSAXs net identifiable assets.
The fair value of the identifiable assets and liabilities of MSAX as at the acquisition
date were:
Fair value
recognised on
acquisition

FRS 103.B64.i

$000
1,269

Property, plant and equipment


Brand

500

Trade and other receivables

1,089

Inventories

752

Cash and cash equivalents

417
4,027

Trade and other payables

(1,038)

Provision for maintenance warranties

(50)

Deferred tax liability

(48)

Income tax payable

(100)
(1,236)

Total identifiable net assets at fair value


Non-controlling interest measured at the non-controlling interests
proportionate share of MSAXs net idenfiable assets
Goodwill arising from acquisition

2,791
(558)

FRS 103.B64.o

772

FRS 103.B64.k

3,005
Consideration transferred for the acquisition of MSAX
Cash paid
Equity instruments issued (1,305,310 ordinary shares of XYZ Holdings
(Singapore) Limited)
Deferred cash settlement
Contingent consideration recognised as at acquisition date
Total consideration transferred
Fair value of equity interest in MSAX held by the Group immediately
before the acquisition

200

FRS 103.B64.f.i

1,475

FRS 103.B64.f.iv

200

FRS 103.B64.f.iii

450

FRS 103.B64.f.iii,

2,325

FRS 103.B64.g.i
FRS 103.B64.f

680

FRS 103.B64.p.i

3,005

XYZ Holdings (Singapore) Limited | 110

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

17. Investment in subsidiaries (continued)


d.

Acquisition of subsidiary (continued)

$000
Effect of the acquisition of MSAX on cash flows
Total consideration for 55% equity interest acquired

2,325

FRS 7.40.a

Less: non-cash consideration

(2,125)

FRS 7.43

Consideration settled in cash

200

FRS 7.40.b

Less: Cash and cash equivalents of subsidiay acquired

(417)

FRS 7.40.c

Net cash inflow on acquisition

217

FRS 7.42

Equity instruments issued as part of consideration transferred


In connection with the acquisition of additional 55% equity interest in MSAX, XYZ
Holdings (Singapore) Limited issued 1,305,310 ordinary shares with a fair value of
$1.13 each. The fair value of these shares is the published price of the shares at the
acquisition date.
The attributable cost of the issuance of the shares as consideration of $50,000 have
been recognised directly in equity as a deduction from share capital.

FRS 103.B64.f.iv

FRS 103.B64.l and m

Contingent consideration arrangement


As part of the purchase agreement with the previous owner of MSAX, a contingent
consideration has been agreed. Additional cash payments shall be payable to the
previous owner of MSAX of:

FRS 103.B64.g.ii

a)

$385,000, if the entity generates $1,000,000 profit before tax for a period of
12 months after the acquisition date, or

FRS 103.B64.g.iii

b)

$705,000 if the entity generates $1,500,000 profit before tax for a period of
12 months after the acquisition date.

As at the acquisition date, the fair value of the contingent consideration was
estimated at $450,000.

FRS 103.B64.g.i

As of 31 December 2014, the key performance indicators of MSAX show clearly that
target (a) will be achieved and the achievement of target (b) is probable due to a
significant expansion of the business and synergies implemented. Accordingly, the
fair value of the contingent consideration has been adjusted to reflect this
development and such change has been recognised through profit or loss.
The fair value of the contingent consideration as at 31 December 2014 has been
increased by $235,000 to $685,000. The fair value of the contingent consideration
was calculated by applying the income approach using the probability-weighted
payout approach and at a discount rate of 8%. This fair value adjustment of
contingent consideration is recognised in the Other expenses line item in the
Groups profit or loss for the year ended 31 December 2014.

FRS 103.58
FRS 103.B67.b

Transaction costs
Transaction costs related to the acquisition of $300,000 have been recognised in the
Administrative expenses line item in the Groups profit or loss for the year ended
31 December 2014.

XYZ Holdings (Singapore) Limited | 111

FRS 103.B64.l and m

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
d.

Acquisition of subsidiary (continued)


Gain on remeasuring previously held equity interest in MSAX to fair value at
acquisition date
The Group recognised a gain of $140,000 as a result of measuring at fair value its
25% equity interest in MSAX held before the business combination. The gain is
included in the Other income line item in the Groups profit or loss for the year
ended 31 December 2014.

FRS 103.B64.p.ii

Trade and other receivables acquired


Trade and other receivables acquired comprise of trade receivables and bills of
exchange and promissory notes with fair values of $600,000 and $489,000,
respectively. Their gross amounts are $655,000 and $489,000, respectively. At the
acquisition date, $55,000 of the contractual cash flows pertaining to trade
receivables are not expected to be collected. It is expected that the full contractual
amount of the bills of exchange and promissory notes can be collected.

FRS 103.B64.h

Goodwill arising from acquisition


The goodwill of $772,000 comprises the value of strengenthing the Groups market
position in the ASEAN region, improved resilience to sector specific volatilities, and
cost reduction syngeries expected to arise from the acquisition. It also includes the
value of a customer list, which has not been recognised separately. Goodwill is
allocated entirely to the electronic components segment. Due to the contractual
terms imposed on the acquisition, the customer list is not separable and therefore
does not meet the criteria for recognition as an intangible asset under FRS 38. None
of the goodwill recognised is expected to be deductible for income tax purposes.

FRS 103.B64.e
FRS 103.B64.k

Impact of the acquisition on profit or loss


From the acquisition date, MSAX has contributed $8,000,000 of revenue and
$301,000 to the Groups profit for the year. If the business combination had taken
place at the beginning of the year, the revenue from continuing operations would
have been $144,720,000 and the Groups profit from continuing operations, net of
tax would have been $5,801,000.

FRS 103.B64.q.i
FRS 103.B64.q.ii

Provisional accounting of the acquisition of MSAX


A brand has been identified as an intangible asset arising from this acquisition. The
Group has engaged an independent valuer to determine the fair value of the brand.
As at 31 December 2014, the fair value of the brand amounting to $500,000 has
been determined on a provisional basis as the final results of the independent
valuation have not been received by the date the financial statements was authorised
for issue. Goodwill arising from this acquisition, the carrying amount of the brand,
deferred tax liability, and amortisation of the brand will be adjusted accordingly on a
retrospective basis when the valuation of the brand is finalised.

XYZ Holdings (Singapore) Limited | 112

FRS 103.B67.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
e.

Acquisition of ownership interest in subsidiary, without loss of control


On 31 March 2014, the Groups subsidiary company, XYZ Technologies, acquired an
additional 20% equity interest in XYZ Vietnam Ltd (XYZ Vietnam) from its noncontrolling interests for a cash consideration of $800,000. As a result of this
acquisition, XYZ Vietnam became a wholly-owned subsidiary of XYZ Technologies.
The carrying value of the net assets of XYZ Vietnam at 31 March 2014 was
$3,250,000 and the carrying value of the additional interest acquired was
$650,000. The difference of $150,000 between the consideration and the carrying
value of the additonal interest acquired has been recognised as Premium paid on
acquisition of non-controlling interests within equity.
The following summarises the effect of the change in the Groups ownership interest
in XYZ Vietnam on the equity attributable to owners of the Company:

FRS 112.18

$000
Consideration paid for acqusition of non-controlling interests

800

Decrease in equity attributable to non-controlling interests

(650)

Decrease in equity attributable to owners of the Company

150

Commentary:
Acquisition of subsidiary

An entity shall also make disclosures of business combinations in accordance to FRS 103.B64
even if they were effected after the end of the reporting date but before the financial
statements are authorised for issue, unless the initial accounting for the business
combination is incomplete at the time the financial statements are authorised for issue. In
that situation, the entity shall describe which disclosures cannot be made and the reasons
why they cannot be made.

FRS 103.59.b and


B66

For individually immaterial business combinations occurring during the reporting period that
are material collectively, an entity shall disclose in aggregate the information required by FRS
103.B64.e-q.

FRS 103.B65

XYZ Holdings (Singapore) Limited | 113

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

17. Investment in subsidiaries (continued)


Commentary (continued):
Acquisition of subsidiary (continued)

An acquirer shall also disclose information that enables users of its financial statements to
evaluate the financial effects of adjustments recognised in the current reporting period that
relate to business combinations that occurred in the current period or previous reporting
periods.
Illustrative disclosure for adjustments to initial accounting for a business combination that
was determined provisionally in the previous reporting period:

FRS 103.61 and


B67

FRS 103.B67.a

The purchase price allocation of the acquisition of Acquiree Group (Acquiree) in the
financial year ended 31 December 2014 were provisional as the Group had sought an
independent valuation for the land and buildings owned by Acquiree. The results of this
valuation had not been received at the date the 2014 financial statements were
authorised for issue. The valuation of the land and buildings was received in April 2014
and showed that the fair value at the date of acquisition was $XXX, an increase of $XXX
compared to the provisional value.
The 2013 comparative information has been restated to reflect this adjustment. The
value of the land and buildings increased by $XXX, there was an increase in the deferred
tax liability of $XXX and an increase in non-controlling interest of $XXX. There was also a
corresponding reduction in goodwill of $XXX, to give total goodwill arising on the
acquisition of $XXX. The depreciation charge on the buildings from the acquisition date
to 31 December 2013 increased by $XXX.

In this illustration, no contingent liabilities are recognised in the business combination.


Illustrative note disclosure where an entity recognised contingent liabilities in a business
combination:
A contingent liability at a fair value of $XXX has been determined at the acquisition date
resulting from a claim for payment by a supplier whose shipment has been rejected and
payment has been refused by the Group due to deviations from the defined technical
specifications of the goods. The claim is subject to legal arbitration and is only expected
to be finalised in late 2015. As at the reporting date, the contingent liability has been
reassessed and is determined to be $XXX, which is based on the expected probable
outcome (see Note X on Contingent Liability). The charge has been recognised in profit or
loss.

XYZ Holdings (Singapore) Limited | 114

FRS 103.B64.j
FRS 103.56

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
Commentary (continued):

Please refer to commentary no. 7 of Note 2.4 Basis of consolidation and business
combinations.
In this illustration, the Group has elected to measure non-controlling interest arising from
acquisition of MSAX at the non-controlling interests proportionate share of MSAXs
identifiable net assets. The following is an illustrative disclosure when an entity chooses to
measure non-controlling interest arising in a business combination at fair value:
Fair value of non-controlling interest in Acquiree
The fair value of the non-controlling interest in Acquiree, an unlisted company, was
estimated by applying the income approach that is corroborated by market approach. The
fair value estimates are based on:

A discount rate range of XX% to XX%;

Terminal value, calculated based on the long term sustainable growth rate for the
industry ranging from XX% to XX%, which has been used to determine income for the
future years; and

Adjustments because of the lack of control and marketability that market participants
would consider when estimating the fair value of the non-controlling interest in
Acquiree.

If the acquisition results in a bargain purchase instead of goodwill recognised, the acquirer
shall disclose the amount of the gain recognised and the line item in the consolidated
statement of comprehensive income in which the gain is recognised, and a description of the
reasons why the transaction resulted in a gain.

FRS 103.B64.o.ii

FRS 103.B64.n

Disposal of ownership in interest in subsidiary, without loss of control


In this illustration, the Group does not dispose any ownership in interest in subsidiary, without
loss of control. The following provides illustrative disclosures if the Group disposes its
ownership of interest in subsidiary without loss of control.
On 13 June 2014, the Group disposed of a 5% equity interest in XYZ China Co. Ltd.
Following the disposal, the Group still controls XYZ China Co. Ltd., retaining 70% of the
ownership interests. The transaction has been accounted for as an equity transaction with
non-controlling interests, resulting in:
2014
Proceeds from sale of 5% ownership interest

$000
XXX

Net assets attributable to NCI

(XXX)

Increase in equity attributable to parent

XXX

Represented by:
Decrease in foreign currency translation reserve

(XXX)

Decrease in asset revaluation reserve

(XXX)

Other reserves
Increase in equity attributable to parent entity

XXX
XXX

XYZ Holdings (Singapore) Limited | 115

FRS 112.10.b.iii
FRS 112.18

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
17. Investment in subsidiaries (continued)
Commentary (continued):

Loss of control in subsidiary


In this illustration, there is no loss of control in subsidiary. Illustrative disclosures when the
Group losses control in its subsidiary
On 27 February 2014, the Group entered into a sale agreement to dispose of 85% of its
interest in its wholly-owned subsidiary, Sun Pte Ltd., at its carrying value. The disposal
consideration was fully settled in cash. The disposal was completed on 30 April 2013, on
which date control of Sun Pte Ltd. passed to the acquirer.

FRS 112.10.b.iv

FRS 7.40.d

The value of assets and liabilities of Sun Pte Ltd. recorded in the consolidated financial
statements as at 27 February 2014, and the effects of the disposal were:
2014
Property, plant and equipment
Trade and other receivables
Inventories
Cash and short-term deposits

$000
XXX
XXX
XXX
XXX

Trade and other payables


Income tax payable

XXX
(XXX)
(XXX)

Carrying value of net assets

(XXX)

Cash consideration
Cash and cash equivalents of the subsidiary

XXX
(XXX)

Net cash inflow on disposal of a subsidiary

XXX

Gain on disposal:
2014
$000
Cash received
Net assets derecognised
Fair value of retained interest
Cumulative exchange differences in respect of the net
assets of the subsidiary reclassified from equity on
loss of control of subsidiary
Gain on disposal

XXX
(XXX)
XXX

XXX
XXX

The gain or loss on disposal attributable to measuring the retained interest amounted to
$XXX was included in other income in profit or loss.

XYZ Holdings (Singapore) Limited | 116

FRS 112.19

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
18. Investment in joint venture
The Group has 50% (2013: 50%) interest in the ownership and voting rights in a joint
venture, XYZ-ABC JV Co. Ltd that is held through a subsidiary. This joint venture is
incorporated in Peoples Republic of China and is a strategic venture in the business or
property investment. The Group jointly controls the venture with other partner under the
contractual agreement and requires unanimous consent for all major decisions over the
relevant activities.

FRS 112.21
FRS 27.17.b

Summarised financial information in respect of XYZ-ABC JV Co. Ltd. based on its FRS
financial statements, and reconciliation with the carrying amount of the investment in the
consolidated financial statements are as follows:

FRS 112.21.b.ii
FRS 112.B12
FRS 112.B13

Summarised balance sheet


Group
2014

2013

$000

$000

Cash and cash equivalents

176

132

Trade receivables

542

808

Current assets

718

940

3,220

2,898

100

100

Non-current assets

3,320

2,998

Total assets

4,038

3,938

Non-current assets excluding goodwill


Goodwill

Current liabilities

(200)

(412)

Non-current liabilities (excluding trade, other payables and


provisions)

(490)

(480)

Other non-current liabilities

(100)

(100)

Total non-current liabilities

(590)

(580)

Total liabilities

(790)

(992)

Net assets

3,248

2,946

Net assets excluding goodwill

3,148

2,846

Proportion of the Groups ownership


Groups share of net assets
Goodwill on acquisition
Carrying amount of the investment

50%

50%

1,574

1,423

100

100

1,674

1,523

XYZ Holdings (Singapore) Limited | 117

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
18. Investment in joint venture (continued)

Summarised statement of comprehensive income


Group

Revenue
Operating expenses
Interest expense

2014
$000
214
(58)
(5)

2013
$000
199
(65)
(6)

Profit before tax


Income tax expense

151
-

128
-

Profit after tax


Other comprehensive income
Total comprehensive income

151
151

128
128

Dividends of $60,000 (2013:$50,000) were received from XYZ-ABC JV Co. Ltd. ABC-XYZ
JV Co. Ltd is restricted by regulatory requirements by paying dividends greater than 50%
of the annual profit.

FRS 112.B12.a
FRS 112.22.a

Commentary:

In this illustration, the Group does not have investment in joint operation.
The following disclosures are required for investments in joint operations:
(a) the name of the joint operation
(b) the nature of the entitys relationship with the joint operations, (by, for example,
describing the nature of the activities of the joint operation and whether it is strategic to
the entitys activities)

FRS 112.21.a

Other disclosures required for joint ventures are not applicable for joint operations.

For interests in joint arrangements, an entity shall disclose information that enables users of
its financial statements to evaluate:
(a) the nature, extent and financial effects of its interests in joint arrangements, including
the nature and effects of its contractual relationship with the other investors with joint
control of joint arrangements; and

FRS 112.20

(b) the nature of, and changes in, the risks associated with its interests in joint ventures.

If the joint venture is accounted for using the equity method, the entity shall disclose the fair
value of its investment in the joint venture or associate, if there is a quoted market price for
the investment.

FRS 112.21.b.iii

In this illustration, the Group have only one investment in joint venture which is material
The following disclosures are required, in aggregate for all individually immaterial joint
ventures:
(a) the carrying amount of its interests
(b) its share of the joint ventures
i.

profit or loss from continuing operations

ii. post-tax profit or loss from discontinued operations


iii. other comprehensive income

XYZ Holdings (Singapore) Limited | 118

FRS 112.B16

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
18. Investment in joint venture (continued)
Commentary (continued):

In this illustration, the Group does not have any unrecognised share of losses of its
investment in joint venture.

FRS 112.22.c

If the Group have stopped recognising its share of losses of its joint venture when applying
the equity method, it shall disclose the unrecognised share of losses of the joint venture,
both for the reporting period and cumulatively.

An entity shall disclose the proportion of voting rights held for each joint arrangement if
different from the proportion of ownership interests held.

FRS 112.21.a.iv

An entity shall disclose the principal place of business for each joint arrangement if different
from the country of incorporation of the joint arrangement.

FRS 112.21.a.iii

An entity may present the summarised financial information on the basis of the joint
ventures financial statements if:

FRS 112.B15

(a) the entity measures its interest in the joint venture at fair value; and
(b) the joint venture does not prepare FRS financial statements and preparation on that
basis would be impracticable or cause undue cost.
In that case, the entity shall disclose the basis on which the summarised financial information
has been prepared.
In this illustration, the joint venture does not have depreciation and amortisation and interest
income. For each material joint venture, an entity shall disclose the following information:

FRS 112.B13

(a) cash and cash equivalents


(b) current financial liabilities (excluding trade and other payables and provisions)
(c) non-financial liabilities (excluding trade and other payables and provisions)
(d) depreciation and amortisation
(e) interest income
(f)

interest expense

(g) income tax expense or income

An entity shall also disclose the nature and extent of any significant restrictions (e.g.
resulting from borrowing arrangements, regulatory requirements or contractual
arrangements between investors with joint control of a joint venture) on the ability of joint
ventures to transfer funds to the entity in the form of cash dividends, or to repay loans and
advances.

XYZ Holdings (Singapore) Limited | 119

FRS 112.22.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
19. Investment in associates
FRS 112.21.a.i

The Groups material investments in associates are summarised below:


2014

2013

$000

$000

QSpeed Pte Ltd

4,560

4,465

HKI Pte Ltd

5,576

5,420

Other associates

Fair value of investment in an associate for which there is a


published price quotation

Name

Country of
incorporation

Principal activities

459

436

10,595

10,321

FRS 112.B16

10,600

10,400

FRS 112.21.b.iii

Proportion (%) of
ownership interest
2014

2013

35

35

25

45

45

FRS 112.21
FRS 27.17.b

Held through subsidiaries:


QSpeed Pte Ltd i

Singapore

MSAX Sdn Bhd ii

Malaysia

Heart Land Ltd i

Singapore

Manufacture of
electronic
components
Manufacture
of
electronic
components
Investment
properties

Singapore

Investment properties

47

47

Drill Pte Ltd

Singapore

Investment properties

22

22

HKI Pte Ltd

i
ii

Audited by Ernst & Young LLP, Singapore

SGX 717

Audited by member firm of EY Global in Malaysia

*The Group holds 80% of ownership interest in MSAX Sdn Bhd in 2013 and accounts for it as a subsidiary
(Note X).

The activities of the associates are strategic to the Group activities. The Group has not
recognised losses relating to Heart Land Ltd where its share of losses exceeds the Groups
interest in this associate. The Groups cumulative share of unrecognised losses at the end
of the reporting period was $50,000 (2013: $35,000), of which $15,000 (2013: $5,000)
was the share of the current years losses. The Group has no obligation in respect of
these losses.

FRS 112.21.a.ii
FRS 112.22.c

The Group has not recognised its share of the current year profit of $8,000 (2013: nil)
relating to Drill Pte Ltd as the Groups cumulative share of unrecognised losses with
respect to that associate was $17,000 (2013: $25,000) at the end of the reporting
period.
Dividends of $40,000 (2013: $30,000) and $60,000 (2013: $50,000) were received
from QSpeed Pte Ltd and HKI Pte Ltd respectively. QSpeed Pte Ltd. is restricted by
regulatory requirements by paying dividends greater than 60% of the annual profit.

XYZ Holdings (Singapore) Limited | 120

FRS 112.B12.a
FRS 112.22.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
19. Investment in associates (continued)
Aggregate information about the Groups investments in associates that are not
individually material are as follows:
2014
$000

Profit or loss after tax from continuing operations


Other comprehensive income
Total comprehensive income

FRS 112.21.c.ii
FRS 112.B16

2013
$000

1,237

555

223

174

1,460

729

The summarised financial information in respect of QSpeed Pte Ltd and HKI Pte Ltd,
based on its FRS financial statements and a reconciliation with the carrying amount of
the investment in the consolidated financial statements are as follows:

FRS 112.21.b.i
FRS 112.B12
FRS 112.B14

Summarised balance sheet


QSpeed Pte Ltd
As at
As at
December
December
2014
2013
$000

$000

HKI Pte Ltd


As at
As at
December
December
2014
2013
$000

$000

Current assets

8,040

8,318

6,987

6,510

Non-current assets excluding


goodwill

8,728

8,510

12,390

10,870

550

550

315

315

Total assets

17,318

17,378

19,692

17,695

Current liabilities

(1,388)

(1,211)

(2,433)

(1,788)

Non- current liabilities

(4,494)

(5,146)

(6,229)

(5,188)

Total liabilities

(5,882)

(6,357)

(8,662)

(6,976)

Net assets

11,436

11,021

11,030

10,719

Net assets excluding goodwill

10,886

10,471

10,715

10,404

35%

35%

47%

47%

3,810

3,665

5,036

4,890

Goodwill on acquisition

550

550

315

315

Other adjustments

200

250

225

215

4,560

4,465

5,576

5,420

Goodwill

Proportion of the Groups


ownership
Groups share of net assets

Carrying amount of the


investment

Summarised statement of comprehensive income


QSpeed Pte Ltd

Revenue

HKI Pte Ltd

2014

2013

2014

2013

$000

$000

$000

$000

20,269

18,467

25,202

23,850

(47)

(22)

(22)

Other comprehensive income

(3)

Total comprehensive income

(42)

(14)

(25)

Profit after tax from continuing


operations

XYZ Holdings (Singapore) Limited | 121

FRS 112.B14.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
19. Investment in associates (continued)
Commentary:
Investment in associates

For interests in associates, an entity shall disclose information that enables users of its
financial statements to evaluate:

FRS 112.20

(a) the nature, extent and financial effects of its interests in associates, including the nature
and effects of its contractual relationship with the other investors with significant
influence over associates; and
(b) the nature of, and changes in, the risks associated with its interests in associates.
FRS 112.21.b.iii

If the associate is accounted for using the equity method, the entity shall disclose the fair
value of its investment in the associate, if there is a quoted market price for the investment.

An entity shall disclose the principal place of business for each associate if different from the
country of incorporation of the associate.

FRS 112.21.a.iii

An entity shall disclose the proportion of voting rights held for each associate if different from
the proportion of ownership interests held.

FRS 112.21.a.iv

If the Group have stopped recognising its share of losses of its associate when applying the
equity method, it shall disclose the unrecognised share of losses of the associate, both for the
reporting period and cumulatively.

FRS 112.22.c

An entity shall also disclose the nature and extent of any significant restrictions (e.g. resulting
from borrowing arrangements, regulatory requirements or contractual arrangements
between investors with significant influence over an associate) on the ability of associates to
transfer funds to the entity in the form of cash dividends, or to repay loans and advances.

FRS 112.22.a

In this illustration, the Group does not have any immaterial associate that is classified as
discontinued operation.
The following disclosures are required, in aggregate for all individually immaterial associates:

FRS 112.B16

(a) the carrying amount of its interests


(b) its share of the associates
i.

profit or loss from continuing operations

ii.

post-tax profit or loss from discontinued operations

iii.

other comprehensive income

iv.

total comprehensive income

These disclosures above shall be disclosed separately for associates.

An entity may present the summarised financial information on the basis of the associates
financial statements if:

(a) the entity measures its interest in the associate at fair value
(b) the associate does not prepare FRS financial statements and preparation on that basis
would be impracticable or cause undue cost.

In that case, the entity shall disclose the basis on which the summarised financial information
has been prepared.

XYZ Holdings (Singapore) Limited | 122

FRS 112.B15

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
20. Deferred tax
Deferred tax as at 31 December relates to the following:
Group
Consolidated balance
sheet

Deferred tax liabilities:


Differences in depreciation for tax
purposes
Differences in amortisation of
intangible assets
Impairment of intangible assets

Company
Consolidated
income
statement

FRS 12.81.g.i and ii

Balance sheet

2014

2013

2014

2013

2014

2013

$000

$000

$000

$000

$000

$000

(601)

(633)

146

251

(217)

(218)

(62)

(111)

(47)

(20)

(60)

60

Revaluations to fair value:


- Freehold land and buildings
- Available-for-sale financial
assets
Fair value adjustments on
acquisition of subsidiary
Convertible redeemable
preference shares
Undistributed earnings of
associates
Other items

(1,159)

(903)

(150)

(94)

(4)

(3)

(9)

(48)

(9)

(13)

(176)

(145)

31

20

(8)

(5)

(2,273)

(1,904)

(226)

(13)

(231)

Deferred tax assets:


Provisions

419

427

Unutilised tax losses

23

Other items

28
470

463

Deferred tax expense

(5)

19

(4)

(1)

17

(8)

185

12

18

21

26

252

XYZ Holdings (Singapore) Limited | 123

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
20. Deferred tax (continued)
Unrecognised tax losses

FRS 12.81.e

At the end of the reporting period, the Group has tax losses of approximately $867,000
(2013: $682,000) that are available for offset against future taxable profits of the
companies in which the losses arose, for which no deferred tax asset is recognised due to
uncertainty of its recoverability. The use of these tax losses is subject to the agreement of
the tax authorities and compliance with certain provisions of the tax legislation of the
respective countries in which the companies operate. The tax losses have no expiry date
except for an amount of $101,000 (2013:$101,000) which will expire in 2015.
Unrecognised temporary differences relating to investments in subsidiaries and joint
venture

FRS 12.81.f

At the end of the reporting period, no deferred tax liability (2013: nil) has been
recognised for taxes that would be payable on the undistributed earnings of certain of the
Groups subsidiaries and joint venture as:
-

The Group has determined that undistributed earnings of its subsidiaries will not be
distributed in the foreseeable future; and

The joint venture of the Group cannot distribute its earnings until it obtains the
consent of both the venturers. At the end of the reporting period, the Group does not
foresee giving such consent.

Such temporary differences for which no deferred tax liability has been recognised
aggregate to $450,000 (2013: $340,000). The deferred tax liability is estimated to be
$81,000 (2013: $68,000).

FRS 12.87

Tax consequences of proposed dividends


There are no income tax consequences (2013: nil) attached to the dividends to the
shareholders proposed by the Company but not recognised as a liability in the financial
statements (Note 43).

FRS 12.81.i

Commentary:
Deferred tax income or expense recognised in profit or loss

This disclosure is required in situations where the amount of the deferred tax income or
expense recognised in profit or loss relating to each type of deferred tax assets/liabilities is
not apparent from the changes in the amounts recognised in the balance sheet.

XYZ Holdings (Singapore) Limited | 124

FRS 12.81.g.ii

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
21. Trade and other receivables
Group

FRS 1.77-78.b
FRS 107.7 and
31

Company

2014

2013

2014

2013

$000

$000

$000

$000

21,694

24,191

Bills of exchange and promissory notes

540

507

Amounts due from related companies

361

288

300

Staff loans

155

150

50

50

Refundable deposits

102

119

22,852

24,967

338

350

Amounts due from subsidiaries

3,409

2,061

FRS 24.18.b

SGD loans to subsidiaries

10,563

12,574

FRS 24.18.b

SGD loans to associates

1,230

1,230

1,230

1,230

FRS 24.18.b

SGD loan to a fellow subsidiary

1,500

1,500

1,500

1,500

FRS 24.18.b

63

48

51

36

2,793

2,778

16,753

17,401

25,645

27,745

17,091

17,751

6,117

4,858

4,621

4,145

Trade and other receivables (current):


Trade receivables

FRS 24.18.b

Other receivables (non-current):

Staff loans
Total trade and other receivables (current and
non-current)
Add: Cash and short-term deposits (Note 27)
Less: Sales tax receivables
Total loans and receivables

(15)
31,747

(13)
32,590

(3)
21,709

(2)

FRS 107.8.c

21,894

Trade receivables
Trade receivables are non-interest bearing and are generally on 30 to 90 days terms.
They are recognised at their original invoice amounts which represent their fair values on
initial recognition.

FRS 107.7 and


31

At the end of the reporting period, trade receivables arising from export sales amounting
to $1,560,000 (2013: $1,750,000) are arranged to be settled via letters of credit issued
by reputable banks in countries where the customers are based. Trade receivables from
first-time customers that are insured by trade credit insurance underwritten by a
reputable insurer in Singapore amount to $520,000 (2013: nil) at the end of the
reporting period.

FRS 107.36.b

Trade receivables denominated in foreign currencies at 31 December are as follows:


Group

FRS 107.34.a

Company

2014

2013

2014

2013

$000

$000

$000

$000

United States Dollar

4,128

4,525

Renminbi

1,567

2,015

Bills of exchange and promissory notes


These receivables bear interest at market rates and have an average maturity of 30 days
(2013: 20 days) from the end of the reporting period.

XYZ Holdings (Singapore) Limited | 125

FRS 107.7 and


31

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
21. Trade and other receivables (continued)
Related party balances and staff loans
-

Amounts due from related companies are non-trade related, unsecured, non-interest
bearing, repayable upon demand and are to be settled in cash.

Amounts due from subsidiaries and loans to subsidiaries are unsecured, non-interest
bearing and are to be settled in cash. The former are not expected to be repaid within
the next 12 months while the latter are due on 30 June 2017.

Loans to associates bear interest at SIBOR + 2% p.a. (2013: SIBOR + 2% p.a.), have an
average maturity of 1.5 years (2013: 2.5 years), secured by corporate guarantees
issued by their respective holding companies and are to be settled in cash.

Loan to a fellow subsidiary is unsecured, bears interest at SIBOR + 2% p.a. (2013:


SIBOR + 2% p.a.), repayable on 30 September 2016 and is to be settled in cash.

Staff loans are unsecured and non-interest bearing. Non-current amounts have an
average maturity of 1.5 years (2013: 1.5 years). The loans are recognised initially at
fair value. The difference between the fair value and the absolute loan amount
represents payment for services to be rendered during the period of the loan and is
recorded as part of prepaid operating expenses.

FRS 107.7,31
and 36.b
FRS 24.18.b

Receivables that are past due but not impaired


The Group has trade receivables amounting to $5,760,000 (2013: $6,852,000) that are
past due at the end of the reporting period but not impaired. These receivables are
unsecured and the analysis of their aging at the end of the reporting period is as follows:
Group
2014

2013

$000

$000

4,105

5,234

30 - 60 days

568

832

61- 90 days

822

524

91-120 days

245

262

Trade receivables past due but not impaired:


Lesser than 30 days

More than 120 days

20

5,760

6,852

XYZ Holdings (Singapore) Limited | 126

FRS 107.37.a
FRS 107.36.b
FRS 107.IG28

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

21. Trade and other receivables (continued)


Receivables that are impaired
The Groups trade receivables that are impaired at the end of the reporting period and the
movement of the allowance accounts used to record the impairment are as follows:
Group
Collectively impaired

Trade receivables nominal amounts


Less: Allowance for impairment

Individually impaired

2014

2013

2014

2013

$000

$000

$000

$000

1,220

1,350

150

80

(100)

(50)

(350)

(410)

870

940

50

30

410

510

50

60

85

95

50

20

Movement in allowance accounts:


At 1 January
Charge for the year
Written off
Exchange differences
At 31 December

FRS 107 IG29.a

FRS 107.37.b
FRS 107.IG29.b

FRS 107.16

(130)
(15)
350

(205)

(30)

10

410

100

50

Trade receivables that are individually determined to be impaired at the end of the
reporting period relate to debtors that are in significant financial difficulties and have
defaulted on payments. These receivables are not secured by any collateral or credit
enhancements.

FRS 107.37.b
FRS 107.36.b

Receivables that are impaired


At the end of the reporting period, the Group and the Company have provided an
allowance of $100,000 (2013: $100,000) for impairment of the unsecured loan to a
fellow subsidiary company with a nominal amount of $1,600,000 (2013: $1,600,000).
This related party has been suffering significant financial losses for the current and past
two financial years.

FRS 107.37.b
FRS 107.36.b
FRS 24.18.c

There has been no movement in this allowance account for the financial year ended 31
December 2014 (2013: charge of $100,000 for impairment loss).

FRS 107.16 and 6


FRS 24.18.d

XYZ Holdings (Singapore) Limited | 127

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
21. Trade and other receivables (continued)
Receivables subject to offsetting arrangements
The Group regularly purchases electronic raw materials from and sell electronic products
to MNO Pte Ltd. Both parties have an arrangement to settle the net amount due to or
from each other on a 30-days term basis.
The Groups trade receivables and trade payables that are off-set are as follows:

31 December 2014
$000
Gross carrying
amounts
Description
Trade receivables
Trade payables

6,100
-

Gross amounts
offset in the
balance sheet
(2,540)
(2,540)

Net amounts in the


balance sheet

FRS 107.13C.a
FRS 107.13C.b
FRS 107.13C.c

3,560
-

31 December 2013
$000
Description
Trade receivables
Trade payables

5,450
-

(1,730)
(1,730)

3,720
-

Receivables subject to an enforceable master netting arrangement that are not otherwise
set-off
The Group regularly purchases electronic raw materials from and sell electronic products
to PQR Pte Ltd. Both parties do not have an arrangement to settle the amount due to or
from each other on a net basis but have the right to set off in the case of default and
insolvency or bankruptcy.

FRS 107.13E

The Groups trade receivables and trade payables subject to an enforceable master
netting arrangement that are not otherwise set-off are as follows:
FRS 107.13C.d.i
FRS 107.13C.e

31 December 2014
$000
Gross carrying
amounts

Related amounts
not set off in the
balance sheet

Net amount

Description
Trade receivables

3,560

(1,493)

2,067

Trade payables

1,493

(1,493)

31 December 2013
$000
Description
Trade receivables
Trade payables

4,230
1,699

(1,699)
(1,699)

2,531
-

XYZ Holdings (Singapore) Limited | 128

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
21. Trade and other receivables (continued)
Commentary:
Collateral and other credit enhancements

When an entity holds collateral (of financial or non-financial assets) and is permitted to sell or
repledge the collateral in the absence of default by the owner of the collateral, it shall disclose:
(a) the fair value of the collateral held; (b) the fair value of any such collateral sold or
repledged, and whether the entity has an obligation to return it; and (c) the terms and
conditions associated with its use of the collateral.

When an entity obtains financial or non-financial assets during the period by taking possession
of collateral it holds as security or calling on other credit enhancements (e.g., guarantees), and
such assets meet the recognition criteria under FRS, an entity shall disclose for such assets
held at the reporting date:

FRS 107.15

FRS 107.38

(a) the nature and carrying amount of the assets; and


(b) when the assets are not readily convertible into cash, its policies for disposing of such
assets or for using them in its operations.
The above disclosure required for financial assets obtained by taking possession of collateral or
other credit enhancements are only applicable to assets still held at the reporting date.

An entity shall disclose a description of collateral held as security and of other credit
enhancements, and their financial effect (e.g. a quantification of the extent to which collateral
or other credit enhancements mitigate credit risk) in respect of the amount that best
represents the maximum exposure to credit risk.

FRS 107.36.b

Categories of financial assets and financial liabilities

Please refer to commentary no. 1 of Note 22 Investment securities.

Ageing analysis of financial assets that are past due but not impaired

FRS 107 requires the disclosure of an analysis by class of the age of financial assets that are
past due but not impaired. Any entity uses its judgement to determine the appropriate time
bands to be disclosed.

FRS 107.37.a and IG


28

Allowance account for credit losses

FRS 107 requires disclosure requirements where financial assets are impaired by credit losses
and the entity records the impairment in a separate account (e.g., an allowance account used
to record individual impairments or a similar account used to record a collective impairment of
assets) rather than directly reducing the carrying amount of the asset. In such circumstances,
the entity shall disclose a reconciliation of changes in that account (the reconciliation) during
the period for each class of financial assets.
In this illustration, the entity has presented the reconciliation of changes in the two allowance
accounts that it has used to record impairment of trade receivables, i.e., trade receivables that
are collectively impaired and those that are individually impaired.

XYZ Holdings (Singapore) Limited | 129

FRS 107.16

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
21. Trade and other receivables (continued)
Commentary (continued):
FRS 107 Disclosures - Offsetting financial assets and financial liabilities

FRS 107 require an entity to disclose information to enable users of its financial statements to
evaluate the effect or potential effect of netting arrangements on the entitys financial position
which includes the effect or potential effect of rights of set-off associated with the entitys
recognised financial assets and recognised financial liabilities that are within the scope of
paragraph 13A of FRS 107.

FRS 107.13B

These disclosures are required for all recognised financial instruments that are set off in
accordance with paragraph 42 of FRS 32 and also apply to recognised financial instruments
that are subject to an enforceable master netting arrangement or similar agreement
irrespective of whether they are set off in accordance with paragraph 42 of FRS 32.

FRS 107.13A

To meet the objective above, an entity shall disclose, at the end of the reporting period, the
following quantitative information separately for recognised financial assets and recognised
financial liabilities that are within the scope of paragraph 13A of FRS 107:

FRS 107.13C

(a) the gross amounts of those recognised financial assets and recognised financial liabilities;
(b) the amounts that are set off in accordance with the criteria in FRS 32.42 when
determining the net amounts presented in the balance sheet;
(c) the net amounts presented in the balance sheet;
(d) the amounts subject to an enforceable master netting arrangement or similar
arrangement that are not otherwise include in (b), including
i. amounts related to recognised financial instruments that do not meet some or all of
the offsetting criteria of FRS 32.42; and
ii. amounts related to financial collateral (including cash collateral); and
(e) the net amounts after deducting the amounts in (d) from the amounts in (c) above.
The information above shall be presented in a tabular format, separately for financial assets
and financial liabilities, unless another format is more appropriate.

The total amount disclosed for an instrument in accordance with (d) above shall be limited to
the net amounts presented in the balance sheet for that instrument.

XYZ Holdings (Singapore) Limited | 130

FRS 107.13D

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
22. Investment securities

FRS 107.7 and 31

Group
2014

2013

$000

$000

Current:

FRS 107.8.a.ii

Held for trading investments


- Equity securities (quoted)

1,512

1,260

Non-current:

FRS 107.8.d

Available-for-sale financial assets


- Other debt securities (unquoted)

1,563

980

- Equity securities (quoted)

1,746

848

- Equity securities (unquoted)

139

28

- Equity securities (unquoted), at cost

500

600

3,948

2,456

660

650

4,608

3,106

FRS 107.31

Held-to-maturity investment
- 3% p.a. SGD government bonds due 31 March 2016 (quoted)

FRS 107.8.b

Investments pledged as security


The Groups investment in government bonds amounting to $660,000 (2013:$650,000)
has been pledged as security for a bank loan (Note 30). Under the terms and conditions of
the loan, the Group is prohibited from disposing of this investment or subjecting it to
further charges without furnishing a replacement security of similar value.

FRS 107.14

Impairment losses
During the financial year, the Group recognised the following impairment losses:

FRS 107.20.e and 37.b

Impairment loss of $70,000 (2013: $150,000) and $11,000 (2013: $35,000) for
quoted and unquoted equity securities respectively as there were significant or
prolonged decline in the fair value of these investments below their costs. The Group
treats significant generally as X% and prolonged as greater than X months.
Impairment loss of $100,000 (2013: nil) pertaining to unquoted equity securities
carried at cost, reflecting the write-down in the carrying value of this private equity
investment in a Singapore company that was placed under receivership.
Impairment loss of $17,000 (2013: $25,000) for unquoted other debt securities after
taking into considerations the probability of default or significant delay in repayments
by the debtors.

Commentary:
Categories of financial assets and financial liabilities

FRS 107 required disclosure of the carrying amounts of financial instruments under each of
the classification in FRS 39, either on the face of the balance sheet or in the notes. The
categories of financial instruments include financial assets and financial liabilities that are
classified as held for trading, those that are designated upon initial recognition as financial
assets or financial liabilities at fair value through profit or loss, held-to-maturity investments,
loans and receivables, available-for-sale financial assets, and financial liabilities measured at
amortised cost. In this illustration, the disclosure requirement is met in the respective notes to
the financial statements (refer to this note, Note 21, 26 and 31). Alternatively, the disclosure
of the carrying amounts of financial instruments under each of the classifications in FRS 39
may be presented in a separate centralised note.

XYZ Holdings (Singapore) Limited | 131

FRS 107.8

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
22. Investment securities (continued)
Commentary (continued):
Nature and extent of risks arising from financial instruments

Information such as the interest rates and maturity dates of the debt securities, and countries
where the equity securities are listed should be disclosed if material and enables the users of
the financial statements to evaluate the nature and extent of the risks arising from financial
instruments to which the entity is exposed to at the reporting date. In this illustration, the
countries where the equity securities are listed are disclosed in Note 40 (e) Market price risk.

FRS 107.31

Reclassification of financial assets at cost or amortised cost to fair value

If an entity has reclassified any financial asset measured at cost or amortised cost to fair value
or reclassified any financial asset at fair value, rather than at cost or amortised cost, FRS 107
requires disclosure of the amount and reason for the reclassification.

FRS 107.12

Illustrative disclosure for reclassification of financial assets at cost to fair value:


On 30 November 2014, the Group reclassified its investment in equity instruments of a
private Singapore company (XXX Pte Ltd) that was previously measured at cost of $XXX
to available-for-sale investments measured at fair value of $XXX, when a reliable measure
of fair value became available upon its listing on the SGX-ST.
Determination of significant or prolonged decline in fair value of financial instruments

Please refer to commentary no. 3 of Note 2.16 (c) Impairment of available-for-sale financial
assets.

23. Gross amount due from/(to) customers for contract work-in-progress


Group

Aggregate amount of costs incurred and recognised profits (less


recognised losses) to date
Less: Progress billings and advances

2014

2013

$000

$000

34,089

24,552

(33,796)

(24,740)

FRS 11.40.a

293

(188)

651

398

FRS 11.42.a

(358)

(586)

FRS 11.42.b

293

(188)

Presented as:
Gross amount due from customers for contract work-in-progress
Gross amount due to customers for contract work-in-progress
Advances received included in gross amount due to customers for
contract work

45

60

Retention sums on construction contract included in trade receivables

65

80

FRS 11.40.b
FRS 11.40.c

Commentary:
Advances received before the related work is performed

Where applicable, an entity is required to disclose the amount of advances received from
customer before the related construction work is performed.

XYZ Holdings (Singapore) Limited | 132

FRS 11.40.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

24.

Development properties
Group
2014

2013

$000

$000

Freehold land

1,800

1,800

Development costs

1,100

850

2,900

2,650

During the financial year, borrowing costs of $35,000 (2013: $33,000), arising from
borrowings obtained specifically for the development property were capitalised under
Development costs. The rate used to determine the amount of borrowing costs eligible
for capitalisation was 7.5% (2013: 7.2%), which is the effective interest rate of the specific
borrowing.

FRS 23.26.a and


b

The freehold land under development has been pledged as security for a bank loan (Note
30).

FRS 2.36.h

Commentary:
List of development properties

Where the aggregate value for all properties for development, sale or for investment purposes
held by the entity represent more than 15% of the value of the consolidated net tangible
assets, or contribute more than 15% of the consolidated pre-tax operating profit, entities
listed on the SGX-ST are required to disclose further information regarding development
properties.

SGX 1207.11

Illustrative disclosure pursuant to requirements of SGX 1207.11:


Description and location

%
Site area Gross floor
owned (square
area
metre)
(square
metre)

Stage of completion
as at date of annual
report (expected
year of completion)

An 8-storey luxurious condominium (Snow 100%


Queen Palace) development along
Paterson Road, Singapore

20,500

220,000

60% (2013)

A 35-storey integrated development with


residential apartments, offices and
retail components along Tian Shan
Road, Changning District, Shanghai,
Peoples Republic of China

100%

98,000

450,000

70% (2013)

A 20-storey luxurious condominium (Link


Spring Tower) along HuBei Road,
Hanggu District, Tianjin, Peoples
Republic of China

100%

88,000

300,000

30% (2014)

In this illustration, the entire amount included in development property is expected to be


recovered or settled no more than twelve months after the reporting period.
If the amount includes amounts expected to be recovered more than twelve months after the
reporting period, an entity shall disclose the amount expected to be recovered more than
twelve months after the reporting period.

Borrowing costs capitalised

Please refer to commentary no. 3 of Note 13 Property plant and equipment.

XYZ Holdings (Singapore) Limited | 133

FRS 1.61

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
25. Inventories

FRS 1.77 and 78.c

Group
2014

2013

$000

$000

4,994

5,552

Balance sheet:
Raw materials (at cost)
Work-in-progress (at cost)
Finished goods (at cost or net realisable value)

FRS 2.36.b

3,823

3,491

15,203

15,357

24,020

24,400

80,567

82,122

352

257

FRS 2.36.e

FRS 2.36.f

Income statement:
Inventories recognised as an expense in cost of sales

FRS 2.36.d

Inclusive of the following charge/(credit):


- Inventories written-down
- Reversal of write-down of inventories

(190)

The reversal of write-down of inventories was made when the related inventories were
sold above their carrying amounts in 2013.

FRS 2.36.g

The Group has subjected finished goods amounting to $1,500,000 (2013: $1,500,000),
to a floating charge as security for bank overdraft facilities (Note 30).

FRS 2.36.h

XYZ Holdings (Singapore) Limited | 134

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
26. Derivatives
FRS 107.7
and 31

Group

Contract/
Notional
Amount
Forward currency contracts

9,850

Interest rate swap

2,500

Total derivatives
Add: Held for trading
investments (Note 22)
Add: Contingent consideration
for business combination (Note
32)
Total financial assets/(liabilities)
at fair value through profit or
loss

2014

2013

$000

$000

Assets
150
20

Liabilities
(22)

8,560

Liabilities

60

45

(22)

105

170

(22)

105

1,260

2,500

Assets

170

1,512

Contract/
Notional
Amount

(685)

1,682

(707)

1,365

At the Company level, the carrying amount of financial liability at fair value through profit
or loss is the contingent consideration for business combination amounting to
$685,000 as at 31 December 2014 (2013: Nil).
Forward currency contracts are used to hedge foreign currency risk arising from the
Groups sales and purchases denominated in USD for which firm commitments existed at
the end of the reporting period, extending to March 2015 (2013: March 2013) (Note
40(d)).
The interest rate swap receives floating interest equal to SIBOR + 3% p.a. (2013: SIBOR +
3% p.a.), pays a fixed rate of interest of 7.5% p.a. (2013: 7.5% p.a.) and matures on 30
November 2014 (2013: 30 November 2013).

Commentary:
Categories of financial assets and financial liabilities

Please refer to commentary no. 1 of Note 22 Investment securities.

XYZ Holdings (Singapore) Limited | 135

FRS 107.8.a
and e

FRS 107.8.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

27. Cash and short-term deposits


FRS 107.7 and 31

Group

Cash at banks and on hand


Short-term deposits
Cash and short-term deposits

Company

2014

2013

2014

2013

$000

$000

$000

$000

5,697

4,598

4,256

3,985

420

260

365

160

6,117

4,858

4,621

4,145

Cash at banks earns interest at floating rates based on daily bank deposit rates. Shortterm deposits are made for varying periods of between one day and three months,
depending on the immediate cash requirements of the Group and the Company, and earn
interests at the respective short-term deposit rates. The weighted average effective
interest rates as at 31 December 2014 for the Group and the Company were 2.60%
(2013: 2.80%) and 0.15% (2013: 0.20%) respectively.
Cash and short-term deposits denominated in foreign currencies at 31 December are as
follows:
Group

United States Dollar


Renminbi

FRS 107.7,31 and


34

FRS 107.34.a

Company

2014

2013

2014

2013

$000

$000

$000

$000

442

325

108

120

20

15

For the purpose of the consolidated cash flow statement, cash and cash equivalents
comprise the following at the end of the reporting period:

FRS 7.45

Group

Cash and short-term deposits:


- Continuing operations
- Discontinued operation (Note 11)

2014

2013

$000

$000

6,117

4,858

250

6,367
Bank overdrafts (Note 30)
Cash and cash equivalents

(498)
5,869

4,858
(1,444)
3,414

Commentary:

In this illustration, it is assumed that the Group does not have any cash and cash equivalents
that are not available for use by the Group.
Where applicable, disclosure is required, together with a commentary by management, for the
amount of significant cash and cash equivalent balances held by the enterprise that are not
available for use by the group. There are various circumstances in which cash and cash
equivalent balances held by an enterprise are not available for use by the group. Examples
include cash and cash equivalent balances held by a subsidiary that operates in a country
where exchange controls or other legal restrictions apply when the balances are not available
for general use by the parent or other subsidiaries.
Cash and cash equivalents which are restricted in its use for more than twelve months shall be
classified as non-current assets.

XYZ Holdings (Singapore) Limited | 136

FRS 7.48
FRS 7.49

FRS 1.66.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

28. Provisions

FRS 1.77 and


78.d

Group

At 1 January 2014
Acquisition of a subsidiary (Note 17)
Arose during the financial year

Maintenance
warranties

Legal claim

Total

$000

$000

$000

2,136

2,136

FRS 37.84.a

50

50

116

420

536

FRS 37.84.b

(415)

(415)

FRS 37.84.c

Unused amounts reversed

(60)

(60)

FRS 37.84.d

Discount rate adjustment

30

30

FRS 37.84.e

Utilised

Exchange differences
At 31 December 2014
Current 2014
Non-current 2014

Current 2013
Non-current 2013

45

49

1,902

424

2,326

377

424

801

1,525

1,525

1,902

424

2,326

295

295

1,841

1,841

2,136

2,136

FRS 37.84.a

Maintenance warranties
A provision is recognised for expected warranty claims on certain specialised electronic
components sold during the last two years, based on past experience of the level of
repairs and returns. It is expected that most of these costs will be incurred in the next two
financial years and all will have been incurred within three years from the end of the
reporting period. Assumptions used to calculate the provision for maintenance warranties
were based on current sales levels and current information available about returns based
on the three-year warranty period for the relevant specialised electronic components
sold.
During the financial year, based on the earlier mentioned statistics and warranty claims
experience, management concluded that the provision for maintenance warranties
exceeded the amount necessary to cover warranty claims on products sold during the last
two years. Accordingly, $60,000 (2013: nil) of the warranty provision has been reversed.

FRS 37.85

FRS 1.98.g

Legal claim
On 30 June 2014, a competitor of the Group made a claim against one of the Groups
subsidiaries for infringing its technology licence from 2013 to 2014. At the end of the
reporting period, the management is in the process of negotiating a settlement
agreement with the plaintiff. The provision made represents the managements estimate
of the settlement consideration, being the account of profit for the periods covered by the
licence. The settlement and compensation is expected to be concluded in 2015.

FRS 37.85

Commentary:
Comparative of movements in provision

FRS 37 does not require comparatives of movements in provision to be presented.

XYZ Holdings (Singapore) Limited | 137

FRS 37.84

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

28. Provisions (continued)


Commentary (continued):
Contingent liability

In this illustration, no contingent liabilities are recognised in the business combination.


For contingent liabilities recognised in a business combination, the acquirer is required to
disclose the information required by paragraphs 84 and 85 of FRS 37 Provisions,
Contingent Liabilities and Contingent Assets for each class of provision.

FRS 103.B67.c

29. Deferred capital grants


Group
2014

2013

$000

$000

2,694

1,644

2,040

1,030

34

20

4,768

2,694

730

540

239

180

Cost:
At 1 January
Received during the financial year
Exchange differences
At 31 December
Accumulated amortisation:
At 1 January
Amortisation
Exchange differences
At 31 December

11

10

980

730

Net carrying amount:


Current
Non-current

300

210

3,488

1,754

3,788

1,964

Deferred capital grants relate to government grants received for the acquisition of
equipment for research activities undertaken by the Groups subsidiary in Peoples
Republic of China to promote technology advancement and transfer. There are no
unfulfilled conditions or contingencies attached to these grants.

XYZ Holdings (Singapore) Limited | 138

FRS 20.39.b
FRS 20.39.c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
30. Loans and borrowings
Group
Maturity
Maturity

FRS 107.7 and


31

Company

2014

2013

2014

2013

$000

$000

$000

$000

Current:
Obligations under finance leases (Note
37(d))
Bank overdrafts
6% p.a. fixed rate SGD bank loan

2015

216

16

On demand

498

1,444

2015

475

830

1,189

2,290

Non-current:
Obligations under finance leases (Note
37(d))

2016-2024

720

160

7.5% p.a. fixed rate SGD bonds

2016-2020

3,100

3,000

3,100

3,000

31 July 2020

1,545

- SGD loan at LIBOR + 2.0% p.a.

2016-2020

2,200

2,200

2,200

2,200

- SGD loan at SIBOR + 3.0% p.a.

30 November 2018

5,400

5,400

2,000

450

428

450

428

13,415

13,188

5,750

5,628

14,604

15,478

5,750

5,628

Bank loans:
- 8% p.a. fixed rate USD loan

- 8.5% p.a. fixed rate SGD loan


Convertible redeemable preference shares
Total loans and borrowings

2017-2020

Obligations under finance leases


These obligations are secured by a charge over the leased assets (Note 13). The average
discount rate implicit in the leases is 8.5% p.a. (2013: 8.8% p.a.). These obligations are
denominated in the respective functional currencies of the relevant entities in the Group.
Bank overdrafts
Bank overdrafts are denominated in SGD, bear interest at SIBOR + 3.0% p.a. (2013:
SIBOR + 3.0% p.a.) and are secured by a floating charge over certain inventories (Note
25).
6% p.a. fixed rate SGD bank loan
This loan is fully repayable on 30 June 2015 (2013: 30 June 2014) and is secured by a
charge over freehold land under development (Note 24).
7.5% p.a. fixed rate SGD bonds
These bonds with a face value of $3,200,000 are unsecured and are repayable in 5 equal
annual instalments commencing on 1 January 2016.
8% p.a. fixed rate USD bank loan
This loan has been drawn down under a six-year multi-option facility (MOF). The loan is
repayable within 12 months after the reporting date, but has been classified as long-term
because the Group expects and has the discretion to exercise its rights under the MOF to
refinance this funding. Such immediate replacement funding is available until 31 January
2020. The total amount repayable on maturity is $1,600,000. The facility is secured by a
first mortgage over certain freehold land and buildings of the Group (Note 13).

XYZ Holdings (Singapore) Limited | 139

FRS 1.73

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
30. Loans and borrowings (continued)
SGD bank loan at LIBOR + 2.0% p.a.
This loan is secured by a first mortgage over certain investment properties (Note 14) of
the Group and is repayable in two equal instalments due on 31 December 2016 and 31
January 2020. The loan includes a financial covenant which requires the Group to
maintain a gearing ratio not exceeding 50%.
SGD bank loan at SIBOR + 3.0% p.a.
This loan is secured by a first mortgage over certain of the Groups freehold land and
buildings (Note 13), a charge over certain investment securities (Note 22) of the Group
and corporate guarantee provided by the Company (Note 38(a)). Repayment of this loan
is due on 30 November 2018. The loan includes a financial covenant which requires the
Group to maintain a net current asset and net asset positions throughout the tenure of
the loan.
8.5% p.a. fixed rate SGD loan
As at 31 December 2014, this loan has been presented as part of the liabilities of the
disposal group classified as held for sale (Note 11).
Convertible Redeemable Preference Shares
As at 31 December 2014 and 2013, there were 505,000 Convertible Redeemable
Preference Shares (CRPS) issued and fully paid. The shares were issued at $1 each and
are convertible at the option of the shareholders into ordinary shares of the Company on
1 January 2017 on the basis of one ordinary share for every preference share held. Any
preference shares not converted will be redeemed on 31 December 2020 at a price of
$1.20 per share. The preference shares carry a dividend of 8% p.a., payable half-yearly in
arrears on 30 June and 31 December. The dividend rights are non-cumulative and the
shareholders have no voting rights.

FRS 107.7
FRS 32.28 and 31

The carrying amount of the liability component of CRPS at the end of the reporting period
is arrived at as follows:
Group and Company
2014

2013

$000

$000

Face value of CRPS


Equity component

505
(96)

505
(96)

Liability component of CRPS at initial recognition

409

409

- Opening balance at 1 January

19

- Amortisation of discount during the financial year

22

19

- Closing balance at 31 December

41

19

450

428

FRS 32.28

Add: Accumulated amortisation of discount

Liability component of CRPS at the end of the reporting period

XYZ Holdings (Singapore) Limited | 140

FRS 32.28

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
30. Loans and borrowings (continued)
Commentary:
Defaults or breaches

If during the period, there were defaults or breaches of loan agreement terms, the entity
should disclose:
(a)

Details of any defaults during the period of principal, interest, sinking fund, or
redemption terms of those loans payable;

(b)

The carrying amount of the loans payable in default at the reporting date; and

(c)

Whether the default was remedied, or the terms of the loans payable were renegotiated,
before the financial statements were authorised for issue.

These disclosure requirements are also applicable to breaches of loan agreement terms other
than those mentioned above whose breaches permitted the lender to demand accelerated
repayment (unless the breaches were remedied, or the terms of the loan were renegotiated,
on or before the reporting date).

FRS 107.18

FRS 107.19

Illustrative note disclosure for default on interest payment:


The Company has defaulted in interest payment of $XXX on bank borrowings carried at
$XXX at the end of the reporting period. The Company experienced a temporary shortage
of funds due to decrease in market demand in the Companys products in the first two
quarters. The interest payable of $XXX which was overdue since October 2014 remained
unpaid as at the date when these financial statements were authorised for issue.
Illustrative note disclosure for breach of loan covenant:
During the current financial year, the Company breached a covenant of a bank loan. The
Company did not fulfil the requirement to maintain gearing ratio at X.XX for a credit line of
$XXX. The credit line was fully drawn down and presented as current liability at the end of
the reporting period. The bank is contractually entitled to request for immediate
repayment of the outstanding loan amount in the event of breach of covenant.
The bank had not requested for immediate repayment of the outstanding loan amount as
at the date when these financial statements were authorised for issue. Management
commenced renegotiation of the loan agreement terms in December 2014. As of the date
the financial statements were authorised for issue, the renegotiation was still in progress.
Compound financial instruments with multiple embedded derivatives

If an entity has issued an instrument that contains both a liability and an equity component
and the instrument has multiple embedded derivatives whose values are interdependent (such
as a callable convertible debt instrument), it shall disclose the existence of those features.

XYZ Holdings (Singapore) Limited | 141

FRS 107.17

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
31. Trade and other payables
FRS 1.77
FRS 107.7 and 31

Group

Company

2014

2013

2014

2013

$000

$000

$000

$000

Trade payables

15,698

17,426

332

290

Other payables

1,381

1,129

138

124

288

379

17,367

18,934

470

414

200

17,717

19,140

470

414

2,974

2,579

481

446

- Loans and borrowings (Note 30)

14,604

15,478

5,750

5,628

Total financial liabilities carried at amortised


cost

35,295

36,197

6,701

6,488

Trade and other payables (current):

Amounts due to related companies

FRS 24.18

Other payables (non-current):


Deferred cash settlement (Note 17)
Total trade and other payables
Add:
- Other liabilities (Note 32)

FRS 107.8.f

Trade payables/other payables


These amounts are non-interest bearing. Trade payables are normally settled on 60-day
terms while other payables have an average term of six months.

FRS 107.7 and 31

Trade payables denominated in foreign currencies as at 31 December are as follows:

FRS 107.34.a

Group

United States Dollar

Company

2014

2013

2014

2013

$000

$000

$000

$000

3,140

2,962

66

49

Amounts due to related companies


These amounts are trade related, unsecured, non-interest bearing, repayable on demand
and are to be settled in cash.

FRS 107.7 and 31


FRS 24.18

Purchases from related companies are made at terms equivalent to those prevailing in
arms length transactions with third parties.

FRS 24.23

Commentary:
Categories of financial assets and financial liabilities

Please refer to commentary no. 1 of Note 22 Investment securities.

Disclosures that related party transactions were made on terms equivalent to those that
prevail in arms length transactions are made only if such terms can be substantiated.

XYZ Holdings (Singapore) Limited | 142

FRS 24.23

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
32. Other liabilities

FRS 1.77
FRS 107.7 and 31

Group

Accrued operating expenses

2014
$000

2013
$000

2014
$000

2013
$000

2,948

2,571

401

346

Financial guarantees (Note 38(a))


Contingent consideration for business
combination (Note 17)

Company

26

80

100

2,974

2,579

481

446

685

685

3,659

2,579

1,166

446

Contingent consideration for business combination


As part of the purchase agreement with the previous owner of MSAX, a contingent
consideration has been agreed. This consideration is dependent on the profit before tax of
MSAX during a 12-month period. The fair value at the acquisition date was $450,000,
which has been adjusted as of 31 December 2014 due to a significantly enhanced
performance compared to budget to a fair value of $685,000. The consideration is due
for final measurement and payment to the former shareholders on 18 October 2015. No
further significant change to the consideration is expected.

Commentary:
Contingent consideration for business combination

Illustrative note disclosure for contingent consideration for business combination when the
amount is finalised in 2015:
Note X Other liabilities
As part of the purchase agreement with the previous owners of MSAX dated 18 October
2014, a portion of the consideration was determined to be contingent on the
performance of the acquired entity. At 18 October 2015, a total of $700,000 was paid to
the previous owner of MSAX under this arrangement.

FRS 103.B64

Group
2015
$000
Initial fair value of the contingent consideration at acquisition date
Fair value adjustment as at 31 December 2014

450
235

Financial liability for the contingent consideration as of 31 December 2014


Fair value adjustment as at 18 October 2015

685
15

Total consideration paid

700

As of 31 December 2013 and prior to payment, the fair value of the contingent
consideration was reassessed which led to additional cost charged to profit or loss.
The initial fair value of the consideration of $450,000 is included in cash flows from
investing activities, the remainder, totalling to $250,000, is recognised in cash flows
from operating activities.

FRS 103.B64.g.i

FRS 103.58

Group

Extract of Consolidated Cash Flow Statement

2015
$000
Cash flows from operating activities:
Settlement of contingent consideration for business combination

( 250)

Cash flows from investing activities:


Settlement of contingent consideration for business combination

(450)

XYZ Holdings (Singapore) Limited | 143

FRS 7.16

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

33. Share capital and treasury shares


FRS 1.77 and 78.e

a) Share capital
Group and Company
2014
No. of
shares
000

FRS 1.79

2013
No. of
shares
000

$000

$000

Issued and fully paid ordinary shares


At 1 January
Issued for acquisition of a subsidiary
(Note 17)

FRS 1.79.a.ii

23,080

9,665

22,940

9,510

1,305

1,475

Share issuance expense (Note 17)


Exercise of employee share options
(Note 35)
At 31 December

(50)

140

155

24,385

11,090

23,080

9,665

FRS 1.79.a. iv

FRS 32.37
FRS 102.50
FRS 1.79.a.ii and
iv

The holders of ordinary shares (except treasury shares) are entitled to receive
dividends as and when declared by the Company. All ordinary shares carry one vote per
share without restrictions. The ordinary shares have no par value.

FRS 1.79.a.v

The Company has two employee share option plans under which options to subscribe
for the Companys ordinary shares have been granted to employees of the Group.

FRS 1.79.a.vii

FRS 1.79.a.iii

b) Treasury shares
Group and Company
2014
No. of
shares
000
At 1 January
Acquired during the financial year
Reissued pursuant to employee share option
plans:
- For cash on exercise of employee share
options (Note 35)
- Transferred from employee share option
reserve
- Gain transferred to gain or loss on reissuance
of treasury shares

(200)

$000

No. of
shares
000

$000

(254)

75

81

79

(65)

95

75
At 31 December

FRS 1.79.a.vi

2013

(125)

(159)

Treasury shares relate to ordinary shares of the Company that is held by the Company.
The Company acquired 200,000 (2013: nil) shares in the Company through purchases
on the Singapore Exchange during the financial year. The total amount paid to acquire
the shares was $254,000 (2013: nil) and this was presented as a component within
shareholders equity.
The Company reissued 75,000 (2013: nil) treasury shares pursuant to its employee
share option plans at a weighted average exercise price of $1.08 (2013: nil) each.

XYZ Holdings (Singapore) Limited | 144

FRS 32.33

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
34.

Other reserves

FRS 1.79.b

a) Fair value adjustment reserve


Fair value adjustment reserve represents the cumulative fair value changes, net of tax,
of available-for-sale financial assets until they are disposed of or impaired.
b) Asset revaluation reserve
The asset revaluation reserve represents increases in the fair value of freehold land
and buildings, net of tax, and decreases to the extent that such decrease relates to an
increase on the same asset previously recognised in other comprehensive income.

c) Statutory reserve fund


In accordance with the Foreign Enterprise Law applicable to the subsidiary in the
Peoples Republic of China (PRC), the subsidiary is required to make appropriation to a
Statutory Reserve Fund (SRF). At least 10% of the statutory profits after tax as
determined in accordance with the applicable PRC accounting standards and
regulations must be allocated to the SRF until the cumulative total of the SRF reaches
50% of the subsidiarys registered capital. Subject to approval from the relevant PRC
authorities, the SRF may be used to offset any accumulated losses or increase the
registered capital of the subsidiary. The SRF is not available for dividend distribution to
shareholders.

d) Foreign currency translation reserve


The foreign currency translation reserve represents exchange differences arising from
the translation of the financial statements of foreign operations whose functional
currencies are different from that of the Groups presentation currency.

e) Employee share option reserve


Employee share option reserve represents the equity-settled share options granted to
employees (Note 35). The reserve is made up of the cumulative value of services
received from employees recorded over the vesting period commencing from the grant
date of equity-settled share options, and is reduced by the expiry or exercise of the
share options.

f) Gain or loss on reissuance of treasury shares


This represents the gain or loss arising from purchase, sale, issue or cancellation of
treasury shares. No dividend may be paid, and no other distribution (whether in cash or
otherwise) of the Companys assets (including any distribution of assets to members on
a winding up) may be made in respect of this reserve.

g) Equity component of convertible redeemable preference shares


This represents the residual amount of convertible redeemable preference shares
(CRPS) after deducting the fair value of the liability component. This amount is
presented net of transaction costs and deferred tax liability arising from the CRPS.

XYZ Holdings (Singapore) Limited | 145

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
35.

Employee benefits
Group
2014

2013

$000

$000

17,758

16,332

2,107

2,166

Share-based payments (Employee share option plans)

245

150

Other short-term benefits

392

376

20,502

19,024

Employee benefits expense (including directors):


Salaries and bonuses
Central Provident Fund contributions

Employee share option plans

FRS 19.46
FRS 102.51.a
FRS 1.104

FRS 102.44

Senior executive option plan


Under the senior executive option plan (SEOP), share options are granted to senior
executives with more than 12 months service. The exercise price of the options is equal
to the market price of the shares on the date of grant. The options vest if and when the
Groups earnings per share amount increases by 12%, within three years from the date of
grant. If this increase is not met, the options will lapse. The contractual life of each option
granted is five years. There are no cash settlement alternatives. The Group does not have
a past practice of cash settlement for these share options.

FRS 102.45.a

General employee share option plan


All other employees are entitled to a grant of options, under the general employee share
option plan (GESP), once they have been in service for two years. The vesting of the
options is dependent on the total shareholder return (TSR) of the Group as compared to a
group of principal competitors. Employees must remain in service for a period of three
years from the date of grant. The exercise price of the options is equal to the market price
of the shares on the date of grant. The contractual life of the options is five years. There
are no cash settlement alternatives. The Group does not have a past practice of cash
settlement for these awards.

FRS 102.45.a

There has been no cancellation or modification to the SEOP and GEOP during both 2015
and 2014.
Movement of share options during the financial year
The following table illustrates the number (No.) and weighted average exercise prices
(WAEP) of, and movements in, share options during the financial year:
2014

2013

No.

WAEP ($)

No.

WAEP ($)

Outstanding at 1 January

425,000

1.22

480,000

1.20

- Granted

200,000

1.30

125,000

1.26

FRS 102.45.b.ii

(25,000)

1.05

FRS 102.45.b.iii

- Forfeited

FRS 102.45.b.i

- Exercised

(75,000)

1.08

(140,000)

1.11

FRS 102.45.b.iv

- Expired

(25,000)

1.16

(15,000)

1.15

FRS 102.45.b.v

Outstanding at 31 December

525,000

1.24

425,000

1.22

FRS 102.45.b.vi

Exercisable at 31 December

200,000

1.18

195,000

1.10

FRS 102.45.b.vii

XYZ Holdings (Singapore) Limited | 146

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

35. Employee benefits (continued)


Employee share option plans (continued)
Movement of share options during the financial year (continued)
-

The weighted average fair value of options granted during the financial year was
$1.14 (2013: $1.03).

FRS 102.47.a

The weighted average share price at the date of exercise of the options exercised
during the financial year was $1.30 (2013: $1.20).

FRS 102.45.c

The range of exercise prices for options outstanding at the end of the year was $1.05
to $1.30 (2013: $1.05 to $1.26). The weighted average remaining contractual life
for these options is 3.90 years (2013: 3.86 years).

FRS 102.45.d

Fair value of share options granted

FRS 102.46

The fair value of the share options granted under the SEOP is estimated at the grant date
using a binomial option pricing model, taking into account the terms and conditions upon
which the share options were granted.

FRS 102.47.a.i

The fair value of share options granted under the GESP is estimated at the date of the
grant using a Monte Carlo simulation model, taking into account the terms and conditions
upon which the options were granted. The model simulates the TSR and compares it
against the group of principal competitors. It takes into account historic dividends, share
price fluctuation covariance of the Company and each entity of the group of competitors
to predict the distribution of relative share performance.

FRS 102.47.a.i and iii

The following table lists the inputs to the option pricing models for the years ended 31
December 2014 and 2013:

FRS 102.47.a.i

SEOP (Binomial)
2014
Dividend yield (%)

2013

GESP (Monte Carlo)


2014

2013

3.13

3.01

3.13

3.01

15.00

16.30

16.00

17.50

Risk-free interest rate (% p.a.)

4.10

4.00

4.10

4.00

Expected life of option (years)

4.05

4.25

4.85

4.65

Weighted average share price ($)

1.30

1.20

1.30

1.20

Expected volatility (%)

The expected life of the share options is based on historical data and is not necessarily
indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is
indicative of future trends, which may not necessarily be the actual outcome.

XYZ Holdings (Singapore) Limited | 147

FRS 102.47.a.ii

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
35. Employee benefits (continued)
Commentary:
Cash-settled share-based payment transactions

In this illustration, all the share-based payment transactions are equity-settled. If an entity has
share-based payment transactions that are either cash-settled or with cash alternatives (for
example, share appreciation rights), the entity should disclose:
-

The total expense recognised for the period arising from the share-based payment
transactions;

The total carrying amount of liabilities at the end of the period; and

The total intrinsic value at the end of the period of liabilities for which the counterpartys
right to cash or other assets had vested by the end of the period (e.g., vested share
appreciation rights).

FRS 102.51.a and b

Illustrative note disclosures:


Share Appreciation Rights (SARs) Plan
Business development managers in the electronic components segment are granted share
options, which can only be settled in cash. These SARs will vest when a specified target
number of new sales contracts are closed. The contractual life of the options is six years.

FRS 102.45.a

The expense recognised in profit or loss granted under the Share Appreciation Rights Plan
during the financial year is $XXX (2013: $XXX).

FRS 102.51.a

The carrying amount of the liability recognised in the Groups and the Companys balance
sheets relating to such share options at 31 December 2014 is $XXX (2013: $XXX).

FRS 102.51.b.i

No Share Appreciation Rights granted under this plan had vested at the end of the
reporting period (2013: nil).

FRS 102.51.b.ii

Weighted average share price

If options were exercised on a regular basis throughout the period, an entity may instead
disclose the weighted average share price during the period.

FRS 102.45.c

Range of exercise prices

If the range of exercise prices is wide, the outstanding options shall be divided into ranges that
are meaningful for assessing the number and timing of additional shares that may be issued
and the cash that may be received upon exercise of those options.

XYZ Holdings (Singapore) Limited | 148

FRS 102.45.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
36. Related party transactions
a) Sale and purchase of goods and services
In addition to the related party information disclosed elsewhere in the financial
statements, the following significant transactions between the Group and related
parties took place at terms agreed between the parties during the financial year:
Group

FRS 24.18

FRS 24.19

2014

2013

$000

$000

700

890

Sale of finished goods to:


- Related companies
- Associates
- A company related to a director

50

30

225

135

1,058

1,200

Purchase of raw materials from:


- Related companies

140

106

Purchase of accounting services from a firm related to a director

25

18

Management fees from joint venture

50

60

- Associates

80

76

- A fellow subsidiary

98

92

- Associates

Interest income from:

Related companies:
These are subsidiaries and associates of Good Group (International) Ltd and its
subsidiaries, excluding entities within the Group.
Company / firm related to a director:
- One of the directors of the Company, through his 25% (2013: 25%) equity interest in
Unik-One Pte Ltd (UOPL), had an interest in a contract for the supply of specialised
digital components to UOPL. During the financial year, the Group sold specialised
digital components of $225,000 (2013: $135,000) to UOPL. No balance with UOPL
was outstanding at the end of the reporting period (2013: nil).

FRS 24.18
CA 201.8

- The Group has entered into a contract with LPS Associates LLP, a firm of which the
wife of one of the directors of the Company is the managing partner, for the
provision of consolidation accounting services to the Company for an amount of
$25,000 (2013: $18,000). No balance with the firm was outstanding at the end of
the reporting period (2013: nil).

b) Commitments with related parties


On 1 July 2014, XYZ Technologies Pte Ltd entered into a two-year agreement ending
30 June 2016 with XYZ China Co. Ltd to purchase specific electrical and optional
cables that XYZ Technologies Pte Ltd uses in its production cycle. XYZ Technologies
Pte Ltd expects the potential purchase volume to be $400,000 in 2015 and $300,000
in the first 3 months of 2016. The purchase price is based on XYZ China Co. Ltds
actual cost plus 5% margin and will be settled in cash within 30 days after receiving the
inventory.

XYZ Holdings (Singapore) Limited | 149

FRS 24.18.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
36. Related party transactions (continued)
c) Compensation of key management personnel

FRS 24.17

Group

Short-term employee benefits


Central Provident Fund contributions
Other short-term benefits
Share-based payments

2014

2013

$000

$000

4,938

4,352

355

357

25

80

80

60

5,398

4,849

Directors of the Company

3,470

3,119

Other key management personnel

1,928

1,730

5,398

4,849

Comprise amounts paid to:

Directors interests in employee share option plan

FRS 24.18

During the financial year:


- 37,000 (2013: 25,000) share options were granted to two of the Company's
executive directors under the SEOP (Note 35) at an exercise price of $1.30 (2013:
$1.26) each.
- These directors exercised options for 10,000 (2013: 5,000) ordinary shares of the
Company at a price of $1.05 (2013: $1.05) each, with a total cash consideration of
$10,500 (2013: $5,250) paid to the Company.
At the end of the reporting period, the total number of outstanding share options
granted by the Company to the abovementioned directors under the SEOP amount to
120,000 (2013: 93,000). No share options have been granted to the Company's nonexecutive directors.

Commentary:
Related party transactions

An entity should make disclosures for transactions with related parties separately for each of
the following categories:
(a) the parent;
(b) entities with joint control or significant influence over the entity;
(c) subsidiaries;
(d) associates;
(e) joint ventures in which the entity is a venturer;
(f) key management personnel of the entity or its parent; and
(g) other related parties.
Such categorisation help provide a more comprehensive analysis of related party balances and
transactions.

XYZ Holdings (Singapore) Limited | 150

FRS 24.19 and 20

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
36. Related party transactions (continued)
Commentary (continued):
Related party transactions

The following are examples of transactions that are disclosed if they are with a related party:

FRS 24.21

(a)
(b)
(c)
(d)
(e)
(f)
(g)

purchases or sales of goods (finished or unfinished);


purchases or sales of property and other assets;
rendering or receiving of services;
leases;
transfers of research and development;
transfers under licence agreements;
transfers under finance arrangements (including loans and equity contributions in cash or
in kind);
(h) provision of guarantees or collateral;
(i) commitments to do something if a particular event occurs or does not occur in the future,
including executor contracts (recognised and unrecognised); and
(j) settlement of liabilities on behalf of the entity or by the entity on behalf of that related
party.

Items of a similar nature may be disclosed in aggregate except when separate disclosure is
necessary for an understanding of the effects of related party transactions on the financial
statements of the entity.

FRS 24.24

Key management personnel

Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the entity, directly or indirectly, including any director
(whether executive or otherwise) of that entity.

FRS 24.9

Transactions with key management personnel

In this illustration, the Group does not have any transactions and outstanding balances,
including commitments with key management personnel, close family members of key
management personnel and entities which the key management personnel have control or joint
control.
Illustrative disclosure when the Group have such transactions are as follows:
The transactions and outstanding balances related to key management personnel, close
family members of key management personnel and entities in which the key management
personnel have control or joint control were as follows:

Related parties

Transactions

Mrs. May Lim


Draco Pte. Ltd.

Legal fees
Purchase of office
stationeries

(a)
(b)

Group
Transactions during
Outstanding
the year
balances as at 31
December
2014
2013
2014
2013
$000
$000
$000
$000
XXX
XXX
XXX

XXX

XXX

FRS 24.18.a,b

(a) The Group uses the legal services provided by Mrs. May Lim who is a close family member
of Mr. Goh Hock Inn, a Director of the Company. The legal fees paid were in relation to
purchase of certain non-current assets of the Group. The fees charged were based on
normal market rates for such services and were due and payable under normal payment
terms.
(b) The Group purchases its office stationeries from Draco Pte. Ltd., a Company controlled by
Mr. Goh Hock Inn, a Director of the Company. These purchases are based on normal
market rates for such supplies and were due and payable under normal payment terms.

XYZ Holdings (Singapore) Limited | 151

FRS 24.18.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
37. Commitments
a) Capital commitments
Capital expenditure contracted for as at the end of the reporting period but not
recognised in the financial statements are as follows:
Group

Capital commitments in respect of


property, plant and equipment

Company

2014
$000

2013
$000

2014
$000

2013
$000

1,690

550

90

55

63

168

1,753

718

90

55

Share of joint ventures capital


commitments in relation to investment
properties

FRS 16.74.c
FRS 112.23.a
FRS 40.75.h

b) Operating lease commitments as lessee


In addition to the land use rights disclosed in Note 16, the Group has entered into
commercial leases on certain motor vehicles and office equipment. These leases have
an average tenure of between three and six years with no renewal option or contingent
rent provision included in the contracts. The Group is restricted from subleasing the
leased equipment to third parties.

FRS 17.35.d

Minimum lease payments, including amortisation of land use rights recognised as an


expense in profit or loss for the financial year ended 31 December 2014 amounted to
$484,000 (2013: $387,000).

FRS 17.35.c

Future minimum rental payable under non-cancellable operating leases (excluding land
use rights) at the end of the reporting period are as follows:

FRS 17.35.a

Group
2014
$000

2013
$000

Not later than one year

370

352

Later than one year but not later than five years

800

926

Later than five years

115

126

1,285

1,404

c) Operating lease commitments as lessor


The Group has entered into commercial property leases on its investment properties.
These non-cancellable leases have remaining lease terms of between two and eight
years. All leases include a clause to enable upward revision of the rental charge on an
annual basis based on prevailing market conditions.
Future minimum rental receivable under non-cancellable operating leases at the end of
the reporting period are as follows:
Group
2014
$000

2013
$000

492

440

Later than one year but not later than five years

1,968

1,760

Later than five years

1,400

1,110

3,860

3,310

Not later than one year

XYZ Holdings (Singapore) Limited | 152

FRS 17.56.c

FRS 17.56.a

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
37. Commitments (continued)
Commentary:

An entity shall disclose total commitments it has made but not recognised at the reporting date
(including its share of commitments made jointly with other investors with joint control of a
joint venture) relating to its interests in joint ventures. Commitments are those that may give
rise to a future outflow of cash or other resources.

FRS 112.B18

Unrecognised commitments that may give rise to a future outflow of cash or other resources
include:

FRS 112.B19

(a) unrecognised commitments to contribute funding or resources as a result of, for example:
i.

the constitution or acquisition agreements of a joint venture (that, for example,


require an entity to contribute funds over a specific period).

ii. capital-intensive projects undertaken by a joint venture.


iii. unconditional purchase obligations, comprising procurement of equipment, inventory
or services that an entity is committed to purchasing from, or on behalf of, a joint
venture.
iv. unrecognised commitments to provide loans or other financial support to a joint
venture.
v. unrecognised commitments to contribute resources to a joint venture, such as assets
or services.
vi. other non-cancellable unrecognised commitments relating to a joint venture.
(b) Unrecognised commitments to acquire another partys ownership interest (or a portion of
that ownership interest) in a joint venture if a particular event occurs or does not occur in
the future.
Future minimum lease payments under non-cancellable operating leases

The disclosure of future minimum lease payments according to time bands relates only to noncancellable operating leases. A non-cancellable lease is a lease that is cancellable only:
(a) upon the occurrence of some remote contingency;
(b) with the permission of the lessor;
(c) if the lessee enters into a new lease for the same or an equivalent asset with the same
lessor; or
(d) upon payment by the lessee of such an additional amount that, at inception of the lease,
continuation of the lease is reasonably certain.
A leasing arrangement where the lessee has the right to terminate lease by providing a written
notice to the lessor without incurring losses significant in comparison to the value of remaining
lease payments is generally not considered a non-cancellable lease and is not included in such
disclosure.

XYZ Holdings (Singapore) Limited | 153

FRS 17.4

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
37. Commitments (continued)
d) Finance lease commitments (continued)
The Group has finance leases for certain items of plant and equipment and furniture
and fixtures. These leases have terms of renewal but no purchase options and
escalation clauses. Renewals are at the option of the specific entity that holds the
lease.

FRS 17.31.e

Future minimum lease payments under finance leases together with the present value
of the net minimum lease payments are as follows:

FRS 17.31.b

Group
2014

2013

$000

$000
Present
value of
payments
(Note 30)

Minimum
lease
payments

Present
value of
payments
(Note 30)

Not later than one year

251

216

30

16

Later than one year but not later than


five years

392

252

265

120

Later than five years

643

468

117

40

1,286

936

412

176

Total minimum lease payments


Less: Amounts representing finance
charges
Present value of minimum lease
payments

(350)
936

936

Minimum
lease
payments

(236)
176

176

XYZ Holdings (Singapore) Limited | 154

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
38.

Contingencies
FRS 37.86

a) Contingent liabilities
Legal claim
On 30 November 2014, a customer has commenced an action against the Group in
respect of construction works claimed to be sub-standard. The estimated payout is
$250,000 should the action be successful. A trial date has not yet been set and
therefore it is not practicable to state the timing of any payment. The Group has been
advised by its legal counsel that it is possible, but not probable, that the action will
succeed and accordingly no provision for any liability has been made in these financial
statements.

FRS 11.45

Guarantees
The Group has provided the following guarantees at the end of the reporting period:

FRS 24.20.h

It has guaranteed its share of $20,000 (2013: $15,000) of the associates


contingent liabilities which have been incurred jointly with other investors.

It has guaranteed part of the bank overdraft of the associate to a maximum


amount of $300,000 (2013: nil), which it is severally liable for in the event of
default by the associate.

FRS 112.23.b

It has guaranteed its interest in its share of the joint ventures loan of $245,000
(2013: $240,000) (Note 30).

FRS 112.23.b

It has guaranteed to an unrelated party the performance of a contract for the joint
venture. No liability is expected to arise (2013: nil).

FRS 112.23.b

The Company has provided a corporate guarantee to a bank for a $5,400,000 (2013:
$5,400,000) loan (Note 30) taken by a subsidiary.

FRS 112.23.b

FRS 24.20.h

b) Contingent asset
a)

A legal claim for defamation of $500,000 was lodged against one of the Groups
competitors in October 2013. Based on advice from the legal counsel, the Group is
confident that the dispute will be settled in its favour.

b) The Group is claiming amounts (such as variations and additional works under the
construction contracts) and pending proceedings and disputes with clients. It is not
possible to reasonably determine the extent and timing of possible inflow of
economic benefits. These claims are therefore not recognised in these financial
statements.

XYZ Holdings (Singapore) Limited | 155

FRS 37.89

FRS 11.45

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities
a) Fair value hierarchy
The Group categorises fair value measurements using a fair value hierarchy that is
dependent on the valuation inputs used as follows:

FRS 113.72

Level 1 Quoted prices (unadjusted) in active market for identical assets or


liabilities that the Group can access at the measurement date,

FRS 113.76

Level 2 Inputs other that quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly, and

Level 3 Unobservable inputs for the asset or liability.

Fair value measurements that use inputs of different hierarchy levels are categorised in
its entirety in the same level of the fair value hierarchy as the lowest level input that is
significant to the entire measurement.

FRS 113.81
FRS 113.86
FRS 113.73

Commentary:

An entity shall disclose information that helps users of its financial statements assess both of
the following:

FRS 113.91

(a) For assets and liabilities that are measured at fair value on a recurring or non-recurring
basis in the balance sheet after initial recognition, the valuation techniques and inputs
used to develop those measurements.
(b) For recurring fair value measurements using significant unobservable inputs (Level 3), the
effect of the measurements on profit or loss or other comprehensive income for the
period.
To meet the objective above, an entity shall consider all the following:
(a) The level of detail necessary to satisfy the disclosure requirements;
(b) How much emphasis to place on each of the various requirements;
(c) How much aggregation and disaggregation to undertake; and
(d) Whether users of financial statements need additional information to evaluate the
quantitative information disclosed.
If the disclosures provided in accordance with FRS 113 and other FRSs are insufficient to meet
the objectives above, an entity shall disclose additional information necessary to meet those
objectives.

XYZ Holdings (Singapore) Limited | 156

FRS 113.92

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
b) Assets and liabilities measured at fair value
The following table shows an analysis of each class of assets and liabilities measured at
fair value at the end of the reporting period:
Group
2014
$000
Fair value measurements at the end of the reporting period using
Quoted prices in
active markets
for identical
instruments

Significant
observable
inputs other
than quoted
prices

Significant
unobservable
inputs

(Level 1)

(Level 2)

(Level 3)

Total

Assets measured at fair value


Financial assets:
Held for trading financial assets (Note 22)
Quoted equity securities

1,512

1,512

Available-for-sale financial assets (Note 22)


Equity securities
Quoted equity securities
Unquoted equity securities

1,746

1,746

139

139

1,563

1,563

150

150

Debt securities
Unquoted debt securities
Derivatives
Forward currency contracts
Interest rate swap
Financial assets as at 31 December 2014

20

20

3,258

170

1,702

5,130

Non-financial assets:
Investment properties
Commercial

2,831

2,831

Residential

1,814

1,814

Freehold land

11,874

11,874

Buildings

3,291

3,291

Disposal group classified as held for sale*

199

199

Non-financial assets as at 31 December 2014

1,814

18,195

20,009

Property, plant and equipment

Liabilities measured at fair value


Financial liabilities
Derivatives
Forward currency contracts

(22)

(22)

Contingent consideration for business


combination

(685)

(685)

Financial liabilities as at 31 December 2014

(22)

(685)

(707)

*Disposal group classified as held for sale with a carrying amount of $649,000 were
written down to their fair value of $219,000, less costs to sell of $20,000 (or $199,000),
resulting in a net loss of $450,000, which was included in the profit or loss for the period.

XYZ Holdings (Singapore) Limited | 157

FRS 113.93.a
and b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
b) Assets and liabilities measured at fair value (continued)
FRS 113.93.a
and b

Group
2013
$000
Fair value measurements at the end of the reporting period using
Quoted prices
in active
markets for
identical
instruments

Significant
observable
inputs other
than quoted
prices

Significant
unobservable
inputs

(Level 1)

(Level 2)

(Level 3)

Total

Assets measured at fair value


Financial assets:
Held for trading financial assets (Note 22)
Quoted equity securities

1,260

1,260

848

848

28

28

980

980

Forward currency contracts

60

60

Interest rate swap

45

45

2,108

105

1,008

3,221

Available-for-sale financial assets (Note 22)


Equity securities
Quoted equity securities
Unquoted equity securities
Debt securities
Unquoted debt securities
Derivatives

Financial assets as at 31 December 2013


Non-financial assets:
Investment properties
Commercial

2,380

2,380

Residential

1,575

1,575

Freehold land

10,726

10,726

Buildings

3,574

3,574

1,575

16,680

18,255

Property, plant and equipment

Non-financial assets as at 31 December 2013

c) Level 2 fair value measurements


The following is a description of the valuation techniques and inputs used in the fair
value measurement for assets and liabilities that are categorised within Level 2 of the
fair value hierarchy:
Derivatives
Forward currency contracts and interest rate swap contracts are valued using a
valuation technique with market observable inputs. The most frequently applied
valuation techniques include forward pricing and swap models, using present value
calculations. The models incorporate various inputs including the credit quality of
counterparties, foreign exchange spot and forward rates, interest rate curves and
forward rate curves.
Residential investment properties
The valuation of residential investment properties are based on comparable market
transactions that consider sales of similar properties that have been transacted in the
open market.

XYZ Holdings (Singapore) Limited | 158

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements
i) Information about significant unobservable inputs used in Level 3 fair value
measurements
The following table shows the information about fair value measurements using
significant unobservable inputs (Level 3)
Description

Fair Value
as at 31
December
2014

Valuation
techniques

Unobservable inputs

Range (weighted
average)

Recurring fair value


measurements
Available-for-sale
financial assets:
Unquoted equity
securities

Unquoted debt
securities

Contingent
consideration for
business combination

139

Cost of equity

6% to 11% (7.3%)

Dividend yield

3% to 7.5% (4.6%)

Discount for lack of


marketability

5% to 20% (4.6%)

Probability of default

5% to 50% (10%)

Loss severity

40% to 100% (60%)

Probability of meeting
contractual earnings
target

20% to 100% (60%)

Own credit risk

6% to 10% (8%)

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

10% to 25% (13%)

11,874

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

15% to 30% (20%)

3,291

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

10% to 20% (15%)

199

Discounted
cash flow

Weighted average cost of


capital

6% to 12% (10.1%)

Long-term revenue growth


rate

3% to 5.5% (4.2%)

Long-term pre-tax
operating margin

7.5% to 13% (9.2%)

Discount for lack of


marketability

5% to 20% (10%)

1,563

(685)

Discounted
cash flow

Discounted
cash flow

Discounted
cash flow

Investment properties
Commercial

2,831

Property, plant and


equipment
Freehold land

Buildings

Non-recurring fair value


measurements
Disposal group
classified as held for
sale

*The yield adjustments are made for any difference in the nature, location or condition of
the specific property.

XYZ Holdings (Singapore) Limited | 159

FRS 113.93.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
i) Information about significant unobservable inputs used in Level 3 fair value
measurements (continued)
Description

Fair Value
as at 31
December
2013

Valuation
techniques

Unobservable inputs

FRS 113.93.d

Range (weighted
average)

Recurring fair value


measurements
Available-for-sale
financial assets:
Unquoted equity
securities

Unquoted debt
securities

28

980

Discounted
cash flow

Discounted
cash flow

Cost of equity

6% to 11% (7.3%)

Dividend yield

3% to 7.5% (4.6%)

Discount for lack of


marketability

5% to 20% (4.6%)

Probability of default

5% to 50% (10%)

Loss severity

40% to 100% (60%)

Investment properties
Commercial

2,380

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

10% to 25% (13%)

10,726

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

15% to 30% (20%)

3,574

Market
comparable
approach

Yield adjustments based


on managements
assumptions*

10% to 20% (15%)

Property, plant and


equipment
Freehold land

Buildings

*The yield adjustments are made for any difference in the nature, location or condition of
the specific property.

For unquoted equity securities, a significant increase (decrease) in the expected


dividend yield would result in a significantly higher (lower) fair value measurement. A
significant increase (decrease) in discount for lack of marketability would result in a
significantly lower (higher) fair value measurement. A change in assumption used for
dividend yield may warrant a directionally opposite change in assumption for discount
for lack of marketability.
For unquoted debt securities, significant increases (decreases) in prepayment rates,
probability of default and loss severity in the event of default would result in a
significant lower (higher) fair value measurement. Generally, a change in the
assumption used for the probability of default is accompanied by a directionally
similar change in the assumption used for the loss severity and a directionally
opposite change in the assumption used for prepayment rates.
For contingent consideration, a significant increase (decrease) in the probability of
meeting the contractual earnings target would result in a significantly higher (lower)
fair value measurement.
For freehold land and buildings and commercial investment properties, a significant
increase (decrease) in yield adjustments based on managements assumptions would
result in a significantly lower (higher) fair value measurement.

XYZ Holdings (Singapore) Limited | 160

FRS 113.93.h.i

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
i) Information about significant unobservable inputs used in Level 3 fair value
measurements (continued)
The following table shows the impact on the Level 3 fair value measurement of assets
and liabilities that are sensitive to changes in unobservable inputs that reflect
reasonably possible alternative assumptions. The positive and negative effects are
approximately the same.
31 December 2014
Effect of reasonably possible
alternative assumptions
Carrying
amount

Profit or loss

Other
comprehensive
income

$000

$000

$000

Recurring fair value measurements


Available-for-sale financial assets:
Unquoted equity securities
Unquoted debt securities
Contingent consideration for business
combination

139

15

1,563

56

(685)

35

31 December 2013
Effect of reasonably possible
alternative assumptions
Carrying
amount

Profit or loss

Other
comprehensive
income

$000

$000

$000

Recurring fair value measurements


Available-for-sale financial assets:
Unquoted equity securities
Unquoted debt securities

28

10

980

18

In order to determine the effect of the above reasonably possible alternative


assumptions, the Group adjusted the following key unobservable inputs used in the
fair value measurement:
-

For unquoted equity securities, the Group adjusted the discount for lack of
marketability by increasing and decreasing the assumptions by 5% to 8% (2013:
6% to 9%) depending on the individual characteristics of the instrument.

For unquoted debt securities, the Group adjusted the probability of default and
loss severity assumptions used to calculate the credit valuation adjustment. The
adjustments made were to increase and decrease the assumptions by 6% (2013:
5%), which is within the range based on the Groups internal credit risk assessment
for the counterparties.

For contingent consideration for business combination, the Group adjusted the
probability of meeting the contractual earnings target by increasing and
decreasing assumption by 10% (2013: 10%).

XYZ Holdings (Singapore) Limited | 161

FRS 113.93.h.ii

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)

FRS 113.93.e

ii) Movements in Level 3 assets and liabilities measured at fair value


The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):
Group
2014
$000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale
financial assets
Unquoted
equity
securities
Opening balance
Total gains or losses for
the period
Included in profit or loss
Included in other
comprehensive income
Purchases, issues, sales
and settlements
Purchases
Sales
Transfer from/(to)
investment properties
Exchange differences
Arising from acquisition of
subsidiary
Closing balance

Investment
properties

Contingent
consideration

Total

Unquoted
debt
securities

Commercial

28

980

2,380

3,388

350

(235)

115

FRS 113.93.e.i

42

28

70

FRS 113.93.e.ii

103
(34)

576
(21)

400
-

1,079
(55)

FRS 113.93.e.iii

(300)
1

(300)
1

FRS 113.93.e.iv

(450)

(450)

139

1,563

2,831

(685)

3,848

Group
2013
$000
Fair value measurements using significant unobservable inputs (Level 3)

Opening balance
Total gains or losses for
the period
Included in profit or loss
Included in other
comprehensive income
Purchases, issues, sales
and settlements
Purchases
Sales
Closing balance

Available-for-sale financial assets

Investment
properties

Unquoted equity
securities

Commercial

Unquoted
debt
securities

Total

40

1,026

2,330

3,396

50

50

FRS 113.93.e.i

15

24

FRS 113.93.e.ii

16
(43)

15
(70)

31
(113)

FRS 113.93.e.iii

28

980

2,380

3,388

XYZ Holdings (Singapore) Limited | 162

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
ii) Movements in Level 3 assets and liabilities measured at fair value
(continued)
The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):

Group
2014
$000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale financial
assets
Unquoted
equity
securities

Unquoted
debt
securities

Property, plant and


equipment
Freehold
land

Buildings

Investment
properties

Contingent
consideration

Total

Commercial

Total gains and


losses for the period
included in
Profit or loss:
- Other income
Net gain
from fair
value
adjustment
of
investment
properties (i)

FRS 113.93.e.i

350

350

(235)

(235)

- Other expenses
Fair value
adjustment
of contingent
consideration
of business
combination
(ii)

Other
comprehensive
income:
- Net gain on fair
value changes
of available-forsale financial
assets
- Net surplus on
revaluation of
land and
buildings

FRS 113.93.e.ii

42

28

70

1,001

249

1250

(i)

Relates to net gain from fair value adjustment of investment properties held as at 31 December
2014.

(ii)

Relates to unrealised loss from fair value adjustment of contingent consideration for business
combination as at 31 December 2014.

XYZ Holdings (Singapore) Limited | 163

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
ii) Movements in Level 3 assets and liabilities measured at fair value
(continued)
The following table presents the reconciliation for all assets and liabilities measured
at fair value based on significant unobservable inputs (Level 3):

Group
2013
$000
Fair value measurements using significant unobservable inputs (Level 3)
Available-for-sale
financial assets
Unquoted
equity
securities

Property, plant and


equipment

Unquoted
debt
securities

Freehold
land

Investment
properties

Buildings

Contingent
consideration

Total

Commercial

Total gains and


losses for the period
included in
Profit or loss:
- Other income
Net gain
from fair
value
adjustment
of
investment
properties (i)
Other
comprehensive
income:
- Net gain on fair
value changes
of available-forsale financial
assets
- Net surplus on
revaluation of
land and
buildings

(i)

FRS 113.93.e.i

50

50

FRS 113.93.e.ii

15

24

1,784

620

2,404

Relates to net gain from fair value adjustment of investment properties held as at 31 December
2013.

XYZ Holdings (Singapore) Limited | 164

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
d) Level 3 fair value measurements (continued)
iii) Valuation policies and procedures

FRS 113.93.g

The Groups Chief Financial Officer (CFO), who is assisted by the Head of Treasury
and senior controller (collectively referred to as the CFO office) oversees the
Groups financial reporting valuation process and is responsible for setting and
documenting the Groups valuation policies and procedures. In this regard, the CFO
office reports to the Groups Audit Committee.
For all significant financial reporting valuations using valuation models and significant
unobservable inputs, it is the Groups policy to engage external valuation experts who
possess the relevant credentials and knowledge on the subject of valuation, valuation
methodologies and FRS 113 fair value measurement guidance to perform the
valuation.
For valuations performed by external valuation experts, the appropriateness of the
valuation methodologies and assumptions adopted are reviewed along with the
appropriateness and reliability of the inputs (including those developed internally by
the Group) used in the valuations.
In selecting the appropriate valuation models and inputs to be adopted for each
valuation that uses significant non-observable inputs, external valuation experts are
requested to calibrate the valuation models and inputs to actual market transactions
(which may include transactions entered into by the Group with third parties as
appropriate) that are relevant to the valuation if such information are reasonably
available. For valuations that are sensitive to the unobservable inputs used, external
valuation experts are required, to the extent practicable to use a minimum of two
valuation approaches to allow for cross-checks.
Significant changes in fair value measurements from period to period are evaluated
for reasonableness. Key drivers of the changes are identified and assessed for
reasonableness against relevant information from independent sources, or internal
sources if necessary and appropriate.
The CFO office documents and reports its analysis and results of the external
valuations to the Audit Committee on a quarterly basis. The Audit Committee
performs a high-level independent review of the valuation process and results and
recommends if any revisions need to be made before presenting the results to the
Board of Directors for approval.

XYZ Holdings (Singapore) Limited | 165

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
e) Assets and liabilities not carried at fair value but for which fair value is disclosed
The following table shows an analysis of the Groups assets and liabilities not measured at
fair value but for which fair value is disclosed:

Group
2014
$000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets
for
identical
assets
(Level 1)

Significant
observable
inputs other
than quoted
prices
(Level 2)

Significant
unobservable
inputs
(Level 3)

Carrying
amount

Total

Assets
Government bonds

675

675

660

Investment in associates

10,600

10,600

10,595

Staff loans (non-current)

60

60

63

Deferred cash settlement

(205)

(205)

(200)

Financial guarantees

(29)

(29)

(26)

- Fixed rate bank loans and


bonds

(4,983)

(4,983)

(4,890)

- Convertible redeemable
preference shares

(509)

(509)

(450)

Liabilities:

Loans and borrowings (noncurrent)

Company

Assets
Amounts and loans due from
subsidiaries

13,432

13,432

13,563

Staff loans (non-current)

49

49

51

(85)

(85)

(80)

- Fixed rate bank loans and


bonds

(3,162)

(3,162)

(3,100)

- Convertible redeemable
preference shares

(509)

(509)

(450)

Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)

XYZ Holdings (Singapore) Limited | 166

FRS 113.97
FRS 107.25

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
e) Assets and liabilities not carried at fair value but for which fair value is disclosed
(continued)

FRS 113.97
FRS 107.25

Group
2013
$000
Fair value measurements at the end of the reporting period using
Quoted
prices in
active
markets
for
identical
assets
(Level 1)

Significant
observable
inputs other
than quoted
prices
(Level 2)

Significant
unobservable
inputs
(Level 3)

Carrying
amount

Total

Assets
Government bonds

665

665

650

Investment in associates

10,400

10,400

10,321

Staff loans (non-current)

45

45

48

(11)

(11)

(8)

- Fixed rate bank loans and


bonds

(5,342)

(5,342)

(5,240)

- Convertible redeemable
preference shares

(459)

(459)

(428)

Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)

Company

Assets
Amounts and loans due from
subsidiaries

14,161

14,161

14,635

Staff loans (non-current)

34

34

36

(105)

(105)

(100)

- Fixed rate bank loans and


bonds

(3,060)

(3,060)

(3,000)

- Convertible redeemable
preference shares

(459)

(459)

(428)

Liabilities:
Financial guarantees
Loans and borrowings (noncurrent)

Determination of fair value


Amounts and loans due from subsidiaries, Staff loans, Deferred cash, Fixed rate bank loans
and bonds, and Convertible redeemable preference shares
The fair values as disclosed in the table above are estimated by discounting expected
future cash flows at market incremental lending rate for similar types of lending,
borrowing or leasing arrangements at the end of the reporting period.

XYZ Holdings (Singapore) Limited | 167

FRS 113.97
FRS 113.93.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
f) Fair value of financial instruments by classes that are not carried at fair value
and whose carrying amounts are not reasonable approximation of fair value
The fair value of financial assets and liabilities by classes that are not carried at fair
value and whose carrying amounts are not reasonable approximation of fair value are
as follows:
Group
Note

Company

2014

2013

2014

2013

$000

$000

$000

$000

Carrying
amount

Fair
value

FRS 107.7 and 31


FRS 107.25,26 and
29

Carrying
amount

Fair
value

Carrying
amount

Fair
value

Carrying
amount

Fair
value

Financial assets:
Government bonds

22

660

675

650

665

Equity securities, at
cost

22

500

600

Amounts and loans due


from subsidiaries

21

13,972

13,432

14,635

14,161

Staff loans (noncurrent)

21

63

60

48

45

51

49

36

34

Financial liabilities:
Deferred cash
settlement

31

(200)

(205)

Financial guarantee

32

(26)

(29)

(8)

(11)

Loans and borrowings


(non-current)

30
(720)

(769)

(160)

(169)

(4,890)

(4,983)

(5,240)

(5,342)

(3,100)

(3,162)

(3,000)

(3,060)

(450)

(509)

(428)

(459)

(450)

(509)

(428)

(459)

- Obligations under
finance leases
- Fixed rate bank
loans and bonds
- Convertible
redeemable
preference shares

(80)

(85)

(100)

(105)

T Investment in equity securities carried at cost

Fair value information has not been disclosed for the Groups investments in equity
securities that are carried at cost because fair value cannot be measured reliably.
These equity securities represent ordinary shares in an Israeli high-technology
company that is not quoted on any market and does not have any comparable industry
peer that is listed. In addition, the variability in the range of reasonable fair value
estimates derived from valuation techniques is significant. The Group does not intend
to dispose of this investment in the foreseeable future. The Group intends to eventually
dispose of this investment through sale to institutional investors.

XYZ Holdings (Singapore) Limited | 168

FRS 107.30.a-d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
Commentary:

Disclosures in tabular format


An entity shall present the quantitative disclosures required by FRS 113 in a tabular format
unless another format is more appropriate.
Classes of assets and liabilities
An entity shall determine appropriate classes of assets and liabilities on the basis of the
following:

FRS 113.99

FRS 113.94

(a) The nature, characteristics and risks of the asset or liability; and
(b) The level of the fair value hierarchy within which the fair value measurement is
categorised.
The number of classes may need to be greater for fair value measurements categorised
within Level 3 of the fair value hierarchy because those measurements have a greater
degree of uncertainty and subjectivity. Determining appropriate classes of assets and
liabilities for which disclosures about fair value measurements should be provided
requires judgement. A class of assets and liabilities will often require greater
disaggregation than the line items presented in the balance sheet. If another FRS
specifies the class for an asset or a liability, an entity may use that class in providing the
disclosures required in FRS 113 if that class meets the requirements in this paragraph.

In this illustration, the current use of the non-financial assets does not differ from their highest
and best use. If for recurring and non-recurring fair value measurements, the highest and best
use of a non-financial asset differs from its current use, an entity shall disclose the fact and
why the non-financial asset is being used in a manner that differs from its highest and best use.

In this illustration, the Groups commercial properties are categorised within Level 3 of the fair
value hierarchy as the properties fair values are determined based on comparable market
transactions adjusted for significant unobservable inputs such as yield adjustments relating to
nature, location and condition of the specific property.

FRS 113.93.i

In this illustration, the Groups residential investment properties are categorised within Level 2
of the fair value hierarchy as the properties fair values are determined solely based on
observable inputs other than quoted prices.

In this illustration, the Group does not have any liability measured at fair value and issued with
an inseparable third-party credit enhancement.
For a liability measured at fair value and issued with an inseparable third-party credit
enhancement, an issuer shall disclose the existence of that credit enhancement and whether it
is reflected in the fair value measurement of the liability.

XYZ Holdings (Singapore) Limited | 169

FRS 113.98

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
Commentary (continued):

Transfers between fair value hierarchy


Transfers between Level 1 and Level 2
FRS 113 requires disclosures of the amount of any transfers between Level 1 and Level 2 of
the fair value hierarchy for assets and liabilities held at the end of the reporting period that
are measured at fair value on a recurring basis and the reasons for those transfers. Transfers
into each level shall be disclosed and discussed separately from transfers out of each level.

FRS 113.93.c

In this illustration, there were no assets or liabilities transferred between Level 1 and Level 2.
Illustrative disclosure if an entity has transfers of assets or liabilities between Level 1 and
Level 2.
The following table shows transfers from Level 1 to Level 2 of the fair value hierarchy
for assets and liabilities which are recorded at fair value.
Group
2013
$000
Financial assets held-for-trading
- Quoted equity securities
Financial investments available-for-sale
- Other debt securities

XXX
XXX

The above financial assets were transferred from Level 1 to Level 2 as they were
delisted from the stock exchange and therefore ceased to be actively traded during the
year and fair values were consequently measured using valuation techniques and using
observable market inputs.
Transfers into or out of Level 3
FRS 113 requires disclosures of the amount of any transfers into or out of Level 3 of the fair
value hierarchy, the reasons for those transfers and the entitys policy for determining when
transfers between levels are deemed to have occurred. Transfers into Level 3 shall be
disclosed and discussed separately from transfers out of Level 3.
In this illustration, there were no assets or liabilities transferred from Level 1 and Level 2 to
Level 3.
Illustrative disclosure if there were transfers of assets or liabilities into Level 3.
During the financial year ended 31 December 2014, the Group transferred certain
financial instruments from Level 2 to Level 3 of the fair value hierarchy. The carrying
amount of the total financial assets transferred was $XXX.
The reason for the transfers from Level 2 to Level 3 is that inputs to the valuation
models for the other debt securities ceased to be observable. Prior to transfer, the fair
value of the instruments was determined using observable market transactions or
binding broker quotes for the same or similar instruments. Since the transfer, these
instruments have been valued using valuation models incorporating significant non
market-observable inputs.
Illustrative disclosure if there were transfers of assets or liabilities out of Level 3.
The Group transferred an unquoted equity security from Level 3 to Level 1 of the fair
value hierarchy. The carrying amount of the total financial assets transferred was
$XXX.
The security was transferred from Level 3 into Level 1 as it was listed on the stock
exchange during the financial year. Prior to the transfer, the fair value of the security
was determined using valuation model incorporating significant non market-observable
inputs. Since the transfer, the fair value of the security is determined based on market
price quoted in the stock exchange.

XYZ Holdings (Singapore) Limited | 170

FRS 113.93.e.iv

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
Commentary (continued):

In this illustration, there has been no change in valuation technique for recurring and nonrecurring fair value measurements categorised within Level 2 and Level 3 of the fair value
hierarchy. If there has been a change in valuation technique (e.g. changing from a market
approach to an income approach or use of an additional valuation technique), the entity shall
disclose that change and the reason(s) for making it.

For recurring and non-recurring fair value measurements categorised within Level 3 of the fair
value hierarchy, a description of valuation processes used by the entity (including, for
example, how an entity decides its valuation policies and procedures and analyses changes in
fair value measurements from period to period.
An entity might disclose the following:
(a)

FRS 113.93.d

FRS 113.93.g

FRS 113.IE65

for the group within the entity that decides the entitys valuation policies and
procedures:
i.

its description;

ii.

to whom that group reports; and

iii.

the internal reporting procedures in place (e.g. whether and, if so, how pricing, risk
management or audit committees discuss and assess the fair value measurements.

(b)

the frequency and methods for calibration, back testing and other testing procedures of
pricing models;

(c)

the process for analysing changes in fair value measurements from period to period;

(d)

how the entity determined that third-party information, such as broker quotes or pricing
services, used in the fair value measurement was developed in accordance with FRS 113;
and

(e)

the methods used to develop and substantiate the unobservable inputs used in a fair
value measurement.

It is important to note that the illustration on valuation policies and procedures for
recurring and non-recurring fair value measurements categorised within Level 3 of the
fair value hierarchy is based on certain assumed facts regarding circumstances
surrounding XYZ Holdings (Singapore) Limited. The valuation policies and procedures
of other entities may be different and disclosures would have to be customised in the
light of specific facts and circumstances applicable to the entity.

In this illustration, investment properties are carried at fair value. For any investment
properties recorded at cost, FRS 40 requires disclosure about fair value. Please refer to
commentary no.2 of Note 2.8 Investment properties.
Where investment properties are carried at cost for which fair value are disclosed, FRS 113.97
requires the disclosures of

FRS 113.97

the level of the fair value hierarchy within which the fair value measurements are
categorised in their entirety (Level 1, 2 or 3),

FRS 113.93.b

a description of the valuation technique(s) and inputs used in the fair value measurement.
If there has been a change in valuation technique, the entity shall disclose the reason for
making it,

FRS 113.93.d

- the fact and why the non-financial asset is being used in a manner that differs from its

highest and best use if the highest and best use of a non-financial asset differs from its
current use

XYZ Holdings (Singapore) Limited | 171

FRS 113.93.i

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
39. Fair value of assets and liabilities (continued)
Commentary (continued):
Fair value of financial assets and liabilities

FRS 107.25 requires the fair value of each class of financial assets and liabilities to be
disclosed in a way that permits it to be compared with its carrying amount. However,
disclosures of fair value are not required:
-

When the carrying amount is a reasonable approximation of fair value (e.g., short-term
trade and other receivables and payables, and long-term loans that are re-priced to market
rate);

For an investment in equity instruments that do not have a quoted market price in an active
market, or derivatives linked to such equity instruments, that is measured at cost in
accordance with FRS 39 because its fair value cannot be measured reliably; or

For a contract containing a discretionary participation feature (as described in FRS 104) if
the fair value of that feature cannot be measured reliably.

FRS 107.25 and 29

In this illustration, in addition to the above exemptions, the comparison between carrying
amount and fair value of financial assets or liabilities that are carried at fair value (e.g., held for
trading investments and derivatives) has not been disclosed as these assets are carried at fair
value.
Financial instruments whose fair value cannot be reliably measured

FRS 107 requires the disclosure of fair value information for financial instruments whose fair
value cannot be reliably measured to include disclosure of whether and how the entity intends
to dispose of such financial instruments.

FRS 107.20.d

If financial instruments whose fair value previously could not be reliably measured are
derecognised, that fact, their carrying amounts at the time of de-recognition, and the amount
of gain or loss recognised shall be disclosed.

FRS 107.30.e

XYZ Holdings (Singapore) Limited | 172

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies

FRS 107.7 and 31

The Group and the Company is exposed to financial risks arising from its operations and
the use of financial instruments. The key financial risks include credit risk, liquidity risk,
interest rate risk, foreign currency risk and market price risk. The board of directors
reviews and agrees policies and procedures for the management of these risks, which are
executed by the Chief Financial Officer, Head of Treasury and Head of Credit Control. The
Audit Committee provides independent oversight to the effectiveness of the risk
management process. It is, and has been throughout the current and previous financial
year, the Groups policy that no trading in derivatives for speculative purposes shall be
undertaken.

FRS 107.31-33
and IG15

The following sections provide details regarding the Groups and Companys exposure to
the above-mentioned financial risks and the objectives, policies and processes for the
management of these risks.

Commentary:
Alternative simplified disclosures
In this illustration, the entity is exposed to all credit risk, liquidity risk, interest rate risk, foreign
currency risk and market price risk.

FRS 107.31, 33
and IG17

Example illustrative financial risk management objectives and policies for a non-complex trading
entity which is exposed mainly to credit risk and liquidity risk.
The Group and the Company is exposed to financial risks arising from its operations and the
use of financial instruments. The key financial risks include credit risk and liquidity risk.
The following sections provide details regarding the Group and Company's exposure to the
above-mentioned financial risks and the objectives, policies and processes for the
management of these risks.
Nature and extent of risks arising from financial instruments

FRS 107 requires an entity to disclose qualitative and quantitative information that enables
users of its financial statements to evaluate the nature and extent of risks arising from
financial instruments to which the entity is exposed at the reporting date, including the
entitys policies and processes for accepting, measuring, monitoring and controlling such
risks. In addition, an entity is required to disclose any change in the qualitative information
from the previous period and explain the reasons for the change.
The disclosures in response to FRS 107 illustrated in this note are based on assumed
circumstances of XYZ Holdings (Singapore) Limited and may not be applicable or
relevant to other entities. Each entity should customise the information disclosed
according to the specific circumstances, financial risk exposures, and risk management
policies and procedures relevant to the entity.

FRS 107.AGB6

Alternative approaches of disclosure

Decentralised disclosures

FRS 107.33.c

In this illustration, most of the information regarding the nature and extent of risks arising
from financial instruments required by FRS 107.31-42, has been disclosed in one centralised
note. Alternatively, an entity may disclose such information in the respective balance sheet
item notes where appropriate.

XYZ Holdings (Singapore) Limited | 173

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40.

Financial risk management objectives and policies (continued)


Commentary (continued):

Incorporating disclosures by cross reference


The disclosures of information regarding the nature and extent of risks arising from financial
instruments may instead be incorporated in the financial statements by cross-reference from
the financial statements to some other statement, such as management commentary or risk
report, that is available to users of the financial statements on the same terms as the financial
statements and at the same time. Without the information incorporated by cross-reference,
the financial statements are incomplete.

In this illustration, theres no change to the Groups exposure to risk arising from financial
instruments. FRS 107 requires disclosures of changes from previous period for
(a) exposures to risk and how they arise; (or)
(b) its objective, policies and processes for managing the risk and the methods used to
measure the risks from the previous period.

a) Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should
a counterparty default on its obligations. The Groups and the Companys exposure to
credit risk arises primarily from trade and other receivables. For other financial assets
(including investment securities, cash and short-term deposits and derivatives), the
Group and the Company minimise credit risk by dealing exclusively with high credit
rating counterparties.

FRS 107.33.a-b and


IG15

The Groups objective is to seek continual revenue growth while minimising losses
incurred due to increased credit risk exposure. The Group trades only with recognised
and creditworthy third parties. It is the Groups policy that all customers who wish to
trade on credit terms are subject to credit verification procedures. In addition,
receivable balances are monitored on an ongoing basis with the result that the Groups
exposure to bad debts is not significant. For transactions that do not occur in the
country of the relevant operating unit, the Group does not offer credit terms without
the approval of the Head of Credit Control.
Excessive risk concentration
Concentrations arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographical region, or have economic features that
would cause their ability to meet contractual obligations to be similarly affected by
changes in economic, political or other conditions. Concentrations indicate the relative
sensitivity of the Groups performance to developments affecting a particular industry.

FRS 107.33.a-b
FRS 107.IG15.c

In order to avoid excessive concentrations of risk, the Groups policies and procedures
include specific guidelines to focus on maintaining a diversified portfolio. Identified
concentrations of credit risks are controlled and managed accordingly. Selective
hedging is used within the Group to manage risk concentrations at both the relationship
and industry levels. The Group does not apply hedge accounting.
Exposure to credit risk
At the end of the reporting period, the Groups and the Companys maximum exposure
to credit risk is represented by:
-

A nominal amount of $565,000 (2013: $255,000) relating to a corporate


guarantee provided by the Group to the banks on associates and joint ventures
loans

A nominal amount of $5,400,000 (2013: $5,400,000) relating to a corporate


guarantee provided by the Company to a bank on a subsidiarys bank loan

Information regarding credit enhancements for trade and other receivables is disclosed
in Note 21.

XYZ Holdings (Singapore) Limited | 174

FRS 107 AGB9-B10

FRS 107.36.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
a) Credit risk (continued)
Credit risk concentration profile
The Group determines concentrations of credit risk by monitoring the country and
industry sector profile of its trade receivables on an ongoing basis. The credit risk
concentration profile of the Groups trade receivables at the end of the reporting
period is as follows:

FRS 107.34.a
and AGB8

Group
2014

2013

$000

% of total

$000

% of total

10,019

46%

12,950

53%

Peoples Republic of China

4,989

23%

4,995

21%

Malaysia

3,467

16%

3,442

14%

Vietnam

1,981

9%

1,619

7%

Other countries

1,238

6%

1,185

5%

21,694

100%

24,191

100%

Multi-industry conglomerates

8,590

39%

9,989

41%

Electronics

7,539

35%

7,496

31%

Property

4,719

22%

5,883

24%

846

4%

823

4%

21,694

100%

24,191

100%

By country:
Singapore

By industry sectors:

Others

At the end of the reporting period, approximately:


-

21% (2013: 19%) of the Groups trade receivables were due from 5 major
customers who are multi-industry conglomerates located in Singapore.

11% (2013: 9%) of the Groups trade and other receivables were due from related
parties while almost all of the Companys receivables were balances with related
parties.

Financial assets that are neither past due nor impaired

FRS 107.34.a,
34.c and AGB8

FRS 107.36.c

Trade and other receivables that are neither past due nor impaired are with
creditworthy debtors with good payment record with the Group. Cash and short-term
deposits, investment securities and derivatives that are neither past due nor impaired
are placed with or entered into with reputable financial institutions or companies with
high credit ratings and no history of default.
Financial assets that are either past due or impaired

FRS 107.37

Information regarding financial assets that are either past due or impaired is disclosed
in Note 21 (Trade and other receivables) and Note 22 (Investment securities).

XYZ Holdings (Singapore) Limited | 175

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
a) Credit risk (continued)
Commentary:
Credit risk relating to financial assets or financial liabilities at fair value through profit or loss

In this illustration, no financial instrument has been designated as financial assets or financial
liabilities at fair value through profit or loss. If an entity has designated a loan or receivable or
financial liability as at fair value through profit or loss, FRS 107 requires further disclosures
regarding the maximum credit risk exposures of such receivables and the amount by which
any related credit derivatives or similar instruments mitigate that credit risk exposure;
changes in fair value during the period and cumulatively, of such loan or receivable or financial
liabilities that is attributable to changes in credit risk (including the methods of determining
such fair value changes) and of any related credit derivatives or similar instruments; and the
difference between the financial liabilitys carrying amount and the contractual repayment
amount.

FRS 107.9-11

Disclosure of maximum exposure to credit risk

For financial instruments where the carrying amount best represents the maximum exposure
to credit risk, the disclosure of the maximum exposure to credit risk is not required.

FRS 107.36.a

Quantitative disclosures

FRS 107 requires the disclosure of summary quantitative data about an entitys exposure to
financial risk (e.g., credit risk, liquidity risk and market risk) that is based on the information
provided internally to key management personnel of the entity (as defined in FRS 24, Related
Party Disclosures), e.g., the board of directors or CEO. As such, the disclosures would be
defined by the actual information used by management in managing financial risks, which may
be different from those disclosed in this illustration.

FRS 107.34.a

In addition, if the above-mentioned quantitative data disclosed as at the end of the reporting
period are unrepresentative of the entitys exposure to risk during the period, the entity shall
provide further information that is representative e.g., an entity might disclosed the highest,
lowest and average amount of risk to which it was exposed during the period to meet the
disclosure requirement.

FRS 107.35 and


IG20

The identification of concentrations of credit risk requires judgement taking into account the
circumstances of the entity. Apart from country and industry sectors, other measures of
credit risk concentrations may include credit rating or other measures of credit quality, limited
number of individual counterparties, or groups of closely related counterparties.

FRS 107.AGB8 and


IG18

XYZ Holdings (Singapore) Limited | 176

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
b) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in
meeting financial obligations due to shortage of funds. The Groups and the Companys
exposure to liquidity risk arises primarily from mismatches of the maturities of financial
assets and liabilities. The Groups and the Companys objective is to maintain a balance
between continuity of funding and flexibility through the use of stand-by credit
facilities.

FRS 107.33.a-b,
39.c and IG5

The Groups and the Companys liquidity risk management policy is that not more than
20% (2013: 20%) of loans and borrowings (including overdrafts and convertible
redeemable preference shares) should mature in the next one year period, and that to
maintain sufficient liquid financial assets and stand-by credit facilities with three
different banks. At the end of the reporting period, approximately 8% (2013: 15%) of
the Groups loans and borrowings will mature in less than one year based on the
carrying amount reflected in the financial statements, excluding discontinued
operation. None (2013: none) of the Companys loans and borrowings will mature in
less than one year at the end of the reporting period.

FRS 107.33.b, 39.c


and AGB11F.e

The Group assessed the concentration of risk with respect to refinancing its debt and
concluded it to be low. Access to sources of funding is sufficiently available and debt
maturing within 12 months can be rolled over with existing lenders.

FRS 107.34.a, 34.c


and AGB8

FRS 107.AGB11F.a
and c

Analysis of financial instruments by remaining contractual maturities


The table below summarises the maturity profile of the Groups and the Companys
financial assets and liabilities at the end of the reporting period based on contractual
undiscounted repayment obligations.

Group

2014

2013

$000

$000

One to
One year or five
Over five
less
years
years

Total

One year One to Over five


or less five years years

FRS 107.39.a, b and


AGB11D

Total

Financial assets:
Trade and other
receivables
Cash and short-term
deposits
Derivatives
Total undiscounted
financial assets

24,921

2,984

27,905

26,936

2,980

29,916

6,117

6,117

4,858

4,858

170

170

105

105

31,208

2,984

34,192

31,899

2,980

34,879

Financial liabilities:
Trade and other payables

17,517

250

17,767

19,140

19,140

Other liabilities

2,974

2,974

2,579

2,579

Loans and borrowings

1,189

12,817

4,275

18,281

2,290

12,659

3,277

18,226

685

685

22

22

22,387

13,067

4,275

39,729

24,009

12,659

3,277

39,945

(9,679)

(3,277)

(5,066)

Contingent consideration
for business combination
Derivatives
Total undiscounted
financial liabilities
Total net undiscounted
financial assets/
(liabilities)

8,821

(10,083) (4,275)

(5,537)

7,890

XYZ Holdings (Singapore) Limited | 177

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)

Company

2014

2013

$000

$000

One year or One to Over five


less five years years

Total

One year One to Over five


or less five years years

Total

Financial assets:
Trade and other
receivables
Cash and short-term
deposits

338

17,289

4,621

Total undiscounted
financial assets

4,959

17,289

Trade and other payables

470

Other liabilities

481

17,627

350

17,855

18,205

4,621

4,145

4,145

22,248

4,495

17,855

22,350

470

414

414

481

446

446

4,682

2,084

6,766

3,796

2,540

6,336

951

4,682

2,084

7,717

860

3,796

2,540

7,196

4,008

12,607

(2,084)

14,531

3,635

14,059

(2,540)

15,154

Financial liabilities:

Loans and borrowings


Total undiscounted
financial liabilities
Total net undiscounted
financial assets/
(liabilities)

The table below shows the contractual expiry by maturity of the Group and Companys
contingent liabilities and commitments. The maximum amount of the financial
guarantee contracts are allocated to the earliest period in which the guarantee could
be called.
2014

2013

$000

$000

One to
One year or five Over five
less
years
years

Total

One year One to Over five


or less five years years

Total

Group
Financial guarantees

320

245

565

15

240

255

5,400

5,400

5,400

5,400

Company
Financial guarantees

XYZ Holdings (Singapore) Limited | 178

FRS 107.AGB11C.c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Commentary:
Quantitative disclosures

Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Other factors to consider in disclosing liquidity risk

The application guidance in FRS 107 illustrates the other factors that an entity might also
consider disclosing which include, but are not limited to, whether the entity:
(a)

has committed borrowing facilities (e.g., commercial paper facilities) or other lines of
credit (e.g., stand-by credit facilities) that it can access to meet liquidity needs;

(b)

holds deposits at central banks to meet liquidity needs;

(c)

has very diverse funding sources;

(d)

has significant concentrations of liquidity risk in either its assets or its funding sources;

(e)

has internal control processes and contingency plans for managing liquidity risk;

(f)

has instruments that include accelerated repayment terms (e.g., on the downgrade of
the entitys credit rating);

(g)

has instruments that could require the posting of collateral (e.g., margin calls for
derivatives);

(h)

has instruments that allows the entity to choose whether it settles its financial liabilities
by delivering cash (or another financial asset) or by delivering its own shares; or

(i)

has instruments that are subject to master netting agreements.

FRS 107.AGB11F

Maturity analysis for financial liabilities

In this illustration, certain undiscounted payments presented differ from the carrying amount
included in the balance sheet because the balance sheet amounts are based on discounted
cash flows.

FRS 107.AGB11D

When the amount payable is not fixed, the maturity analysis is determined by reference to the
conditions existing at the reporting date. For example, when the amount payable varies with
changes in an index, the amount disclosed may be based on the level of the index at the
reporting date.

The number of time bands illustrated is only an example. An entity should use its judgement
to determine the number of time bands that is suitable for the entity.
When the counterparty has a choice of when an amount is paid, the liability is included on the
basis of the earliest date on which the entity can be required to pay. For example, financial
liabilities that the entity can be required to repay on demand are included in the earliest time
band.

XYZ Holdings (Singapore) Limited | 179

FRS 107.AGB11

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

40. Financial risk management objectives and policies (continued)


b) Liquidity risk (continued)
Commentary (continued):
Maturities of financial assets held for liquidity purposes

FRS 107.39.c requires an entity to describe how it manages the liquidity risk inherent in the
items disclosed in the quantitative disclosures required in FRS 107.39.a and b. If financial
assets are readily saleable or expected to generate cash inflows to meet cash outflows on
financial liabilities and if that information is necessary to enable users of its financial
statements to evaluate the nature and extent of liquidation risk. An entity shall disclose a
maturity analysis of financial assets it holds for managing liquidity risks.

FRS 107.AGB11E

Quantitative liquidity risk disclosures

FRS 107 specified minimum liquidity risk disclosures, i.e., the contractual maturity analysis of
financial liabilities, required by FRS 107.39.
FRS 107 permits derivative liabilities to be excluded from the paragraph 39 maturity analysis,
unless the contractual maturities are essential for an understanding of the timing of the cash
flows. The application guidance cites an interest rate swap designated in a cash flow hedging
relationship as an example of such an essential case. Given that the hedged cash flows are
required to be highly probable, the swap would normally be expected to be held to maturity.
For those derivatives included in the contractual maturity analysis, the guidance still requires
gross cash flows to be disclosed for those derivatives which will involve a gross exchange of
cash flows, such as currency swaps. Below is an illustration of such a presentation:

FRS 107.AGB11B

FRS 107.AGB11D

Group
$000
One year One to Over five
or less five years years

Total

Derivatives:
- Interest rate swaps settled net

XXX

XXX

- Forward currency contracts gross payments

XXX

XXX

(XXX)

(XXX)

- Forward currency contracts gross receipts

Financial guarantees issued

FRS 107 requires issued financial guarantee contracts to be recorded in the contractual
maturity analysis based on the maximum amount guaranteed. They are to be allocated to the
earliest date they can be drawn down, irrespective of whether it is likely that those
guarantees will be drawn or the amount that is expected to be paid.

XYZ Holdings (Singapore) Limited | 180

FRS 107.AGB11C.c

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Groups and
the Companys financial instruments will fluctuate because of changes in market
interest rates. The Groups and the Companys exposure to interest rate risk arises
primarily from their loans and borrowings, interest-bearing loans given to related
parties and investments in debt securities. The Group does not hedge its investment in
fixed rate debt securities as they have active secondary or resale markets to ensure
liquidity. The Companys loans at floating rate given to related parties form a natural
hedge for its non-current floating rate bank loan. All of the Groups and the Companys
financial assets and liabilities at floating rates are contractually re-priced at intervals of
less than 6 months (2013: less than 6 months) from the end of the reporting period.

FRS 107.33.a- b
and IG16

The Groups policy is to manage interest cost using a mix of fixed and floating rate
debts. The Groups policy is to keep 40% to 70% (2013: 40% to 70%) of its loans and
borrowings at fixed rates of interest. To manage this mix in a cost-efficient manner, the
Group enters into interest rate swaps. At the end of the reporting period, after taking
into account the effect of an interest rate swap, approximately 62% (2013: 58%) of the
Groups borrowings are at fixed rates of interest.

FRS 107.33.b
and 34.a

Sensitivity analysis for interest rate risk


At the end of the reporting period, if SGD interest rates had been 75 (2013: 75)
basis points lower/higher with all other variables held constant, the Groups profit
before tax would have been $20,000 (2013: $18,000) higher/lower, arising mainly as
a result of lower/higher interest expense on floating rate loans and borrowings,
lower/higher interest income from floating rate loans to related parties and
lower/higher positive fair value of an interest rate swap, and the Groups other reserve
in other comprehensive income would have been $30,000 (2013: $30,000)
higher/lower, arising mainly as a result of an increase/decrease in the fair value of
fixed rate debt securities classified as available-for-sale. The assumed movement in
basis points for interest rate sensitivity analysis is based on the currently observable
market environment, showing a significantly higher volatility as in prior years.

XYZ Holdings (Singapore) Limited | 181

FRS 107.40,
IG36 and AGB18

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
c) Interest rate risk (continued)
Commentary:
Sources of interest rate risk

Interest rate risk arises on interest-bearing financial instruments recognised in the balance
sheet (e.g., loans and receivables and debt instruments issued) and on some financial
instruments not recognised in the balance sheet (e.g., some loan commitments).

FRS 107.AGB22

Quantitative disclosures

Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Sensitivity analysis for market risk

FRS 107 requires disclosure of sensitivity analysis for each type of market risk to which an
entity is exposed at the reporting date, showing how profit or loss and equity would have been
affected by changes in the relevant risk variable that were reasonably possible at that date.
These analyses shall be provided for the whole of an entitys business. However, an entity may
also drill down to provide different types of sensitivity analysis for different classes of
financial instruments.

FRS 107.40.a

The sensitivity analysis should be based on changes in the risk variable that were reasonably
possible at the reporting date having considered the economic environments in which the
entity operates, the type of market risk concerned and the time frame over which the
assessment is being made i.e., the period until the entity will next present the analysis e.g.,
next annual reporting period. A reasonably possible change should not include remote or
worst case scenarios or stress test.

FRS 107.AGB19 and


IG35

An entity should also disclose the methods and assumptions used in preparing the sensitivity
analysis, and changes from the previous period in the methods and assumptions used,
including the reasons for such changes.

FRS 107.40.b and c

Instead of the sensitivity analysis illustrated, FRS 107 permits an entity to use a sensitivity
analysis that reflects interdependencies between risk variables, such as a value-at-risk
methodology, if it uses this analysis to manage its exposure to financial risks. This applies
even if such a methodology measures only the potential for loss and does not measure the
potential for gain. In such cases, the entity should also disclose an explanation of the method
and objective of the analysis (e.g., whether the model relies on Monte Carlo simulations), the
main parameters and assumptions used (e.g., the holding period and confidence level), and
limitations that may result in the information disclosed not fully reflecting the fair value of
assets and liabilities involved.

FRS 107.41 and


AGB20

When the sensitivity analyses disclosed are unrepresentative of a risk inherent in a financial
instrument (e.g., because the end of the reporting period exposure does not reflect exposure
during the financial year), the entity shall disclose that fact and the reason it believes the
sensitivity analyses are unrepresentative, including additional disclosures regarding the risk
inherent in that financial instrument.

FRS 107.42 and


IG37-40

In this illustration, company-level sensitivity analysis has not been disclosed because
according to the assumed scenario, XYZ Holdings (Singapore) Limited is an investment holding
company with no significant net exposure to market price risk. If this is not the case, the entity
should provide company-level disclosures as appropriate.

FRS 107.34.b

XYZ Holdings (Singapore) Limited | 182

FRS 107.AGB21

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
c) Interest rate risk (continued)
Commentary (continued):
Sensitivity analysis for interest rate risk

In this illustration, the interest rate risk sensitivity analysis has been performed for the effect of
a change in SGD interest rates because it is relevant to the interest rate risk exposure of XYZ
Holdings (Singapore) Limited. An entity might disclose a sensitivity analysis for interest rate
risk for each currency in which the entity has material exposure to interest rate risk.
Illustrative tabular disclosure of interest rate risk sensitivity analysis where more than one
currency is involved:
The table below demonstrates the sensitivity to a reasonably possible change in interest
rates with all other variables held constant, of the Groups profit before tax (through the
impact on interest expense on floating rate loans and borrowings) and the Groups equity
(through the impact on other reserves for fixed rate debt securities classified as availablefor-sale).
Group
$000
Increase/
decrease in
basis points

Effect on profit
before tax

Effect on
equity

- Singapore dollar

+15

(XX)

(XX)

- US dollar

+20

(XX)

(XX)

- Singapore dollar

-10

XX

XX

- US dollar

-15

XX

XX

- Singapore dollar

+15

(XX)

(XX)

- US dollar

+20

(XX)

(XX)

- Singapore dollar

-10

XX

XX

- US dollar

-15

XX

XX

2014

2013

XYZ Holdings (Singapore) Limited | 183

FRS 107.IG34

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
d) Foreign currency risk
The Group has transactional currency exposures arising from sales or purchases that
are denominated in a currency other than the respective functional currencies of Group
entities, primarily SGD, Malaysian Ringgit (Ringgit) and Renminbi (RMB). The foreign
currencies in which these transactions are denominated are mainly United States
Dollars (USD). Approximately 23% (2013: 25%) of the Groups sales are denominated in
foreign currencies whilst almost 80% (2013: 83%) of costs are denominated in the
respective functional currencies of the Group entities. The Groups trade receivable and
trade payable balances at the end of the reporting period have similar exposures.

FRS 107.33.a
and 34.a

The Group and the Company also hold cash and short-term deposits denominated in
foreign currencies for working capital purposes. At the end of the reporting period,
such foreign currency balances are mainly in USD.

FRS 107.33.a
and 34.a

The Group requires all of its operating entities to use forward currency contracts to
eliminate the currency exposures on any individual transactions in excess of $100,000
for which payment is anticipated more than one month after the Group has entered
into a firm commitment for a sale or purchase. The forward currency contracts must be
in the same currency as the hedged item. It is the Groups policy not to enter into
forward contracts until a firm commitment is in place. It is the Groups policy to
negotiate the terms of the forward currency contracts to match the terms of the firm
commitment to maximise hedge effectiveness.
At 31 December 2014, the Group had hedged 75% (2013: 68%) and 70% (2013: 65%)
of its foreign currency denominated sales and purchases respectively, for which firm
commitments existed at the end of the reporting period, extending to March 2015
(2013: March 2014). The Group does not apply hedge accounting for such foreign
currency denominated sales and purchases.

FRS 107.33.b

FRS 107.34.a

The Group is also exposed to currency translation risk arising from its net
investments in foreign operations, including Malaysia, Peoples Republic of China (PRC)
and Vietnam. The Groups investment in its Vietnam subsidiary is hedged by a USD
denominated bank loan, which mitigates structural currency exposure arising from the
subsidiarys net assets. The Groups net investments in Malaysia and PRC are not
hedged as currency positions in Ringgit and RMB are considered to be long-term in
nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Groups profit before tax to a
reasonably possible change in the USD, RMB and Ringgit exchange rates against the
respective functional currencies of the Group entities, with all other variables held
constant.
Group

USD/SGD
USD/RMB
RMB/SGD

2014

2013

$000

$000

Profit before tax

Profit before tax

- strengthened 3% (2013: 3%)

30

30

- weakened 3% (2013: 3%)

+28

+28

- strengthened 4% (2013: 4%)

15

12

- weakened 4% (2013: 4%)

+15

+12

- strengthened 4% (2013: 4%)

+57

+66

- weakened 4% (2013: 4%)

57

66

+40

+68

40

68

Ringgit/SGD - strengthened 3% (2013: 4%)


- weakened 3% (2013: 4%)

XYZ Holdings (Singapore) Limited | 184

FRS 107.40 and


AGB18

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
40. Financial risk management objectives and policies (continued)
d) Foreign currency risk (continued)
Commentary:
Disclosure of amounts denominated in foreign currencies

The disclosure of exposures to foreign currency amounts is required under the disclosure
principles of FRS 107.31 (nature and extent of risks) as well as the specific requirement in FRS
107.34 to disclose summary quantitative data about the entity's exposure to risks (including
foreign currency risks) arising from financial instruments. In this illustration, most of the
information regarding foreign currency risk exposures is presented in Note 40(d), Note 21,
Note 27 and Note 31. These disclosures include a mixture of quantitative data that are
measured in dollar amounts (e.g., cash and short-term deposits amount denominated in foreign
currency) as well as data that are not measured in dollar amounts, e.g., the exposures arising
from trade receivables are represented by the percentage of total trade receivables
denominated in foreign currencies.

FRS 107.31 and 34

Each entity should customise the information disclosed according to its specific circumstances.
Quantitative disclosures

Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Sensitivity analysis for market risk

Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)

According to FRS 107, foreign currency risk arises on financial instruments that are
denominated in a foreign currency i.e., in a currency other than the functional currency in
which they are measured. For the purpose of FRS 107, currency risk does not arise from
financial instruments that are non-monetary items or from financial instruments denominated
in the functional currency. Currency translation risk arising from its net investments in foreign
operations does not fall within the definition of foreign currency risk according to FRS 107.
In the scenario illustrated, there is no impact (other than those affecting net profit) to equity
arising from exposures to currency risk as defined by FRS 107.
Illustrative disclosure if there are impact to equity arising from exposures to currency risk:
The following table demonstrates the sensitivity of the Groups profit before tax and equity to
a reasonably possible change in the USD, RMB and Ringgit exchange rates against the
respective functional currencies of the Group entities, with all other variables held constant.
Group
2014
2013
$000
$000
Profit
Equity
Profit
Equity
before
before
tax
tax
USD/SGD
USD/RMB
RMB/SGD
Ringgit/SGD

- strengthened X% (2013: X%)


- weakened X% (2013: X%)
- strengthened X% (2013: X%)
- weakened X% (2013: X%)
- strengthened X% (2013: X%)
- weakened X% (2013: X%)
- strengthened X% (2013: X%)
- weakened X% (2013: X%)

XX
+XX
XX
+XX
XX
+XX
XX
+XX

XX
+XX
XX
+XX
XX
+XX
XX
+XX

XX
+XX
XX
+XX
XX
+XX
XX
+XX

XX
+XX
XX
+XX
XX
+XX
XX
+XX

XYZ Holdings (Singapore) Limited | 185

FRS 107.AG B23

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

40. Financial risk management objectives and policies (continued)


e) Market price risk
Market price risk is the risk that the fair value or future cash flows of the Groups
financial instruments will fluctuate because of changes in market prices (other than
interest or exchange rates). The Group is exposed to equity price risk arising from its
investment in quoted equity securities. These securities are quoted on the Singapore
Exchange Securities Trading Limited (SGX-ST) in Singapore and are classified as held
for trading or available-for-sale financial assets. The Group does not have exposure to
commodity price risk.
The Groups objective is to manage investment returns and equity price risk using a mix
of investment grade shares with steady dividend yield and non-investment grade
shares with higher volatility. The Groups policy is to limit its interest in the latter type
of investments to 25% (2013: 25%) of its entire equity portfolio. Any deviation from
this policy is required to be approved by the CEO and audit committee. At the end of
the reporting period, 24% (2013: 19%) of the Groups equity portfolio consist of noninvestment grade shares of companies operating in PRC and Singapore, while the
remaining portion of the equity portfolio comprise investment grade shares included in
the Straits Times Index (STI).

FRS 107.33.a

FRS 107.33.b
and 34.a

Sensitivity analysis for equity price risk


At the end of the reporting period, if the STI had been 2% (2013: 2%) higher/lower with
all other variables held constant, the Groups profit before tax would have been
$88,000 (2013: $78,000) higher/lower, arising as a result of higher/lower fair value
gains on held for trading investments in equity instruments, and the Groups other
comprehensive income would have been $66,000 (2013: $77,000) higher/lower,
arising as a result of an increase/decrease in the fair value of equity securities
classified as available-for-sale.

Commentary:
Quantitative disclosures

Please refer to commentary no. 3 of Note 40(a) (Credit risk)

Sensitivity analysis for market risk

Please refer to commentary no. 3 of Note 40(c) (Interest rate risk)

In this illustration, the sensitivity analysis for equity price risk has been performed by
analysing the effect of a reasonably possible change in STI on the fair value of the equity
instruments held by the Group, as it is assumed that all the quoted equity securities held by
the Group are listed in Singapore.

XYZ Holdings (Singapore) Limited | 186

FRS 107.40,
AGB17-18 and
AGB25-27

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
41. Capital management

FRS 1.134

Capital includes debt and equity items as disclosed in the table below.

FRS 1.135.a.i

The primary objective of the Groups capital management is to ensure that it maintains a
strong credit rating and healthy capital ratios in order to support its business and
maximise shareholder value.

FRS 1.135.a

The Group manages its capital structure and makes adjustments to it, in light of changes
in economic conditions. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years ended 31
December 2014 and 31 December 2013.

FRS 1.135.a and c

As disclosed in Note 34(c), a subsidiary of the Group is required by the Foreign Enterprise
Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund
whose utilisation is subject to approval by the relevant PRC authorities. This externally
imposed capital requirement has been complied with by the above-mentioned subsidiary
for the financial years ended 31 December 2014 and 2013.
The Group monitors capital using a gearing ratio, which is net debt divided by total capital
plus net debt. The Groups policy is to keep the gearing ratio between 20% and 40%. The
Group includes within net debt, loans and borrowings (excluding convertible redeemable
preference shares), trade and other payables, less cash and short-term deposits excluding
discontinued operations. Capital includes convertible redeemable preference shares,
equity attributable to the owners of the Company less the fair value adjustment reserve
and the abovementioned restricted statutory reserve fund.
Group
2014

2013
$000

Loans and borrowings (Note 30)

14,604

15,478

Trade and other payables (Note 31)

17,717

19,140

- Convertible redeemable preference shares (Note 30)


- Cash and short-term deposits (Note 27)

Net debt
Convertible redeemable preference shares
Equity attributable to the owners of the Company
Less:

(450)

(428)

(6,117)

(4,858)

25,754

29,332

450

428

72,669

66,927

- Fair value adjustment reserve

(672)

(436)

- Statutory reserve fund

(903)

(740)

Total capital

71,544

66,179

Capital and net debt

97,298

95,551

26%

31%

Gearing ratio

FRS 1.135.a

FRS 1.135.b

$000

Less:

FRS 1.135.a.ii and d

XYZ Holdings (Singapore) Limited | 187

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014

41. Capital management (continued)


Commentary:
Disclosure of capital management information according to entity specific circumstances

FRS 1 requires the disclosure of information (as provided to key management personnel) that
enables users of financial statements to evaluate the entitys objectives, policies and processes
for managing capital, including (but not limited to) a description and summary quantitative data
of what it manages as capital, the presence and impact of externally imposed capital
requirements and how the entity is meeting its objectives for managing capital etc. This note as
well as FRS 1.IG10 provide illustrative examples of such disclosures of an entity that is not a
regulated financial institution.

FRS 1.134 and


135

It is important to note that the illustration provided in this note is based on certain
assumed facts regarding circumstances surrounding XYZ Holdings (Singapore) Limited
and its objectives, policies and processes for managing capital. For example, a gearing
ratio with a specific measurement basis has been disclosed as this is the measure used to
monitor capital. The Group considers both capital and net debt as relevant components of
funding, hence part of its capital management. Other entities may use different methods
to monitor capital or use gearing ratios with different measurement bases. Disclosures
would have to be customised in the light of specific facts and circumstances applicable to
the entity.
Also, an entity may manage capital in a number of ways and be subject to a number of different
capital requirements. For example, a conglomerate may include entities that undertake
insurance and banking activities, and those entities may also operate in several jurisdictions.
When an aggregate disclosure of capital requirements and how capital is managed would not
provide useful information or distorts a financial statement users understanding of an entitys
capital resources, the entity shall disclose separate information for each capital requirement to
which the entity is subject to.

FRS 1.136

Externally imposed capital requirement

In this illustration, it is assumed that the externally imposed capital requirement has been
complied with. When an entity has not complied with externally imposed capital requirements,
the consequences of such non-compliance shall be disclosed. FRS 1.IG 11 has an example that
illustrates the application of FRS 1.135.e when an entity has not complied with externally
imposed capital requirement during the period.

XYZ Holdings (Singapore) Limited | 188

FRS 1.135.e

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42. Segment information

FRS 108.20, 21.a

For management purposes, the Group is organised into business units based on their
products and services, and has four reportable segments as follows:

FRS 108.22

I. The electronic components segment is a supplier of digital and analogue electronic


components for consumer and industrial-grade electronics manufacturers. It offers
products and services in the areas of common and specialised electronic components,
energy efficiency, and electrical architecture.
II. The property segment is in the business of constructing, developing and leasing out of
residential and commercial properties. This reportable segment has been formed by
aggregating the property construction/development operating segment and the
investment properties operating segment, which are regarded by management to
exhibit similar economic characteristics.

FRS 108.12

III. The corporate segment is involved in Group-level corporate services, treasury


functions and investments in marketable securities.
IV. The fire prevention equipment and services segment produces and installs
extinguishers, fire prevention equipment and fire retardant fabrics. This segment has
been classified as a discontinued operation during the financial year (Note 11).
Except as indicated above, no operating segments have been aggregated to form the
above reportable operating segments.
Management monitors the operating results of its business units separately for the
purpose of making decisions about resource allocation and performance assessment.
Segment performance is evaluated based on operating profit or loss which in certain
respects, as explained in the table below, is measured differently from operating profit or
loss in the consolidated financial statements. Group financing (including finance costs)
and income taxes are managed on a group basis and are not allocated to operating
segments.

FRS 108.27

Transfer prices between operating segments are on an arms length basis in a manner
similar to transactions with third parties.

FRS 108.27.a

XYZ Holdings (Singapore) Limited | 189

FRS 108.28.b

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42.

Segment information (continued)

Electronic
components

Property

Fire prevention
equipment and
services
(Discontinued
operation)

Corporate

Adjustments and
eliminations

Notes

Per consolidated
financial
statements

FRS 108.20,21.b

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

$000

105,292

103,965

31,428

38,606

13,152

14,598

(13,152)

(14,598)

136,720

142,571

FRS 108.23.a
and 32

Inter-segment

265

120

(265)

(120)

FRS 108.23.b

Total revenue

105,292

103,965

31,428

38,606

265

120

13,152

14,598

(13,417)

(14,718)

136,720

142,571

Interest income

430

327

430

327

FRS 108.23.c

Dividend income

526

406

526

406

FRS 108.23.f

Fair value gains on investment properties

489

129

489

129

FRS 108.23.f

2,188

2,092

925

883

150

115

150

125

3,263

3,090

FRS 108.23.e

151

128

151

128

FRS 108.23.g

94

657

234

500

650

FRS 108.23.g
FRS 36.129.a
FRS 108.23.f

Revenue:
External customers

Results:

Depreciation and amortisation


Share of results of joint ventures
Share of results of associates
Impairment of non-financial assets

(125)

(650)

1,121

754

107

95

310

218

Segment profit/(loss)

6,035

5,698

2,001

2,635

452

438

1,674

1,523

(193)

Other non-cash expenses

(551)

(150)

(880)

(1,462)

657

328

500

1,538

1,067

FRS 108.23.i

7,057

7,116

FRS 108.23

1,674

1,523

FRS 108.24.a

Assets:
Investment in joint ventures
Investment in associates

566

10,595

9,755

10,595

10,321

FRS 108.24.a

8,134

2,872

2,803

1,560

758

221

11,695

4,653

FRS 108.24.b

Segment assets

76,689

73,426

20,449

19,200

12,450

11,960

2,270

2,450

12,489

12,128

124,347

119,164

FRS 108.23

Segment liabilities

16,076

15,748

10,383

8,152

1,314

1,189

1,043

1,130

20,779

24,096

49,595

50,315

FRS 108.23

Additions to non-current assets

XYZ Holdings (Singapore) Limited | 190

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42. Segment information (continued)

Notes

Nature of adjustments and eliminations to arrive at amounts reported in the


consolidated financial statements

The amounts relating to the fire prevention equipment and services segment
has been excluded to arrive at amounts shown in profit or loss as they are
presented separately in the statement of comprehensive income within one line
item, loss from discontinued operation, net of tax.

Inter-segment revenues are eliminated on consolidation.

Other non-cash expenses consist of amortisation of land use rights, sharebased payments, inventories written-down, provisions, and impairment of
financial assets as presented in the respective notes to the financial
statements.

FRS 108.28.e

The following items are added to/(deducted from) segment profit to arrive at
profit before tax from continuing operations presented in the consolidated
income statement:

FRS 108.28.b

Segment results of discontinued operation


Share of results of joint ventures
Share of results of associates
Profit from inter-segment sales
Finance costs
Unallocated corporate expenses

2014

2013

$000
551
151
657
(105)
(1,715)

$000
193
128
328
(50)
(1,512)

(419)

(549)

(880)

(1,462)

Additions to non-current assets consist of additions to property, plant and


equipment, investment properties and intangible assets.

The following items are added to/(deducted from) segment assets to arrive at
total assets reported in the consolidated balance sheet:

2014

2013

$000

$000

1,674
10,595
470
(250)

1,523
10,321
463
(179)

12,489

12,128

The following items are added to/(deducted from) segment liabilities to arrive
at total liabilities reported in the consolidated balance sheet:
2014
Deferred tax liabilities
Income tax payable
Loans and borrowings (including discontinued operation)
Inter-segment liabilities

FRS 108.28.a and b

FRS 108.28.a

Investment in joint ventures


Investment in associates
Deferred tax assets
Inter-segment assets

FRS 108.21.c

2013

$000

$000

2,378
2,927
15,604

1,926
6,734
15,478

(25)
20,779

(20)
24,069

XYZ Holdings (Singapore) Limited | 191

FRS 108.28.c

FRS 108.28.d

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42. Segment information (continued)
Geographical information
Revenue and non-current assets information based on the geographical location of
customers and assets respectively are as follows:
Revenues

FRS 108.33.a and b


FRS 108.20

Non-current assets

2014

2013

2014

2013

$000

$000

$000

$000

Singapore

76,432

86,464

20,570

19,346

Peoples Republic of China

32,970

33,005

15,896

15,591

Malaysia

20,990

20,440

5,061

4,138
3,010

Vietnam and others


Discontinued operation

19,480

17,260

3,082

(13,152)

(14,598)

(1,016)

136,720

142,571

43,593

FRS 108.33.a.i and b.i

42,085

Non-current assets information presented above consist of property, plant and equipment,
investment properties, intangible assets, and land use rights as presented in the
consolidated balance sheet.
Information about a major customer
Revenue from one major customer amount to $15,102,000 (2013: $16,080,000), arising
from sales by the electronics components segment.

FRS 108.34

Commentary:
Information about segment profit or loss

In addition to a measure of profit or loss and total assets for each reportable segments, entities
are required to disclose the following about each reportable segment if the specified amounts
are included in the measure of segment profit or loss reviewed by the chief operating decision
maker (CODM), or are otherwise regularly provided to the CODM, even if not included in that
measure of segment profit or loss:
(a) Revenues from external customers
(b) Revenues from transactions with other operating segments of the same entity
(c) Interest revenue
(d) Interest expense*
(e) Depreciation and amortisation
(f) Material items of income and expense disclosed in accordance with paragraph 86 of FRS 1
Presentation of Financial Statements
(g) The entitys interest in profit or loss of associates and joint ventures accounted for by the
equity method
(h) Income tax expense or income*
(i) Material non-cash items other than depreciation and amortisation
* In this illustration, interest expense and income tax expense have not been disclosed by
segment as these items are managed on a group basis, and are not provided to the CODM at
the operating segment level.

XYZ Holdings (Singapore) Limited | 192

FRS 108.23

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42. Segment information (continued)
Commentary (continued):
Discontinued operation

FRS 108 does not provide specific disclosure requirements for an operating segment classified as
discontinued operation. An entity is therefore not required to provide such segment information
as long as the classification criteria held for sale is met. It is however allowed to continue to
present segment information as long as the definition as operating segment is met.

FRS 108.13

In this illustration, an entire reportable segment has been classified as discontinued operation in
the current period. As this operating segment still meet the quantitative thresholds for separate
reporting, it continues to be reported in the segment information.
Interest income

An entity shall report interest revenue separately from interest expense for each reportable
segment unless a majority of the segments revenues are from interest and the CODM relies
primarily on net interest revenue to assess the performance of the segment and make decisions
about resources to be allocated to the segment. In that situation, an entity may report that
segments interest revenue net of its interest expense and disclose that it has done so.

FRS 108.23

Disclosure of operating segment assets and segment liabilities

Disclosure of operating segment assets and liabilities are required only where such measures are
provided to the CODM.

FRS 108.23

Explanation of measurements of segment profit or loss, segment assets and segment liabilities

If not apparent from the disclosures of reconciliations in this note, entities are required to disclose
further information regarding the nature of differences between the measurements of segment
profit or loss, segment assets, segment liabilities, and the entitys profit or loss before tax and
discontinued operations, assets and liabilities. Those differences could include accounting policies
and policies for allocation of centrally incurred costs, jointly used assets, jointly utilised liabilities
that are necessary for an understanding of the reported segment information.

FRS 108.27.b-d

The following should also be disclosed, where applicable:


-

The nature of any changes from prior periods in the measurement methods used to
determine reported segment profit or loss and the effect, if any, of those changes on the
measure of segment profit or loss.

The nature and effect of any asymmetrical allocations to reportable segments. For example,
an entity might allocate depreciation expense to a segment without allocating the related
depreciable assets to that segment.

XYZ Holdings (Singapore) Limited | 193

FRS 108.27.e-f

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
42. Segment information (continued)
Commentary (continued):
Information about segment profit or loss

An entity should disclose:


(a) Revenues from external customers (i) attributed to the entitys country of domicile; and (ii)
attributed to all foreign countries in total from which the entity derives revenues. If
revenues from external customers attributed to an individual foreign country are material,
those revenues should be disclosed separately. An entity should disclose the basis for
attributing revenues from external customers to individual countries.

FRS 108.33

(b) Non-current assets other than financial instruments, deferred tax assets, post-employment
benefit assets, and rights arising under insurance contracts (i) located in the entitys
country of domicile and (ii) located in all foreign countries in total in which the entity holds
assets. If assets in an individual foreign country are material, those assets should be
disclosed separately.
Information about major customers

For the purposes of disclosing information about major customers, a group of entities known to
a reporting entity to be under common control shall be considered a single customer, and a
government (national, state, provincial, territorial, local or foreign) and entities known to the
reporting entity to be under the control of that government shall be considered a single
customer.

FRS 108.34

43. Dividends
Group and Company
2014

2013

$000

$000

1,001

1,025

612

557

1,613

1,582

1,008

1,001

Declared and paid during the financial year:


Dividends on ordinary shares:
- Final exempt (one-tier) dividend for 2013: 4.34 cents (2012: 4.45 cents)
per share
- Interim exempt (one-tier) dividend for 2014: 2.49 cents (2013: 2.41
cents) per share
Proposed but not recognised as a liability as at 31 December:
Dividends on ordinary shares, subject to shareholders approval at the AGM:
- Final exempt (one-tier) dividend for 2014: 4.10 cents (2013: 4.34 cents)
per share

XYZ Holdings (Singapore) Limited | 194

FRS 1.137.a,
FRS 10.12

XYZ Holdings (Singapore) Limited and its subsidiaries

Notes to the financial statements


For the financial year ended 31 December 2014
44. Events occurring after the reporting period
On 14 January 2015, a building of the Group, with net carrying value of $900,000, was
severely damaged by fire and inventories with net carrying value of $157,000 were lost.
It is expected that insurance proceeds will fall short of the costs of rebuilding and loss of
inventories by $250,000. The financial statements for the year ended 31 December 2014
have not been adjusted for the financial effect of this incident.
On 15 February 2015, the Company completed the disposal of one of its wholly-owned
subsidiary, Good Fire Prevention Pte Ltd (GFP), which has been classified as discontinued
operation (Note 11) as at 31 December 2014, for a cash consideration of $150,000.

FRS 10.21 and 22.d

FRS 10.21 and 22.a

45. Authorisation of financial statements for issue


The financial statements for the year ended 31 December 2014 were authorised for issue
in accordance with a resolution of the directors on 27 February 2015.

XYZ Holdings (Singapore) Limited | 195

FRS 10.17

XYZ Holdings (Singapore) Limited

Appendix A-1

Consolidated statement of comprehensive


income in one statement illustrating the
analysis of expenses by nature

Illustrating the Statement of Comprehensive Income in one statement with the analysis of
expenses by nature:
2014
$000

2013
$000

136,720

142,571

430
526
1,511

327
406
886

Note
Continuing operations
Revenue
Other items of income
Interest income
Dividend income from investment securities
Other income
Items of expense
Raw materials and consumables used
Changes in inventories of finished goods and work-in-progress
Employee benefits expense
Depreciation and amortisation expense
Impairment losses
Net foreign exchange loss
Finance costs
Other expenses
Share of results of joint venture
Share of results of associates
Profit before tax from continuing operations
Income tax expense
Profit from continuing operations, net of tax
Discontinued operation
Loss from discontinued operation, net of tax
Profit for the year

X
X

(98,607)
(2,203)
(20,502)
(3,113)
(833)
(136)
(1,715)
(5,829)

(92,367)
(16,631)
(19,024)
(2,965)
(425)
(145)
(1,512)
(4,461)

151
657
7,057
(1,557)
5,500

128
328
7,116
(1,687)
5,429

(544)
4,956

(188)
5,241

1,250
62
1,312

2,404
10
2,414

FRS 1.81.10A, FRS 1.102


FRS 1.82.a, FRS 1.102
FRS 1.102
FRS 18.35.b.iii
FRS 18.35.b.v
FRS 1.99
FRS 1.102
FRS 1.102
FRS 1.102
FRS 1.102
FRS 1.85
FRS 21.52.a
FRS 1.82.b
FRS 1.102
FRS 1.82.c
FRS 1.82.c
FRS 1.85
FRS 1.82.d, FRS 12.77
FRS 1.85
FRS 1.82.ea, FRS 105.33.a &
33A
FRS 1.81A.a

Other comprehensive income:


Items that will not be reclassified to profit or loss:
Net surplus on revaluation of freehold land and buildings
Share of gain on property revaluation of associates
Items that may be reclassified subsequently to profit or loss:
Net gain on fair value changes of available-for-sale financial assets
Foreign currency translation

174
(181)
(7)

98
(82)
16

FRS 1.82A.a
FRS 1.82A.a, FRS 16.77.f
FRS 1.82A.a, FRS 28.39
FRS 1.82A.b
FRS 1.82A.b
FRS 1.82A.b, FRS 21.52.b

Other comprehensive income for the year, net of tax

1,305

2,430

FRS 1.81A.b

Total comprehensive income for the year

6,261

7,671

FRS 1.81A.c

5,320
(544)
4,776

5,029
(188)
4,841

FRS 105.33.d
FRS 105.33.d
FRS 1.81B.a.ii

180
180

400
400

FRS 1.81B.a.i

6,091
170
6,261

7,211
460
7,671

FRS 1.81B.b.ii
FRS 1.81B.b.i

6,585
(494)
6,091

7,379
(168)
7,211

FRS 105.33.d
FRS 105.33.d

Profit for the year attributable to:


Owners of the Company
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax
Non-controlling interests
Profit from continuing operations, net of tax
Loss from discontinued operation, net of tax

Total comprehensive income attributable to:


Owners of the Company
Non-controlling interests
Attributable to:
Owners of the Company
Total comprehensive income from continuing operations, net of tax
Total comprehensive income from discontinued operations, net of tax

X
X

XYZ Holdings (Singapore) Limited | 196

XYZ Holdings (Singapore) Limited

Appendix A-1

Consolidated statement of comprehensive


income in one statement illustrating the
analysis of expenses by nature and early
adoption of amendments to FRS 1

Note

2014
$000

2013
$000

FRS 1.81.a, FRS 1.102

Earnings per share from continuing operations attributable to owners


of the Company (cents per share)
Basic
Diluted

X
X

22.98
22.73

21.81
21.58

FRS 33.66
FRS 33.66

Earnings per share (cents per share)


Basic
Diluted

X
X

20.63
20.17

21.00
20.53

FRS 33.66
FRS 33.66

Commentary:
Tax effects related to each component of other comprehensive income

An entity may present components of other comprehensive income either:

FRS 1.91

(a) net of related tax effects, as illustrated in the statement of comprehensive income,
or
(b) before related tax effects with one amount shown for the aggregate amount of
income tax relating to those items.
If an entity elects alternative (b), it shall allocate the tax between the items that might be
reclassified subsequently to the profit or loss section and those that will not be
reclassified subsequently to the profit or loss section.

In this illustration, the share of other comprehensive income of associates relates to


property revaluation attributable to owners of the associates, an item which will not be
reclassified to profit or loss subsequently.

FRS 1.82A

If an entity has share of other comprehensive income of associates which relates to items
that may be reclassified subsequently to profit or loss, the item shall be presented under
the group of items that may be reclassified subsequently to profit or loss.

XYZ Holdings (Singapore) Limited | 197

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of summary of significant accounting policies illustrating accounting policies relating to


hedge accounting:

X.
X.X

Summary of significant accounting policies


Hedge accounting
The Group applies hedge accounting for certain hedging relationships which qualify for
hedge accounting.

FRS 107.21

For the purpose of hedge accounting, hedges are classified as:

fair value hedges when hedging the exposure to changes in the fair value of a
recognised asset or liability or an unrecognised firm commitment

FRS 39.86.a

cash flow hedges when hedging exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognised asset or liability or a
highly probable forecast transaction or the foreign currency risk in an unrecognised
firm commitment; or

FRS 39.86.b

hedges of a net investment in a foreign operation.

At the inception of a hedging relationship, the Group formally designates and documents
the hedging relationship to which the Group wishes to apply hedge accounting and the risk
management objective and strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the hedged item or transaction, the
nature of the risk being hedged and how the entity will assess the effectiveness of changes
in the hedging instruments fair value in offsetting the exposure to changes in the hedged
items fair value or cash flows attributable to the hedged risk. Such hedges are expected to
be highly effective in achieving offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they actually have been highly effective
throughout the financial reporting periods for which they were designated.

FRS 39.86.c
FRS 39.88

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
Fair value hedges
The change in the fair value of a hedging derivative is recognised in profit or loss in
finance costs. The change in the fair value of the hedged item attributable to the risk
hedged is recorded as a part of the carrying value of the hedged item and is also
recognised in profit or loss in finance costs.

FRS 39.89

For fair value hedges relating to items carried at amortised cost, the adjustment to
carrying value is amortised through profit or loss over the remaining term to of the hedge
using the effective interest rate method. Effective interest rate amortisation may begin as
soon as an adjustment exists and no later than when the hedged item ceases to be
adjusted for changes in its fair value attributable to the risk being hedged. If the hedged
item is derecognised, the unamortised fair value is recognised immediately in profit or loss.

FRS 39.92

When an unrecognised firm commitment is designated as a hedged item, the subsequent


cumulative change in the fair value of the firm commitment attributable to the hedged risk
is recognised as an asset or liability with a corresponding gain or loss recognised in profit
or loss.

FRS 39.93

The Group has an interest rate swap that is used as a hedge for the exposure of changes in
the fair value of its X% fixed rate secured loan. See Note X for more details.

XYZ Holdings (Singapore) Limited | 198

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of summary of significant accounting policies illustrating accounting policies relating to


hedge accounting: (continued)

X.
X.X

Summary of significant accounting policies (continued)


Hedge accounting (continued)
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised directly in
other comprehensive income in the cash flow hedge reserve, while any ineffective portion
is recognised immediately in profit or loss in other expenses.

FRS 39.95

The Group uses forward currency contracts as hedges of its exposure to foreign currency
risk in forecasted transactions and firm commitments, as well as forward commodity
contracts for its exposure to volatility in the commodity prices. The ineffective portion
relating to foreign currency contracts is recognised in finance costs and the ineffective
portion relating to commodity contracts is recognised in other operating income. Refer to
Note X for more details.
Amounts recognised as other comprehensive income are transferred to profit or loss when
the hedged transaction affects profit or loss, such as when the hedged financial income or
financial expense is recognised or when a forecast sale occurs. Where the hedged item is
the cost of a non-financial asset or non-financial liability, the amounts recognised as other
comprehensive income are transferred to the initial carrying amount of the non-financial
asset or liability.

FRS 39.97, 98
and 100

If the forecast transaction or firm commitment is no longer expected to occur, the


cumulative gain or loss previously recognised in equity is transferred to profit or loss. If
the hedging instrument expires or is sold, terminated or exercised without replacement or
rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously
recognised in other comprehensive income remains in other comprehensive income until
the forecast transaction or firm commitment affects profit or loss.

FRS 39.101

Hedges of a net investment


Hedges of a net investment in a foreign operation, including a hedge of a monetary item
that is accounted for as part of the net investment, are accounted for in a way similar to
cash flow hedges. Gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised as other comprehensive income while any gains or
losses relating to the ineffective portion are recognised in profit or loss. On disposal of the
foreign operation, the cumulative value of any such gains or losses recorded in equity is
transferred to profit or loss.
The Group uses a loan as a hedge of its exposure to foreign exchange risk on its
investments in foreign subsidiaries. Refer to Note X for more details.

XYZ Holdings (Singapore) Limited | 199

FRS 39.102

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of notes to the financial statements illustrating the disclosures of fair value hedge
accounting:

X.
X.X

Hedging activities
Fair value hedges
At 31 December 2014, the Group had an interest rate swap agreement in place with a
notional amount of USDXXX ($XXX) (2013: nil) whereby the Group receives a fixed rate of
interest of X.XX% and pays a variable rate equal to LIBOR+X% on the notional amount. The
swap is being used to hedge the exposure to changes in the fair value of its X.XX% secured
loan.

FRS 107.22
FRS 107.24.a

The decrease in fair value of the interest rate swap of $XXX (2013: nil) has been
recognised in finance costs and offset with a similar gain on the bank borrowings. The
ineffectiveness recognised in 2014 was immaterial.

Commentary:
Disclosure requirement regarding fair value hedges

FRS 107 requires separate disclosures of the amount of gain or loss on the hedging instrument
and on the hedged item attributable to the hedged risk in a fair value hedge relationship.

XYZ Holdings (Singapore) Limited | 200

FRS 107.24.a

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:

X.
X.X

Hedging activities
Cash flow hedges
Foreign currency risk
Foreign currency forward contracts measured at fair value through other comprehensive
income are designated as hedging instruments in cash flow hedges of forecast sales in the
United States and forecast purchases in the United Kingdom. These forecast transactions
are highly probable, and they comprise about 25% of the Groups total expected sales and
about 65% of its total expected purchases.

FRS 107.23.a

While the Group also enter into other foreign exchange forward contracts with the
intention to reduce the foreign exchange risk of expected sales and purchases, these other
contracts are not designated in hedge relationships and are measured at fair value through
profit and loss.
The foreign exchange forward contract balances vary with the level of expected foreign
currency sales and purchases and changes in foreign exchange forward rates.
2014

Group

2013

Assets

Liabilities

Assets

Liabilities

$000

$000

$000

$000

XXX

(XXX)

XXX

(XXX)

Foreign currency forward contracts


Fair value

The terms of the foreign currency forward contracts have been negotiated for the
expected highly probable forecast transactions. As a result, no hedge ineffectiveness
arises requiring recognition through profit or loss. Notional amounts are as provided in
Note X.

FRS 107.24.b

The cash flow hedges of the expected future sales in January 2015 were assessed to be
highly effective and a net unrealised gain of $XXX, with a deferred tax liability of $XXX
relating to the hedging instruments, is included in other comprehensive income.

FRS 107.23.c

The cash flow hedges of the expected future purchases in February and March 2015 were
assessed to be highly effective, and as at 31 December 2014, a net unrealised loss of
$XXX, with a related deferred tax asset of $XXX was included in other comprehensive
income in respect of these contracts.

FRS 107.23.c

At the end of December 2013, the cash flow hedges of the expected future sales in the
first quarter of 2014 were assessed to be highly effective and an unrealised gain of $XXX
with a deferred tax liability of $XXX was included in other comprehensive income in
respect of these contracts. The cash flow hedges of the expected future purchases in the
first quarter of 2014 were also assessed to be highly effective and an unrealised loss of
$XXX, with a deferred tax asset of $XXX was included in other comprehensive income in
respect of these contracts.

FRS 107.23.c

The amount removed from other comprehensive income during the year and included in
the carrying amount of the hedging items as a basis adjustment was immaterial for both
2014 and 2013. The amounts retained in other comprehensive income at 31 December
2014 are expected to mature and affect profit or loss in 2015.

XYZ Holdings (Singapore) Limited | 201

FRS 107.23.d, e and


a

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting:

X.
X.X

Hedging activities
Cash flow hedges (continued)
Commodity price risk
The Group purchases copper on an ongoing basis as its operating activities in the
electronic division require a continuous supply of copper for the production of its
electronic devices. The increased volatility in copper price over the past 12 months has led
to the decision to enter into commodity forward contracts
These contracts, which commenced on 1 July 2014, are expected to reduce the volatility
attributable to price fluctuations of copper. Hedging the price volatility of forecast copper
purchases is in accordance with the risk management strategy outlined by the Board of
Directors. The hedging relationships are for a period between 3 to 12 months based on
existing purchase agreements. The Group designated only the spot-to-spot movement of
the entire commodity purchase price as the hedged risk. The forward points of the
commodity forward contracts are therefore excluded from the hedge designation. Changes
in fair value of the forward points are recognised in profit or loss in Other expenses were
immaterial during the year.
As at 31 December 2014, the fair value of outstanding commodity forward contracts
amounted to a liability of $XXX. The ineffectiveness recognised in Other expenses in
profit or loss for the current year was $XXX (see Note X). The cumulative effective portion
of $XXX is reflected in other comprehensive income and will affect the profit or loss in the
first six months of 2015.

XYZ Holdings (Singapore) Limited | 202

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of notes to the financial statements illustrating the disclosures of cash flow hedge
accounting: (continued)

X.
X.X

Hedging activities
Cash flow hedges (continued)
Hedging reserve
The cash flow hedge reserve contains the effective portion of the cash flow hedge
relationships incurred as at the reporting date. $XXX are made up of the net movements in
cash flow hedges and the effective portion of the forward commodity contract, net of tax.

X.X

FRS 1.79.b

Components of other comprehensive income


Group
2014

2013

$000

$000

FRS 1.97

Net movement on cash flow hedges:


Gain/ (losses) arising during the year
Commodity forward contracts

(XXX)

(XXX)

Foreign currency forward contracts

(XXX)

XXX

XXX

(XXX)

XXX

Reclassification adjustments for gains included in the statement of


comprehensive income

FRS 1.92,
FRS 107.23.d

Commentary:
Disclosure requirements regarding cash flow hedges

Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or
loss that arises from cash flow hedges.

FRS 107.24.b

FRS 107 requires the disclosure of the amount of gain or loss on a hedging instrument in a cash
flow hedge relationship reclassified from equity to profit or loss, showing the amount included in
each line in the statement of comprehensive income.

FRS 107.23.d

XYZ Holdings (Singapore) Limited | 203

XYZ Holdings (Singapore) Limited

Appendix A-2

Hedge accounting

Extracts of notes to the financial statements illustrating the disclosures of hedge of net
investments in foreign operations:

X.
X.X

Hedging activities
Hedge of net investments in foreign operations
Included in loans at 31 December 2014 was a borrowing of USDXXX which has been
designated as a hedge of the net investment in the two subsidiaries in the United States,
XX Inc. and XXX Inc. This borrowing is being used to hedge the Groups exposure to foreign
exchange risk on these investments. Gains or losses on the retranslation of this borrowing
are transferred to other comprehensive income to offset any gains or losses on translation
of the net investments in the subsidiaries. There is no ineffectiveness in the years ended
31 December 2014 and 2013.

X.X

Foreign currency translation reserve


The foreign currency translation reserve is also used to record the effect of hedging of net
investments in foreign operations.

X.X

FRS 107.22

FRS 1.79.b

Components of other comprehensive income


Group

Net gains/(losses) on hedge of net investment

2014

2013

$000

$000

XXX

(XXX)

FRS 1.97

Commentary:
Disclosure requirement regarding hedges of net investments in foreign operations

Where applicable, FRS 107 requires the disclosure of the ineffectiveness recognised in profit or
loss that arises from hedges of net investments in foreign operations.

XYZ Holdings (Singapore) Limited | 204

FRS 107.24.c

XYZ Holdings (Singapore) Limited

Appendix A-3

Agreements for the construction of real


estate

Extract of summary of significant accounting policies illustrating accounting policies relating to


agreements for the construction of real estate:

X.
X.X

Significant accounting policies


Revenue
X) Sale of completed development property
A development property is regarded as sold when the significant risks and returns have
been transferred to the buyer, which is normally on unconditional exchange of contracts.
For conditional exchanges, sales are recognised only when all the significant conditions are
satisfied.

FRS 18.14

XX) Sale of development property under construction


Where development property is under construction and agreement has been reached to
sell such property when construction is complete, the Directors consider whether the
contract comprises:
-

A contract to construct a property; or

A contract for the sale of completed property

a)

Where a contract is judged to be for the construction of a property, revenue is


recognised using the percentage of completion method as construction progresses.

b)

Where the contract is judged to be for the sale of a completed property, revenue is
recognised when the significant risks and rewards of ownership of the real estate have
been transferred to the buyer (i.e. revenue is recognised using the completed contract
method).
i)

ii)

If, however, the legal terms of the contract are such that the construction
represents the continuous transfer of work in progress to the purchaser, the
percentage of completion method of revenue recognition is applied and revenue
is recognised as work progresses.
In Singapore context, INT FRS 115 includes an accompanying note on the
application of INT FRS 115 in Singapore which requires the percentage of
completion method of revenue recognition to be applied to sale of private
residential properties in Singapore prior to completion of the properties that are
regulated under the Singapore Housing Developers (Control and Licensing) Act
(Chapter 130) and uses the standard form of sale and purchase agreements
(SPAs) prescribed in the Housing Developers Rules. The accompanying note to
INT FRS 115 does not address the accounting treatment for other SPAs,
including SPAs with a Deferred Payment Scheme feature in Singapore.

In the above situations (i) and (ii), the percentage of work completed is measured
based on the costs incurred up until the end of the reporting periods as a proportion of
total costs expected to be incurred.

FRS 18.14

INT FRS 115.13

INT FRS 115.17

INT FRS 115.20.a

INT FRS 115.17,


INT FRS 115.20.c

Commentary:
Stage of completion

The stage of completion of a contract may be determined in a variety of ways. The entity uses
the method that measures reliably the work performed. Depending on the nature of the contract,
other acceptable methods include surveys of work performed and completion of a physical
proportion of the contract work.

XYZ Holdings (Singapore) Limited | 205

INT FRS 115.17


FRS 11.30

XYZ Holdings (Singapore) Limited

Appendix A-3

Agreements for the construction of real


estate

Extract of summary of significant accounting judgements and estimates relating to revenue


recognition on development property under construction:

X.
X.X

Significant accounting judgements and estimates


Key sources of estimation uncertainty
X) Revenue recognition on development property under construction
The Group recognises revenue for pre-completion sales of certain types of properties by
reference to the stage of completion using the percentage of completion method. The
stage of completion is measured based on the costs incurred up until the end of the
reporting periods as a proportion of total costs expected to be incurred. Significant
assumptions are required to estimate the total contract costs and the recoverable
variation works that affect the stage of completion and the revenue respectively. In
making these estimates, management has relied on past experience and knowledge of the
project engineers. The carrying amounts of assets and liabilities as well as the revenue
from sale of development property (recognised on percentage of completion basis) are
disclosed in Note X (Development Property) and Note Y (Revenue) to the financial
statements respectively.

FRS 1.125

Extract of notes to financial statements illustrating the disclosure of revenue from sale of
development property:

X.

Revenue
Group
2014

2013

$000

$000

Revenue from sale of development properties (recognised on


completed contract basis)

XXX

XXX

FRS 18.35.b.i

Revenue from sale of development properties (recognised on


percentage of completion basis)

XXX

XXX

FRS 18.35.b.i,
INT FRS 115.20.b

XYZ Holdings (Singapore) Limited | 206

XYZ Holdings (Singapore) Limited

Appendix A-3

Agreements for the construction of real


estate

Extract of notes to the financial statements illustrating the disclosure of development property:

X.

Development property
The Group includes a division that develops residential property, which it sells in the ordinary
course of business and has entered into contracts to sell certain of these properties on
completion of construction.
The Group has considered the application of INT FRS 15 to these contracts and concluded that
there pre-completion contracts were not, in substance, construction contracts. However,
where the legal terms were such that the construction represented the continuous transfer of
work in progress to the purchaser, the percentage of completion method of revenue
recognition has been applied and revenue recognised as work progressed. Development
expenditure incurred in respect of inventory property dealt with under the percentage of
completion method is recognised in profit or loss in the period incurred.

INT FRS 115.20

Revenue from sales of residential property where the contracts are not in substance
construction contracts and do not lead to a continuous transfer of work in progress, is
recognised when both: (i) construction is complete; and (ii) either legal title to the property
has been transferred or there has been an unconditional exchange of contracts. Construction
and other expenditure attributable to such property is included in inventory property until
disposal. During the year, the Group transferred the remaining unsold units of a residential
property to investment property, in conjunction with the commencement of operating lease of
these units to a third party.
The amount recognised in costs of sales for the year in respect of inventory property is:

FRS 2.36(d)

Group
2014

2013

$000

$000

In respect of sales recognised on a percentage of completion


basis

XXX

XXX

In respect of other inventory property sales

XXX

XXX

INT FRS 115.21

Group
2014

2013

$000

$000

At 1 January

XXX

XXX

Construction costs incurred

XXX

XXX

FRS 11.40(a)

Interest capitalised

XXX

XXX

FRS 23.26(a)

Transfer to completed investment property

XXX

XXX

FRS 40.57(d)

Disposals (recognised in cost of sales)

(XXX)

At 31 December

(XXX)

(XXX)

XYZ Holdings (Singapore) Limited | 207

XYZ Holdings (Singapore) Limited

Appendix A-3

X.

Agreements for the construction of real


estate

Development property
The following table provides information about such continuous transfer agreements that are
in progress at the reporting date:
Group
2014

2013

$000

$000

Aggregate costs incurred and recognised to date

XXX

XXX

Profit before tax recognised to date

XXX

XXX

Advances received

XXX

XXX

XYZ Holdings (Singapore) Limited | 208

INT FRS 115.21

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Extract of summary of significant accounting policies illustrating changes in accounting policies


on adoption of Revised FRS 19:

X.
X.X

Summary of significant accounting policies (continued)


Defined benefit plan
The net defined benefit liability or asset is the aggregate of the present value of the
defined benefit obligation (derived using a discount rate based on high quality corporate
bonds) at the end of the reporting period reduced by the fair value of plan assets (if any),
adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset
ceiling is the present value of any economic benefits available in the form of refunds from
the plan or reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is determined separately for
each plan using the projected unit credit method.
Defined benefit costs comprise the following:

FRS 19.8

FRS 19.67

FRS 19.120

Service cost

Net interest on the net defined benefit liability or asset

Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on
non-routine settlements are recognised as expense in profit or loss. Past service costs are
recognised when plan amendment or curtailment occurs.
Net interest on the net defined benefit liability or asset is the change during the period in
the net defined benefit liability or asset that arises from the passage of time which is
determined by applying the discount rate based on high quality corporate bonds to the net
defined benefit liability or asset. Net interest on the net defined benefit liability or asset is
recognised as expense or income in profit or loss.

FRS 19.8
FRS 19.103

FRS 19.8
FRS 19.123

Remeasurements comprising actuarial gains and losses, return on plan assets and any
change in the effect of the asset ceiling (excluding net interest on defined benefit liability)
are recognised immediately in other comprehensive income in the period in which they
arise. Remeasurements are recognised in retained earnings within equity and are not
reclassified to profit or loss in subsequent periods.

FRS 19.127
FRS 19.122

Plan assets are assets that are held by a long-term employee benefit fund or qualifying
insurance policies. Plan assets are not available to the creditors of the Group, nor can they
be paid directly to the Group. Fair value of plan assets is based on market price
information. When no market price is available, the fair value of plan assets is estimated by
discounting expected future cash flows using a discount rate that reflects both the risk
associated with the plan assets and the maturity or expected disposal date of those assets
(or, if they have no maturity, the expected period until the settlement of the related
obligations).

FRS 19.8
FRS 19.113

The Groups right to be reimbursed of some or all of the expenditure required to settle a
defined benefit obligation is recognised as a separate asset at fair value when and only
when reimbursement is virtually certain.

FRS 19.116

XYZ Holdings (Singapore) Limited | 209

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Extracts of summary of significant accounting estimates and judgements relating to defined


benefit plan:

X.
X.X

Significant accounting judgements and estimates


Key sources of estimation uncertainty
The cost of defined benefit pension plans and other post-employment medical benefits as
well as the present value of the pension obligation are determined using actuarial
valuations. The actuarial valuation involves making various assumptions. These include the
determination of the discount rates, expected rates of return of assets, future salary
increases, mortality rates and future pension increases. Due to the complexity of the
valuation, the underlying assumptions and its long-term nature, defined benefit obligations
are highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date. The net benefit liability as at 31 December 2014 is $XXX (2013: $XXX).
Further details are provided in Note X.
In determining the appropriate discount rate, management considers the interest rates of
high quality corporate bonds in the respective currencies with at least AA rating, with
extrapolated maturities corresponding to the expected duration of the defined benefit
obligation. The underlying bonds are further reviewed for quality, and those having
excessive credit spreads are removed from the population of bonds on which the discount
rate is based, on the basis that they do not represent high quality bonds.
The mortality rate is based on publicly available mortality tables for the specific country
and is modified accordingly with estimates of mortality improvements. Future salary
increases and pension increases are based on expected future inflation rates for the
specific country.
Further details about the assumptions used are provided in Note X.

XYZ Holdings (Singapore) Limited | 210

FRS 1.125

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Extracts of notes to the financial statements illustrating the disclosures relating to defined benefit plan:

X.

Defined benefit plan


The Group operates two defined benefit pension plans, both of which require contributions to be made to separately administered funds. One provides a pension
of 2% of final salary for each year of service (Singapore plan), while the other provides 2.5% of average salary (US plan). Both benefit plans become vested after
five years of service and require contributions to be made to separately administered funds.
The Group also provides additional post employment healthcare benefits to certain senior employees in Singapore. These benefits are unfunded.
The amount included in the consolidated balance sheet arising from the entitys obligation in respect of its defined benefit plans is as follows:
Unfunded
post-employment medical
benefits

Funded pension plans


Singapore plan

US plan

Total

31
December
2014
$000

31
December
2013
$000

31
December
2014
$000

31
December
2013
$000

31
December
2014
$000

31
December
2013
$000

31
December
2014
$000

31
December
2013
$000

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

XXX

(XXX)

XXX

XXX

XXX

XXX

XXX

XXX

Restrictions on asset recognised

XXX

XXX

Net liability arising from defined


benefit obligation

XXX

(XXX)

XXX

XXX

XXX

XXX

XXX

Present value of defined benefit


obligation
Fair value of plan assets

XYZ Holdings (Singapore) Limited | 211

XXX

FRS 19.135.a
FRS 19.139.a.i

XYZ Holdings (Singapore) Limited

Appendix A-4
X.

Defined benefit plans

Defined benefit plan (continued)


FRS 19.140.a.ii
FRS 19.141

Changes in present value of the defined benefit obligations are as follow:

Unfunded
post-employment
medical
benefits

Funded pension plans


Singapore plan

US plan

Total

2014

2013

2014

2013

2014

2013

2014

2013

$000

$000

$000

$000

$000

$000

$000

$000

At 1 January

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Interest cost

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

XXX

XXX

XXX

XXX

XXX

XXX

(XXX)

XXX

(XXX)

XXX

(XXX)

XXX

XXX

XXX

XXX

XXX

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

XXX

(XXX)

XXX

(XXX)

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Current service cost


Remeasurement
(gains)/losses
Actuarial gains and
losses arising from
changes in
demographic
assumptions
Actuarial gains and
losses arising from
changes in financial
assumptions
Past service cost
(Gains)/Losses on
settlements
Contributions from
plan participants
Liabilities extinguished
on settlements
Benefits paid
Effects of business
combinations and
disposal
Exchange differences
At 31 December

XYZ Holdings (Singapore) Limited | 212

XYZ Holdings (Singapore) Limited

Appendix A-4
X.

Defined benefit plans

Defined benefit plan (continued)


Changes in fair value of plan assets are as follow:
FRS 19.140.a.i
FRS 19.141

Funded pension plans


Singapore plan

At 1 January
Interest income

US plan

Total

2014

2013

2014

2013

2014

2013

$000

$000

$000

$000

$000

$000

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Remeasurement
gains/(losses)
Return on plan assets

XXX

XXX

XXX

XXX

XXX

XXX

Contributions by employer

XXX

XXX

Contributions from plan


participants

XXX

XXX

XXX

XXX

XXX

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

(XXX)

XXX

(XXX)

XXX

(XXX)

XXX

(XXX)

XXX

(XXX)

XXX

XXX

XXX

XXX

XXX

XXX

Benefits paid
Assets distributed on
settlements
Effects of business
combinations and disposal
Exchange differences
At 31 December

Changes in the effect of the asset ceiling are as follow:

FRS 19.140.a.iii
FRS 19.141

Funded pension plans


Singapore plan

At 1 January
Interest income

2014

2013

$000

$000

XXX

XXX

Remeasurement gains/(losses)
Changes in the effect of
limiting to asset ceiling1
Exchange differences
At 31 December

(XXX)

XXX

XXX

The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.

XYZ Holdings (Singapore) Limited | 213

XYZ Holdings (Singapore) Limited

Appendix A-4
X.

Defined benefit plans

Defined benefit plan (continued)


FRS 19.142

The fair value of plan assets by each classes as at the end of the reporting period are as follow:
Funded pension plans
Singapore plan
31 December
2014
$000

Cash and cash equivalents


Equity instruments
- Manufacturing
- Financial institutions
- Telecommunications
Debt instruments
- Government securities
- AAA rated debt securities
- Not rated debt securities
Property
- Singapore
- Australia
Derivatives
- Interest rate swaps
- Forward currency contracts

US plan

31 December
2013
$000

31 December
2014
$000

Total

31 December
2013
$000

31 December
2014
$000

31 December
2013
$000

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Asset-backed securities
Structured debts

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

Fair value of plan assets

XXX

XXX

XXX

XXX

XXX

XXX

All equity and debt instruments held have quoted prices in active market. The remaining plan assets do not have quoted market prices in active market.
The plan assets include a property occupied by a subsidiary of the Group with a fair value of $XXX (2013: $XXX) and ordinary shares of XYZ Holdings Limited
with a fair value of $XXX (2013: $XXX).

XYZ Holdings (Singapore) Limited | 214

FRS 19.143

XYZ Holdings (Singapore) Limited

Appendix A-4
X.

Defined benefit plans

Defined benefit plan (continued)


The cost of defined benefit pension plans and other post-employment medical benefits as well
as the present value of the pension obligation are determined using actuarial valuations. The
actuarial valuation involves making various assumptions. The principal assumptions used in
determining pension and post-employment medical benefit obligations for the defined benefit
plans are shown below:
2014

2013

Singapore plan/ post employment medical plan

XX

XX

US plan

XX

XX

Singapore plan

XX

XX

US plan

XX

XX

Singapore plan

XX

XX

US plan

XX

XX

Male

XX

XX

Female

XX

XX

Male

XX

XX

Female

XX

XX

XX

XX

Discount rates:

Future salary increases:

Future pension increases:

Post retirement mortality for pensioners at 65:


Singapore plan/ post employment medical plan

US plan

Healthcare cost increase rate:

XYZ Holdings (Singapore) Limited | 215

FRS 19.144

XYZ Holdings (Singapore) Limited

Appendix A-4
X.

Defined benefit plans

Defined benefit plan (continued)


The sensitivity analysis below has been determined based on reasonably possible changes of
each significant assumption on the defined benefit obligation as of the end of the reporting
period, assuming if all other assumptions were held constant:

FRS 19.145

31 December 2014

Discount rates
Future salary increases
Future pension increases
Post retirement mortality for
pensioners at 65:
Male
Female
Healthcare cost increase rate

Increase/(decrease)

Singapore
Plan

US Plan

Unfunded
postemployment
medical
benefits

+XX basis points

(XXX)

(XXX)

(XXX)

- XX basis points

XXX

XXX

XXX

+XX %

XXX

XXX

XXX

- XX %

(XXX)

(XXX)

(XXX)

+XX %

XXX

XXX

XXX

- XX %

(XXX)

(XXX)

(XXX)

+XX %

XXX

XXX

XXX

- XX %

(XXX)

(XXX)

(XXX)

+XX %

XXX

XXX

XXX

- XX %

(XXX)

(XXX)

(XXX)

+XX %

XXX

XXX

XXX

- XX %

(XXX)

(XXX)

(XXX)

The management performed an Asset-Liability Matching Study (ALM) annually. The principal
technique of the Groups ALM is to ensure the expected return on assets to be sufficient to support
the desired level of funding arising from the defined benefit plans. The Groups current strategic
investment strategy consists of 50% of equity instruments, 30% of debt instruments, 15% of
investment properties and 5% of cash. The use of debt instruments in combination with interest rate
swaps will reduce the sensitivities caused by the term of the defined benefit obligation by 25%.
The Groups defined benefit pension plans are funded by its subsidiaries. The employees of the
Group contribute 6% of the pensionable salary and the remaining residual contributions are paid by
the subsidiaries of the Group.
The Group expects to contribute $XXX (2013: $XXX) to the defined benefit pension plans in 2015.
The average duration of the defined benefit obligation at the end of the reporting period is 18.4
years (2013: 17.5 years).

XYZ Holdings (Singapore) Limited | 216

FRS19.146

FRS19.147.a

FRS19.147.b
FRS19.147.c

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Commentary:

To meet the disclosure objective of Revised FRS 19 for defined benefit plans, an entity shall
consider all the following:

FRS 19.136

(a) the level of detail necessary to satisfy the disclosure requirements,


(b) how much emphasis to place on each of the various requirements,
(c) how much aggregation or disaggregation to undertake; and
(d) whether users of financial statements need additional information to evaluate the
quantitative information disclosed.
If the disclosures provided in accordance with the specific requirements of Revised FRS 19
are insufficient to meet the objectives above, the entity shall disclose additional information
necessary to meet those objectives. For example, an entity may present an analysis of the
present value of defined benefit obligation that distinguishes the nature, characteristics and
risks of the obligation. Such a disclosure could distinguish:
-

between amounts owing to active members, deferred members, and pensioners

between vested benefits and accrued but not vested benefits

between conditional benefits, amounts attributable to future salary increases and other
benefits

An entity shall assess whether all or some disclosures should be disaggregated to


distinguish plans or groups of plans with materially different risks. For example, an entity
may disaggregate disclosure about plans showing one or more of the following features:

different geographical locations

different characteristics such as flat salary pension plans, final salary pension plans or
post-employment medical plans

different regulatory environments

different reporting segments

different funding arrangements (e.g. wholly unfunded, wholly or partly funded)

When disclosing the characteristics of defined benefit plans and risks associated with them,
an entity shall disclose:

FRS 19.137

FRS 19.138

FRS 19.139

(a) information about the characteristics including


-

the nature of benefits provided by the plan (e.g. final salary defined benefit plan or
contribution-based plan with guarantee).

a description of the regulatory framework in which the plan operates, for example
the level of any minimum funding requirements, and any effect of the regulatory
framework on the plan, such as the asset ceiling.

a description of any other entitys responsibilities for the governance of the plan,
for example responsibilities of trustees or of board members of the plan.

(b) a description of the risks to which the plan exposes the entity, focused on any unusual
entity-specific or plan-specific risks, and of any significant concentrations of risk. For
example, if plan assets are invested primarily in one class of investments, e.g. property,
the plan may expose the entity to a concentration of property market risk.
(c) a description of any plan amendments, curtailments and settlements.

An entity shall provide reconciliation from the opening balance to the closing balance for
any reimbursement rights and the related obligation, if applicable.

XYZ Holdings (Singapore) Limited | 217

FRS 19.140.b

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Commentary (continued):

Past service cost and gains and losses arising from settlements need not be distinguished if
they occur together.

FRS 19.141.d

In the financial statements for periods beginning before 1 January 2014, an entity need not
present comparative information for the disclosures about the sensitivity of the defined
benefit obligation.

FRS 19.173.b

Revised FRS 19 introduces a number of new disclosure requirements. These include:


Sensitivity analysis
-

A sensitivity analysis for each significant assumption as of the end of the reporting
period, showing how the defined benefit obligation would have been affected by
changes in the relevant assumption that were reasonably possible at that date.

FRS 19.145.a

The method and assumptions used in preparing the sensitivity analyses and the
limitation of those methods.

FRS 19.145.b

Changes from the previous period in the methods and assumptions used in preparing
the sensitivity analyses, and the reasons for such changes.

FRS 19.145.c

Asset-liability matching strategies


-

A description of any asset-liability matching strategies used by the plan or the entity,
including the use of annuities and other techniques, such as longevity swaps, to
manage risk.

FRS 19.146

Cash flow information

A description of any funding arrangements, and funding policy that affect future
contributions to the defined benefit plan.

FRS 19.147.a

Expected contributions to the plan for the next annual reporting period.

FRS 19.147.b

Information about the maturity profile of the defined benefit obligation (including,
but not limited to, weighted average duration of the defined benefit obligation).

FRS 19.147.c

Multi-employer plans
In this illustration, we do not illustrate multi-employer plans. If the Group participates in a
multi-employer plan and accounts for that plan as a defined benefit plan, it shall disclose the
following in addition to information required by paragraphs 135-147 of the Revised FRS 19:
(a) a description of the funding arrangements, including the method used to determine the
entitys rate of contributions and any minimum funding requirements.
(b) a description of the extent to which the entity can be liable to the plan for other
entities obligations under the terms and conditions of the multi-employer plan.
(c) a description of any agreed allocation of a deficit or a surplus on:
i.

wind-up of the plan; or

ii.

the entitys withdrawal from the plan.

(d) if the entity accounts for that plan as if it were a defined contribution plan, it shall
disclose the following, in addition to the information required by (a) (c) and instead of
the information required by paragraph 139 to 147 of the Revised FRS 19:
i.

the fact that the plan is a defined benefit plan.

ii.

the reason why sufficient information is not available to enable the entity to
account for the plan as a defined benefit plan.

XYZ Holdings (Singapore) Limited | 218

FRS 19.33.b
FRS 19.148

XYZ Holdings (Singapore) Limited

Appendix A-4

Defined benefit plans

Commentary (continued):

Multi-employer plans (continued)


iii.

the expected contributions to the plan for the next annual reporting period.

iv.

information about any deficit or surplus in the plan that may affect the amount of
future contributions, including the basis used to determine that deficit or surplus
and the implications, if any, for the entity.

v.

an indication of the level of participation of the entity in the plan compared with
other participating entities. Examples of measures that might provide such an
indication include the entitys proportion of the total contributions to the plan or
the entitys proportion of the total number of active members, retired members,
and former members entitled to benefits, if that information is available.

FRS 19.148

Defined benefit plans that share risks between entities under common control
In this illustration, we do not illustrate defined benefit plans that share risks between
entities under common control. If an entity participates in a defined benefit plan that shares
risks between entities under common control, it shall disclose:

FRS 19.149

(a) the contractual agreement or stated policy for charging the net defined benefit cost or
the fact that there is no such policy.
(b) the policy for determining the contribution to be paid by the entity.
(c) if the entity accounts for an allocation of the net defined benefit cost as noted in
paragraph 41 of Revised FRS 19 , all the information about the plan as a whole
required by paragraph 135-147 of Revised FRS 19.
(d) if the entity accounts for the contribution payable for the period as noted in paragraph
41 of Revised FRS 19 , the information about the plan as a whole required by
paragraphs 135 137, 142 - 144 and 147 (a) and (b) of Revised FRS 19.
The information required by (c) and (d) can be disclosed by cross-reference to disclosures in
another group entitys financial statements if:

FRS 19.150

(a) that group entitys financial statements separately identify and disclose the information
required about the plan; and
(b) that group entitys financial statements are available to users of the financial
statements on the same terms as the financial statements of the entity and at the same
time as, or earlier than, the financial statements of the entity.

Paragraph 41 of Revised FRS 19 requires an entity participating in a defined benefit plan


that share risks between entities under common control to obtain information about the
plan as a whole measured in accordance with Revised FRS 19 on the basis of assumptions
that apply to the plan as a whole. If there is a contractual agreement or stated policy for
charging to individual group entities the net defined benefit cost for the plan as a whole
measured in accordance with Revised FRS 19, the entity shall, in its separate or individual
financial statements, recognise the net defined benefit cost so charged. If there is no such
agreement or policy, the net defined benefit cost shall be recognised in the separate or
individual financial statements of the group entity that is legally the sponsoring employer
for the plan. The other group entities shall, in their separate or individual financial
statements, recognise a cost equal to their contribution payable for the period.

XYZ Holdings (Singapore) Limited | 219

FRS 19.41

XYZ Holdings (Singapore) Limited

Appendix B Comparison between FRS and IFRS


Aligned with IFRS?

and

Description

Reference
Preface
Framework

Yes.
P
P

FRS 1

Preface to the Financial Reporting Standards


Framework for the Preparation and Presentation of Financial
Statements of Financial Statements
Presentation

FRS 2

Inventories

FRS 7

Cash Flow Statements

FRS 8

Accounting Policies, Changes in Accounting Estimates and Errors

FRS 10

Events After the Reporting Period

FRS 11

Construction Contracts

FRS 12

Income Taxes

FRS 16

Property, Plant and Equipment

FRS 17

Leases

FRS 18

Revenue

FRS 19

Employee Benefits

FRS 20

FRS 21

Accounting for Government Grants and Disclosure of Government


Assistance
The
Effects of Changes in Foreign Exchange Rates

FRS 23

Borrowing Costs

FRS 24

Related Party Disclosures

FRS 26

Accounting and Reporting by Retirement Benefit Plans

FRS 27

No.

Notes

i
P

Separate Financial Statements

FRS 28

Investments in Associates and Joint Ventures

FRS 29

Financial Reporting in Hyperinflationary Economies

FRS 32

Financial Instruments: Presentation

FRS 33

Earnings Per Share

FRS 34

Interim Financial Reporting

FRS 36

Impairment of Assets

FRS 37

Provisions, Contingent Liabilities and Contingent Assets

FRS 38

Intangible Assets

FRS 39

Financial Instruments: Recognition and Measurement

FRS 40

Investment Property

FRS 41

Agriculture

FRS 101

First-Time Adoption of Financial Reporting Standards

FRS 102

Share-based Payment

FRS 103

Business Combinations

FRS 104

Insurance Contracts

FRS 105

Non-current Assets Held for Sale and Discontinued Operations

FRS 106

Exploration for and Evaluation of Mineral Resources

FRS 107

Financial Instruments: Disclosure

FRS 108

Operating Segments

FRS 110

Consolidated Financial Statements

FRS 111

Joint Arrangements

FRS 112

Disclosure of Interest in Other Entities

FRS 113

Fair Value Measurement

FRS 114

Regulatory Deferral Accounts

P
P

XYZ Holdings (Singapore) Limited | 220

XYZ Holdings (Singapore) Limited

Appendix B Comparison between FRS and IFRS


Notes on differences between FRS and IFRS

FRS 16 has a transitional provision which exempts an entity which had

Revalued its property, plant and equipment before 1 January 1984; or

Performed any one-off revaluation on its property, plant and equipment between 1
January 1984 and 31 December 1996 (both dates inclusive), from complying with the
requirement to keep the valuation current by periodic valuation.

IAS 16 does not have such a transitional provision and therefore, all property, plant and
equipment that had been revalued prior to adoption of IAS 16 would have to be revalued on a
periodic basis.

One of the conditions for exemption from preparing consolidated financial statements or equity
accounting under IFRS 10 and IAS 28 is the ultimate or any intermediate parent of the parent
produces consolidated financial statements available for public use that comply with
International Financial Reporting Standards. The requirement that the consolidated financial
statements comply with IFRS is not required under FRS 110 and FRS 28.

IFRS 3 applies to the accounting for business combinations for which the agreement date is on
or after 31 March 2004.
FRS 103 is effective for annual periods beginning on or after 1 July 2004.

FRS 102 is aligned with IFRS 2 except for the scope and the effective date for non-listed
companies. IFRS 2 applies to grants of shares, share options or other equity instruments that
were granted after 7 November 2002 and had not yet vested at the effective date of IFRS 2.
However, the reference date in FRS 102 is 22 November 2002 instead of 7 November 2002.
For non-listed companies, FRS 102 is effective only for financial periods beginning from 1
January 2006 whereas IFRS 2 applies to all companies for financial periods beginning from 1
January 2005.

IFRS 10, IFRS 11, IFRS 12, Revised IAS 27 and Revised IAS 28 are effective for annual periods
beginning on or after 1 January 2013. FRS 110, FRS 111, FRS 112, Revised FRS 27 and
Revised FRS 28 are effective only for annual periods beginning on or after 1 January 2014.

The following IFRS have not been adopted as FRS:

IFRS 9 Financial Instruments, effective for annual periods beginning on or after 1 January

2018

IFRS 15 Revenue Recognition, effective for annual periods beginning on or after 1 January

2017

Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets,
effective for annual periods beginning on or after 1 July 2016

Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture, effective
for annual periods beginning on or after 1 January 2016

Amendments to FRS 27 Separate Financial Statements, effective for annual periods


beginning on or after 1 January 2016

XYZ Holdings (Singapore) Limited | 221

XYZ Holdings (Singapore) Limited

Appendix B Comparison between FRS and IFRS


Recommended Accounting Practice (RAP) in Singapore
The following RAP issued by the Institute of Singapore Chartered Accountants set out
recommendations on accounting treatment relating to foreign income not remitted to Singapore.

Foreign income not remitted to Singapore


The practice in Singapore is to recognise and account for a deferred tax liability in respect of
foreign-sourced income not remitted to Singapore in the same way as temporary differences
associated with investments in subsidiaries etc. as set out in accordance with FRS 12.39. Thus,
some companies do not provide deferred tax in respect of foreign income on the basis that they
do not intend to remit the funds to Singapore in the foreseeable future.

XYZ Holdings (Singapore) Limited | 222

XYZ Holdings (Singapore) Limited

Appendix B Comparison between FRS and IFRS


INT FRS vs. IFRIC Interpretations

Reference

Aligned with IFRIC


Interpretations

Description

Yes.
INT FRS 7

Introduction of the Euro

INT FRS 10

Government Assistance No Specific Relation to Operating Activities

INT FRS 12

Consolidation Special Purpose Entities

INT FRS 13

Jointly Controlled Entities Non-Monetary Contributions by


Venturers

INT FRS 15

Operating Leases Incentives

INT FRS 21

Income Taxes Recovery of Revalued Non-Depreciable Assets

INT FRS 25

Income Taxes Changes in the Tax Status of an Enterprise or its


Shareholders

INT FRS 27

Evaluating the Substance of Transactions Involving the Legal Form


of a Lease

INT FRS 29

Disclosure Service Concession Arrangements

INT FRS 31

Revenue Barter Transactions Involving Advertising Services

INT FRS 32

Intangible Assets - Web Site Costs

INT FRS 101

Changes in Existing Decommissioning, Restoration and Similar


Liabilities

INT FRS 104

Determining Whether an Arrangement Contains a Lease

INT FRS 105

Rights to Interests Arising from Decommissioning, Restoration and


Environmental Rehabilitation Funds

INT FRS 106

Liabilities Arising from Participating in a Specific Market Waste


Electrical and Electronic Equipment

INT FRS 107

Applying the Restatement Approach under FRS 29 Financial


Reporting in Hyperinflationary Economies

INT FRS 108

Scope of FRS 102

INT FRS 109

Reassessment of Embedded Derivatives

INT FRS 110

Interim Financial Reporting and Impairment

INT FRS 111

Group and Treasury Share Transactions

INT FRS 112

Service Concession Arrangements

INT FRS 113

Customer Loyalty Programmes

INT FRS 114

FRS 19 - The Limit on a Defined Benefit Asset, Minimum Funding


Requirements and their interaction

INT FRS 115

Agreements for the Construction of Real Estate

INT FRS 116

Hedges of a Net Investment in a Foreign Operation

INT FRS 117

Distributions of Non-cash Assets to Owners

INT FRS 118

Transfers of Assets from Customers

INT FRS 119

Extinguishing Financial Liabilities with Equity Instruments

INT FRS 120

Stripping Costs in the Production Phase of a Surface Mine

INT FRS 121

Levies

XYZ Holdings (Singapore) Limited | 223

No.

Notes

XYZ Holdings (Singapore) Limited

Appendix B Comparison between FRS and IFRS

IFRIC 15 is effective for annual periods beginning on or after 1 January 2009. INT FRS 115 is
effective only for annual periods beginning on or after 1 January 2011.
INT FRS 115 includes an accompanying note on application of INT FRS 115 in Singapore. The
accompanying note deals with the accounting treatment for revenue and associated expenses
by housing developers who develop more than four units of private residential properties in
Singapore for sale prior to completion of the properties. These developers are regulated under
the Singapore Housing Developers (Control and Licensing) Act (Chapter 130) and use the
standard form of the sales and purchase agreement prescribed in the schedule to the Housing
Developers Rules.

The following IFRIC Interpretation has not been adopted as INT FRS:

IFRIC 2 Members Shares in Co-operative Entities and Similar Instruments, effective for
annual periods beginning on or after 1 January 2005

XYZ Holdings (Singapore) Limited | 224

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partnership registered in Singapore under the Limited Liability
Partnerships Act (Chapter 163A).

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