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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 25, 2010.
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.
The principal activities of the Company include: |
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| a. |
investment holding, as well as the corporate headquarter, 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. |
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| The principal activities of key subsidiaries are as follows: |
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| i. |
Utilities
This business focuses on the provision of energy, water and on-site logistics and services to customers including
companies in energy intensive industry clusters. It operates in Singapore, the United Kingdom, China, Vietnam, the
United Arab Emirates and Oman. |
| 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 integrated industrial parks and townships in Asia. |
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| 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. |
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| 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 44.
With effect from January 1, 2009, the Group adopted the following new or amended FRS and Interpretations to
FRS (“INT FRS”) which are relevant to the Group’s operations:
| FRS 1 (revised 2008) |
Presentation of Financial Statements |
| FRS 23 (revised 2007) |
Borrowing Costs |
| Amendments to FRS 107 |
Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments |
| FRS 108 |
Operating Segments |
| INT FRS 116 |
Hedges of a Net Investment in a Foreign Operation |
| Improvements to FRSs |
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| i. |
Presentation of financial statements
The Group applies revised FRS 1 Presentation of Financial Statements (2008), which became effective as of
January 1, 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner
changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of
comprehensive income.
Comparative information has been re-presented so that it also is in conformity with the revised standard. Since
the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share. |
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| ii. |
Financial instruments: Disclosures
The Group applies the amendments to FRS 107 Financial Instruments: Disclosures, which became effective as of
January 1, 2009. As a result, the Group discloses:
| a. |
how the fair value of its financial instruments are measured using the “three-level hierarchy” and provides
additional disclosures about the relative reliability of the fair value measurements; and |
| b. |
the maximum amount of issued financial guarantees in the earliest time period for which the guarantees
could be called upon in the contractual maturity analysis. Previously, the Group disclosed the maximum
amount of issued financial guarantees in the contractual maturity analysis only if the Group assessed that
it is probable that the guarantee would be called upon. |
FRS 107 does not require comparative information to be restated and therefore, the contractual maturity
analysis for the comparative period has not been represented. Since the change in accounting policy only
impacts presentation and disclosure aspects, there is no impact on earnings per share. |
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| iii. |
Determination and presentation of operating segments
As of January 1, 2009, the Group determines and presents operating segments based on the information that is
provided to the Group President & Chief Executive Officer (“CEO”), who is the Group’s chief operating decision
maker. This change in accounting policy is due to the adoption of FRS 108 Operating Segments. Previously
operating segments were determined and presented in accordance with FRS 14 Segment Reporting. The new
accounting policy in respect of operating segment disclosures is presented as set out in Note 2(x). |
The adoption of the above FRS and 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. |
Business Combinations
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. |
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| ii. |
Subsidiaries
Subsidiaries are those entities 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 an entity 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 entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. The accounting policies of subsidiaries have been
changed when necessary to align them with the policies adopted by the Group.
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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| iii. |
Acquisitions from Entities under Common Control
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-interest 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. |
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| iv. |
Associates
Associates are those entities 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 entity.
Associates 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.
The results of the associates 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. |
Joint Ventures
Joint ventures are those entities whose activities the Group has joint control, established by contractual
agreement and requiring unanimous consent for strategic financial and operating decisions.
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 entity.
For incorporated joint ventures, the Group accounts for the joint ventures using the equity method of
accounting 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.
The results of the 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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| vi. |
Transactions Eliminated on Consolidation
All significant intra-group balances, transactions, and unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising
from transactions with associates and joint ventures are eliminated against the investment to the extent of the
Group’s interest in the investee. 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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| vii. |
Accounting for Subsidiaries, Associates and Joint Ventures
Investments in subsidiaries, associates and joint ventures are stated in the Company’s balance sheet at cost less
accumulated impairment losses. |
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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 to the respective functional currencies of Group entities at
foreign exchange rates at the dates of the transactions. At each balance sheet date:
| • |
Foreign currency monetary items are translated into the functional currency using foreign exchange rates ruling at that date. |
| • |
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. |
| • |
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 other comprehensive
income when non-monetary items’ gains or losses are recognised directly in other comprehensive income.
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 has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
| • |
Assets and liabilities are translated at foreign exchange rates ruling at the date of the balance sheet. |
| • |
Revenues and expenses are translated at average foreign exchange rates. |
| • |
All resulting foreign exchange differences are taken to the currency translation reserve in the other
comprehensive income. |
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 foreign currency translation reserve in the consolidated statement of comprehensive income
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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