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59 58 Best World International Limited
Annual Report 2011
Best World International Limited
Annual Report 2011
2. Summary of Signifcant Accounting Policies (Cont’d)
Fair Value of Financial Instruments
The carrying values of current fnancial instruments approximate their fair values due to the short-term
maturity of these instruments and the disclosures of fair value are not made when the carrying amount
of current fnancial instruments is a reasonable approximation of fair value. The fair values of non-current
fnancial instruments may not be disclosed separately unless there are signifcant differences at the end of
the reporting year and in the event the fair values are disclosed in the relevant notes. The maximum
exposure to credit risk is: the total of the fair value of the fnancial assets and other fnancial instruments:
the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any
commitments on borrowings at the end of the reporting year. The fair value of a fnancial instrument
is derived from an active market or by using an acceptable valuation technique. The appropriate quoted
market price for an asset held or liability to be issued is usually the current bid price without any deduction
for transaction costs that may be incurred on sale or other disposal and, for an asset to be acquired or
liability held, the asking price. If there is no market, or the markets available are not active, the fair value
is established by using an acceptable valuation technique. The fair value measurements are classifed
using a fair value hierarchy of 3 levels that refects the signifcance of the inputs used in making the
measurements, that is, Level 1 for the use of quoted prices ( unadjusted) in active markets for identical
assets or liabilities; Level 2 for the use of inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices ); and Level 3 for the use of inputs for the asset or liability that are not based on observable market
data (unobservable inputs). The level is determined on the basis of the lowest level input that is signifcant
to the fair value measurement in its entirety. Where observable inputs that require signifcant adjustment
based on unobservable inputs, that measurement is a Level 3 measurement.
Equity
Equity instruments are contracts that give a residual interest in the net assets of the company. Ordinary
shares are classifed as equity. Equity instruments are recognised at the amount of proceeds received net
of incremental costs directly attributable to the transaction. Dividends on equity are recognised as
liabilities when they are declared. Interim dividends are recognised when declared by the directors.
Treasury Shares
Where the company reacquires its own equity instruments as treasury shares, the consideration paid,
including any directly attributable incremental cost is deducted from equity attributable to the company’s
owners until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold
or reissued, any consideration received, net of any directly attributable incremental transaction costs and
the related income tax effects, is included in equity attributable to the company’s owners and no gain or
loss is recognised in proft or loss.
2. Summary of Signifcant Accounting Policies (Cont’d)
Provisions
A liability or provision is recognised when there is a present obligation (legal or constructive) as a result
of a past event, it is probable that an outfow of resources embodying economic benefts will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are
made using best estimates of the amount required in settlement and where the effect of the time value of
money is material, the amount recognised is the present value of the expenditures expected to be
required to settle the obligation using a pre-tax rate that refects current market assessments of the time
value of money and the risks specifc to the obligation. The increase in the provision due to passage of time
is recognised as interest expense. Changes in estimates are refected in the proft or loss in the reporting
year they occur.
Critical Judgements, Assumptions and Estimation Uncertainties
The critical judgements made in the process of applying the accounting policies that have the
most signifcant effect on the amounts recognised in the fnancial statements and the key assumptions
concerning the future, and other key sources of estimation uncertainty at the end of the reporting year,
that have a signifcant risk of causing a material adjustment to the carrying amounts of assets and
liabilities currently or within the next reporting year are discussed below. These estimates and
assumptions are periodically monitored to ensure they incorporate all relevant information available at
the date when fnancial statements are prepared. However, this does not prevent actual fgures differing
from estimates.
Allowance for doubtful accounts:
An allowance is made for doubtful trade accounts for estimated losses resulting from the subsequent
inability of the customers to make required payments. If the fnancial conditions of the customers were
to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required in future periods. Management generally analyses trade receivables, historical bad debts,
customer concentrations, customer creditworthiness and changes in customer payment terms when
evaluating the adequacy of the allowance for doubtful trade receivables. To the extent that it is feasible
impairment and uncollectibility is determined individually for each item. In cases where that process is
not feasible, a collective evaluation of impairment is performed. At the end of the reporting year, the trade
receivables carrying amount approximates the fair value and the carrying amounts might change
materially within the next reporting year but these changes would not arise from assumptions or other
sources of estimation uncertainty at the end of the reporting year.
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2011