ACCOUNTING POLICIES

 Definition
The specific principles and procedures that should be implemented by a company's
management team and will be used to prepare company’s financial statements. These
include any methods, measurement systems and procedures for presenting
disclosures.
Management should select and apply an enterprise’s accounting policies so that
financial statements comply with all MASB Standards and any other technical
pronouncement issued by the MASB.
Where there is no specific requirement, management should develop policies
to ensure that the financial statements provide information that is :
a) Relevant to the decision-making needs of users: and
b) Reliable, in that they:
i. Represent faithfully the results and financial posiyion of the enterprise;
ii. Reflect the economic substance of events and transactions, and not
merely the legal form;
iii. Are neutral, that is free from bias;
iv. Are prudent and;
v. Are complete in all material respects.
Accounting policies are the specific principles, bases, conventions, rules and
practices adopted by the enterprise in preparing and presenting financial statements.
Example of accounting policies :
 The treatments of gains and losses on disposals of non-current assets-they
could be applied to adjust the depreciation charge for the period, or they may
appear as separate items in the financial statements.
 The classification of overheads in the financial statements-for example, some
indirect costs may be included in the trading account section of the statement
of profit or loss, or they may be included in administration costs in the profit
and loss account section of the statement of profit or loss.
 The treatment of interest costs incurred in connection with the construction of
non-current assets-these could be charged to profit and loss as a finance cost,
or they could be capitalised and added to the other costs of creating the fixed
assets (this is permitted by the relevant accounting standard).
The following accounting policies, unless otherwise stated below, have been used
consistently in dealing with items which are considered material in relation to the
financial statements:
In DRB-Hicom Bhd the accounting policies are :-
 Basis of preparation
The financial statements comply with the provisions of the Companies Act 2016 and
Financial Reporting Standards (“FRSs”) in Malaysia.
The financial statements of the Group and of the Company are prepared under the
historical cost convention except for those that are disclosed in this summary of
significant accounting policies.
The preparation of financial statements in conformity with the provisions of the
Companies Act 2016 and FRSs in Malaysia, requires the use of certain critical
accounting estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reported
year. Actual results could differ from those estimates. There are no areas involving a
higher degree of judgement or complexity, or areas where estimates and assumptions
are significant to the financial statements other than as disclosed in Note 56.
The comparatives for 31 March 2016 have been restated with adjustments arising
from the completion of the purchase price allocation exercise as disclosed in Note
51(i)(f). Certain other comparatives have been reclassified to be consistent with
current year’s presentation.

 Assets held for sale

Assets are classified as held for sale and stated at the lower of carrying amount and
fair value less costs to sell if their carrying amount will be recovered principally through
a sale transaction rather than through continuing use. This condition is regarded as
met only when the sale is highly probable and the asset is available for immediate sale
in its present condition subject only to terms that are usual and customary.
A non-current asset is not depreciated or amortised while it is classified as held for
sale or while it is part of a disposal group classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group classified as held for sale are
continued to be recognised.
Assets and liabilities classified as held for sale are presented separately as current
items in the statement of financial position.
  Non-controlling interest
Non-controlling interest represents the portion of profit or loss and net assets in
subsidiary companies not held by the Group and are presented separately in
statements of comprehensive income of the Group and within equity in the
consolidated statement of financial position separately from parent shareholders’
equity. Non-controlling interest is initially measured at the non-controlling interest’s
share of fair values of the identifiable assets and liabilities of the acquire at the date
of acquisition.
The Group applies a policy of treating acquisition/disposal of shares from/to non-
controlling interest as transactions with owners. Gains and losses resulting from
disposal of shares in subsidiary companies to non-controlling interest are recognised
in equity. For purchases from non-controlling interest, the difference between any
consideration paid and the relevant share of the carrying value of net assets of the
subsidiary acquired is recognised as equity.

In TAN CHONG MOTOR HOLDINGS BERHAD, the accounting policies are :

1. Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a
subsidiary not attributable directly or indirectly to the equity holders of the Company,
are presented in the consolidated statement of financial position and statement of
changes in equity within equity, separately from equity attributable to the owners of
the Company. Non-controlling interests in the results of the Group is presented in the
consolidated statement of profit or loss and other comprehensive income as an
allocation of the profit or loss and the comprehensive income for the year between
non-controlling interests and owners of the Company. Losses applicable to the non-
controlling interests in a subsidiary are allocated to the non-controlling interests even
if doing so causes the non-controlling interests to have a deficit balance.
2. Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant
components of individual assets are assessed, and if a component has a useful life that
is different from the remainder of that asset, then that component is depreciated
separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated

useful lives of each component of an item of property, plant and equipment from the
date that they are available for use except for one of the subsidiaries where its plant,
machinery and equipment are depreciated over the shorter of the model useful life or
projected production volume. Leased assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably certain that the Group will
obtain ownership by the end of the lease term. Freehold land is not depreciated.
Buildings are depreciated on a straight-line basis over the shorter of 50 years or the
lease period. Property, plant and equipment under construction are not depreciated
until the assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

Plant, machinery and equipment 4 - 10 years

Furniture, fixtures, fittings and office equipment 3 - 10 years

Motor vehicles 5 years

Renovation 5 - 8 years

Rough road 5 years

Depreciation methods, useful lives and residual values are reviewed at the end of the
reporting period, and adjusted as appropriate.
 ACCOUNTING CONCEPT
 Definition
Accounting concepts is basically the accounting rules that should be follow while
preparing the financial statements and accounts.

Example of accounting concept are :

 Going concern : Financial statements are prepared on the assumption that

the business will remain in operation in future periods. Under this
assumption, revenue and expense recognition may be deferred to a future
period, when the company is still operating. Otherwise, all expense
recognition in particular would be accelerated into the current period.

 Materiality concept : Transactions should be recorded when not doing so

might alter the decisions made by a reader of a company's financial
statements. This tends to result in relatively small-size transactions being
recorded, so that the financial statements comprehensively represent the
financial results, financial position, and cash flows of a business.

In DRB-HICOM BHD, the accounting basis are :

 Accrual Concept: According to this concept revenue and expenses are noted
when they occur in a financial statement but when the cash received or paid
at that time they are not recorded.

Example : For example in DRB-Hicom Bhd, the expenses incurred but not yet

paid in current period should be treated as accrual/accrued expenses under

current liabilities while the expenses incurred in the following period but paid
for in advance should be treated as prepayment expenses under current asset.
 Consistency concept : According to this concept once an accounting method
has been chosen it should be consistently apply them in every period unless
there is a solid reason to go for the alternative.

Example : In DRB-Hicom Bhd, the company adopts straight line method and
should not be changed to adopt reducing balance method in other period.
In TAN CHONG MOTOR HOLDINGS BERHAD, the accounting concept are :
 Accounting Period Concept:
Financial accounting provides information about the economic activities of an
enterprise for specified time periods that are shorter than the life of the enterprise.
Normally, the time periods are of equal length to facilitate comparison.

The time period is identified in the financial statements. The time periods are usually
of twelve months. Sometimes quarterly or half-yearly statements are also issued.
These are considered interim and different from annual statements. For managerial
use, statements covering shorter periods such as a month or a week may also be
prepared.

Accounting period for Tan Chong Motor Holdings Berhad has always been 12 months
(1 January 20xx – 31 December 20xx)
 ACCOUNTING BASIS
 Definition
Method used to determine when revenues and expenses recognized in the
accounts of a firm, and reported in its financial statements. There are two basis in
accounting which are accrual basis accounting and cash basis accounting.
Example :
 In accrual basis accounting, for example, revenues are recognized when
earned and expenses are recognized when incurred, whether or not any
cash is received or paid.
 In cash basis accounting, however, revenues and expenses are recognized
only when cash is received or paid, irrespective of the timing of actual sales
or purchases.

In DRB-HICOM BHD, the accounting basis is :

 Accrual basis of accounting.

Under the accrual basis of accounting, revenues are reported on the income
statement when they are earned. Under the accrual basis of accounting,
expenses are matched with the related revenues and reported when the
expense occurs, not when the cash is paid.

In DRB-Hicom Bhd ,
I. Property development activities

Property development costs

Property development costs comprise all costs that are directly attributable to
development activities or that can be allocated on a reasonable basis to such
activities.

Where the outcome of a development can be reliably estimated, property

development revenue and expenditure are recognised using the percentage of
completion method. The percentage of completion is measured by reference to
the development costs incurred to date in proportion to the estimated total
costs for the property development.

Where the outcome of a development activity cannot be reliably estimated,

property development revenue is recognised only to the extent of costs incurred
 that is probable will be recoverable. Property development costs on
development units sold are recognised as an expense when incurred.

Irrespective of whether the outcome of a property development activity can be

estimated reliably, when it is probable that total property development costs
will exceed total property development revenue, the expected loss is recognised
as an expense immediately.

Property development costs not recognised as an expense is recognised as an

asset and are stated at the lower of cost and net realisable value. Where
revenue recognised in profit or loss exceeds billings to purchasers, the balance
is shown as accrued billings under receivables (within current assets). Where
billings to purchasers exceed revenue recognised, the balance is shown as
progress billings under payables (within current liabilities).

II. Revenue and other income recognition

Rental income : is accrued on a straight line basis over the operating lease
term.

In TAN CHONG MOTOR HOLDINGS BERHAD, the accounting basis is :

 Accrual Basis
The non-current amount due to subsidiaries is in respect of advances that are
unsecured, not repayable within the next twelve months and are subject to interest
at 6.05% (2016: 6.05%) per annum.
Included in trade payable are amount due from related parties of RM4,928,000
(2016: RM16,808,000).
The current amount due to subsidiaries is in respect of advances that are
unsecured, repayable on demand and are subject to interest at 4.43% (2016:
4.38% to 4.64%) per annum.
 ACCOUNTING ESTIMATES
Accounting estimate is an approximation of the amount to be debited or credited on
items for which no precise means of measurement are available. They are based on
specialized knowledge and judgment derived from experience and training. They are
used in the financial statements to determine the carrying amounts of assets and
liabilities and the associated income or expense for the period where such amounts
cannot be measured with precision and certainty.

Examples of accounting estimates include:

 Useful life of non-current assets
 Impairment of non-current assets
 Bad debts
 Provision for obsolete and slow-moving stock
 Revalued amounts of non-current assets
 Provision for pension benefits
 Depreciation