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Notes To The Financial Statements

VITROX CORPORATION BERHAD

[649966-K]

For The Financial Year Ended 31 December 2008

2.

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.12 Leases

Finance Lease

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the

lessee.

A finance lease, including hire purchase, is initially recognised as an asset and liability at the fair value of the leased asset

or, if lower, the present value of the minimum lease payments. The minimum lease payments are subsequently apportioned

between the finance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of

interest on the remaining balance of the liability. The depreciation policy for depreciable leased assets is consistent with

that for equivalent owned assets.

Operating Lease

An operating lease is a lease other than a finance lease.

Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term. The

upfront payments for a lease of land under an operating lease are classified as prepaid lease payments and amortised

on a straight-line basis over the lease term.

2.13 Loans and Borrowings

All loans and borrowings are initially recognised at cost which is the fair value of the proceeds received. The loans and

borrowings are subsequently stated at amortised cost using the effective interest method. The effective interest rate is

the historical rate for a fixed rate instrument and the current market rate for a floating rate instrument.

All borrowing costs are recognised as an expense in the period in which they are incurred.

2.14 Foreign Currency Transactions and Translation

The consolidated financial statements and separate financial statements of the Company are presented in Ringgit

Malaysia, which is also the Company’s functional currency, being the currency of the primary economic environment

in which the entity operates. Items included in the financial statements of each individual entity within the Group are

measured using the individual entity’s own functional currency.

A foreign currency transaction is recorded in the functional currency using the exchange rate at transaction date. At the

balance sheet date, foreign currency monetary items are translated into the functional currency using the closing rate.

Foreign currency non-monetary items measured at cost are translated using the exchange rate at transaction date

whereas those measured at fair value are translated using the exchange rate at valuation date. Exchange differences

arising from the settlement or translation of monetary items are recognised in the income statement. Any exchange

component of the gain or loss on a non-monetary item is recognised on the same basis as that of the gain or loss, ie

directly in equity or in the income statement.

In translating the financial position and results of an entity whose functional currency is not the required presentation

currency, ie Ringgit Malaysia, assets and liabilities are translated into the presentation currency using the closing rate

whereas income and expenses are translated using the average exchange rate for the financial year. All resulting exchange

differences are recognised directly in equity.