Page 184 - Interloop Annual Report 2018-2019

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
- IAS 12 Income Taxes. The amendment clarify that all income tax consequences of dividends
(including payments on financial instruments classified as equity) are recognized consistently
with the transaction that generates the distributable profits.
- IAS 23 Borrowing Costs. The amendment clarify that a company treats as part of general
borrowings any borrowing originally made to develop an asset when the asset is ready for its
intended use or sale.
Further, the following new standards have been issued by the International Accounting Standards
Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan
(SECP), for the purposes of their applicability in Pakistan:
IFRS - 1 ‘First time adoption of International Financial Reporting Standards’.
IFRS - 14 ‘Regulatory Deferral Accounts’.
IFRS - 17 ‘Insurance Contracts’.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with the approved accounting standards require
management to make judgments, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of making the judgments about
carrying values of assets and liabilities that are not readily apparent from other sources. 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 if the revision affects only that
period, or in the period of the revision and future periods. Judgments made by management in application
of the approved accounting standards that have significant effect on the financial statements and estimates
with a significant risk of material adjustments in the next year are discussed in respective policy notes. The
areas where various assumptions and estimates are significant to the Company’s financial statements or
where judgment was exercised in application of accounting policies are as follows:
• Estimate of useful life of operating fixed assets - note 6.1
• Impairment of non financial assets - note 6.5
• Stores and spares - note 6.6
• Stock-in-trade - note 6.7
• Staff retirement benefits - note 6.10
• Provisions - note 6.13
• Contingencies - note 6.14
• Taxation - note 6.15
Interloop Limited
182
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019
5. BASIS OF CONSOLIDATION
Subsidiary
Subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiary is fully consolidated from the
date on which control is transferred to the Group and is deconsolidated from the date that control ceases.
The assets and liabilities of Subsidiary Company have been consolidated on a line by line basis and carrying
value of investments held by the Holding Company is eliminated against Holding Company’s share in paid
up capital of the Subsidiary Company.
Intragroup balances and transactions have been eliminated.
Non-controlling interests are that part of net results of the operations and of net assets of Subsidiary Company
attributable to interest which are not owned by the Holding Company. Non-controlling interests are presented
as separate item in the consolidated financial statements.
Associate
Associates is an entity in which the Group has significant influence, but not control, over the financial
and operating policies. Interests in associate is accounted for using the equity method. They are initially
recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated
financial statements include the Group’s share of the profit or loss and other comprehensive income of
equity accounted investee, until the date on which significant influence ceases.
Unrealized gains arising from transactions with equity accounted investee are eliminated against the
investment to the extent of the Group companies’ interest in the investee. Unrealized losses are eliminated in
the same way as unrealized gains, but only to the extent that there is no evidence of im airment.
6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6.1 Operating fixed assets and depreciation
Operating fixed assets, except freehold land which is stated at cost, are stated at cost less accumulated
depreciation and any identified accumulated impairment loss.
Depreciation is charged to statement of profit or loss, unless it is included in the carrying amount
of another asset, at the rates stated in note 8.1 applying reducing balance method. The useful life
and residual value of major components of fixed assets are reviewed annually to determine that
expectations are not significantly different from the previous estimates. Adjustment in depreciation
rate for current and future periods is made if expectations are significantly different from the previous 2018 - 19
no depreciation is charged in the month of its disposal. Gain/loss on disposal of fixed assets is included Annual Report
estimates. Depreciation is charged from the month when an asset becomes available for use, whereas
in statement of profit or loss.
Expenditure, which enhances or extends the performance of operating fixed assets beyond its original
specification and its useful life, is recognized as a capital expenditure and is added to the cost of the 183