Page 98 - Neal and Massy Holdings Annual Report 2012

96 2012
NOTES TO THE Consolidated FINANCIAL STATEMENTS
September 30, 2012
Expressed in Thousands of Trinidad and Tobago dollars
2 Summary Of Significant Accounting Policies (continued)
2.23 Leases (continued)
a) Group is the lessee (continued)
charges, are included in other long-term payables. The interest element of the finance cost is charged to the income
statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the
useful life of the asset and the lease term.
b) Group is the lessor
When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The
difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.
Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic
rate of return. Assets leased out under operating leases are included in property, plant and equipment in the statement of
financial position. They are depreciated over their expected useful lives on a basis consistent with similarly owned property,
plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a pattern reflecting a constant
periodic rate of return on the lessor’s net investment.
2.24 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period
in which the dividends are approved by the Company’s directors.
3 Financial Risk Management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks. The Group’s aim therefore is to achieve an appropriate balance
between risk and return and minimise potentially adverse effects on the Group’s financial performance. This is achieved by the
analysis, evaluation, acceptance and management of the Group’s risk exposure.
The Board of Directors is ultimately responsible for the establishment and oversight of the Group’s risk management
framework. The main financial risks of the Group relate to the availability of funds to meet business needs, the risk of default by
counterparties to financial transactions, and fluctuations in interest and foreign exchange rates. The treasury function manages
the financial risks that arise in relation to underlying business needs and operates within clear policies and stringent parameters.
The function does not operate as a profit centre and the undertaking of speculative transactions is not permitted.
The Group’s principal financial liabilities comprise bank loans, operating overdrafts and trade payables, which are used to
finance Group operations. There are various financial assets such as trade receivables, investments, loans receivable, cash and
short term deposits which emanate from its operations. The main risks arising from the Group’s financial instruments are credit
risk, liquidity risk, foreign currency risk and interest rate risk.
The following contains information relative to the Group’s exposure to each of the above risks, including quantitative
disclosures.