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| Home > Financial Statements > Statutory Reports > Notes to the Financial Statements |
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These notes form an integral part of the financial statements.
The financial statements were authorised for issue by the Board of Directors on February 26, 2009.
Sembcorp Industries Ltd (the “Company”) is a company incorporated in the Republic of Singapore and has its registered office at 30 Hill Street #05-04, Singapore 179360.
Prior to January 2008, the principal activities of the Company were those of an investment holding company, as well as the corporate headquarters, which gives strategic direction and provides management services to its subsidiaries.
In January 2008, the Company entered into an internal restructuring with its wholly-owned subsidiary, Sembcorp Utilities Pte Ltd, for the acquisition of the entire assets, liabilities and businesses of Sembcorp Utilities & Terminals (“SUT”) and Propylene Purification Unit (“PPU”) divisions, including their current employees.
Following the above acquisition, the principal activities of the Company includes:
| a. |
investment holding, as well as the corporate headquarters, which gives strategic direction and provides management services to its subsidiaries; and |
| b. |
production and supply of utilities services, terminalling and storage of petroleum products and chemicals. |
The principal activities of key subsidiaries are as follows:
| i. |
Utilities
This business focuses on the provision of centralised utilities, energy and water. It offers industrial utilities and services such as energy, steam, industrial water and wastewater treatment to energy intensive users. It operates in Singapore, the United Kingdom, China, Vietnam and the United Arab Emirates. |
| ii. |
Marine
This business focuses principally on repair, building and conversion of ships and rigs, and offshore engineering. |
| iii. |
Environment
The business provides integrated waste management services and undertakes waste-to-resource businesses in the Asia Pacific region. |
| iv. |
Industrial Parks
The business focuses principally on developing, marketing and managing industrial parks and townships in Asia. |
The consolidated financial statements relate to the Company and its subsidiaries (referred to as the “Group”) and the Group’s interests in associates and joint ventures.
| a. |
Basis of Preparation
The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The financial statements are presented in Singapore dollars and rounded to the nearest thousand (“S$’000”), unless otherwise indicated. They are prepared on the historical cost basis except where otherwise described in the
accounting policies below.
The preparation of financial statements in conformity with FRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are discussed in Note 43.
With effect from January 1, 2008, the Group adopted the following new or amended FRS and Interpretations to FRS (“INT FRS”) which are relevant to the Group’s operations:
| INT FRS 111 |
FRS 102 – Group and Treasury Share Transactions |
| INT FRS 114 |
FRS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction |
The adoption of the above INT FRS did not result in substantial changes to the Group’s accounting policies. The accounting policies set out below have been applied consistently by the Group. The accounting policies used by the Group have been applied consistently to all periods presented in these financial statements. |
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| b. |
Consolidation
| i. |
Subsidiaries
Subsidiaries are those companies that are controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities.
The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another company.
Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
All business combinations are accounted for using the purchase method with effect from January 1, 2004 upon the adoption of FRS 103. Prior to January 1, 2004, business combinations were accounted for either by the purchase method, or if they were between entities under common control, by the historical cost method similar to the pooling-of-interest method.
Under the purchase method, the cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition.
Business combinations that involve entities under common control are excluded from the scope of FRS 103. Such combinations are accounted at historical cost in a manner similar to the pooling-of-interests method, in the preparation of the consolidated financial statements. Under this method of accounting, the difference between the value of the share capital issued and the value of shares received is taken to the merger reserve.
The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent. |
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| ii. |
Associates
Associates are companies in which the Group has significant influence, but not control, over the financial and operating policies.
The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group has significant influence over another company.
In the Group’s financial statements, they are accounted for using the equity method of accounting from the day that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the associate (including any other unsecured receivables, that in substance, form part of the Group’s net investment in the associate), recognition of further losses is discontinued unless the Group has incurred obligations or made payments on its behalf to satisfy obligations of the associate that the Group has guaranteed or otherwise committed on behalf of.
The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition. Where the audited financial statements are not available, the share of results is arrived at from unaudited
management financial statements made up mainly to the end of the accounting year to December 31. |
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| iii. |
Joint Ventures
Joint ventures are those enterprises whose activities the Group has joint control over, established by contractual agreement.
The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group has joint control over the enterprise.
For incorporated joint ventures, the Group accounts for the joint ventures in the same manner as associates, from the date joint control commences until the day that the joint control ceases.
For unincorporated joint ventures, the proportionate share in the unincorporated joint ventures’ individual income, expenses, assets and liabilities are included in financial statements of the Group with items of a similar nature on a line-by-line basis.
The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is credited to the income statement in the period of the acquisition. Where the audited financial statements are not available, the share of results is arrived at from unaudited
management financial statements made up mainly to the end of the accounting year to December 31. |
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| iv. |
Associates and Joint Ventures in the Company’s Financial Statements
Investments in associates and joint ventures are stated in the Company’s balance sheet at cost less impairment losses.
The results of the associates and joint ventures are included in the Company’s income statement to the extent of dividends received and receivable, provided the Company’s right to receive the dividend is established before the balance sheet date. |
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| v. |
Transactions Eliminated on Consolidation
All significant intra-group transactions, balances and unrealised gains or losses are eliminated on consolidation. Unrealised gains resulting from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the enterprise. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. |
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| vi. |
Accounting Policies of Subsidiaries, Associates and Joint Ventures
Where necessary, accounting policies for subsidiaries and material associates and joint ventures have been adjusted on consolidation to be consistent with the policies adopted by the Group. |
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| c. |
Foreign Currencies
| i. |
Functional and Presentation Currency
Items included in the financial statements of each company in the Group are measured using the currency of the primary economic environment in which the company operates (“the functional currency”). The consolidated financial statements are presented in Singapore dollars, which is the Company’s functional and presentation currency. |
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| ii. |
Foreign Currency Transactions and Balances
Transactions in foreign currencies are translated into the functional currency at foreign exchange rates ruling at the dates of the transactions. At each balance sheet date:
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Foreign currency monetary items are translated into the functional currency using foreign exchange rates ruling at that date. |
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Non-monetary assets and liabilities measured at historical cost in foreign currencies are translated into the functional currency using foreign exchange rates at the dates of the transactions. |
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Non-monetary assets and liabilities measured at fair value in foreign currencies are translated into the functional currency at foreign exchange rates ruling at the dates the fair value was determined. |
Foreign exchange differences arising from the settlement or from translation of monetary items are recognised in the income statement.
Foreign exchange differences arising from non-monetary items are recognised directly in equity when non-monetary items’ gains or losses are recognised directly in equity. Conversely, when non-monetary items’ gains or losses are recognised directly in the income statement, foreign exchange differences arising from these items are recognised directly in the income statement. |
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| iii. |
Foreign Operations
The results and financial positions of foreign operations (none of which have the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
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Assets and liabilities are translated at foreign exchange rates ruling at the date of the balance sheet. |
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Revenues and expenses are translated at average foreign exchange rates. |
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All resulting foreign exchange differences are taken to the currency translation reserve. |
Goodwill (except those relating to acquisitions of foreign operations prior to January 1, 2004) and fair value adjustments arising from the acquisition of foreign operations are translated to the presentation currency for consolidation at the rates of exchange ruling at the balance sheet date. Goodwill arising from the acquisition of foreign operations prior to January 1, 2004 are translated at foreign exchange rates ruling at the dates of the transactions.
On disposal, accumulated currency translation differences are recognised in the consolidated income statement as part of the gain or loss on disposal. |
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| iv. |
Net Investment in a Foreign Operation
Exchange differences arising from monetary items that in substance form part of the Company’s net investment in a foreign operation are recognised in the Company’s income statement. Such exchange differences are reclassified to the currency translation reserve in the consolidated financial statements and are released to the consolidated income statement upon disposal of the investment as part of the gain or loss on disposal. |
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