Subsequent to recognition, property and equipment are stated at
cost less accumulated depreciation and any accumulated impairment
losses. When assets are retired or otherwise disposed of, the cost
and the related accumulated depreciation and any impairment in
value are removed from the accounts and any resulting gain or loss
is credited to or charged against current operations.
Depreciation of other property and equipment is provided for on
a straight-line basis to write off the cost of each asset to its
residual value over the estimated useful lives of the assets as
follows:
Computer 3 years
Vehicles 10 years
Furniture and equipment 10 years
Useful life and depreciation method are reviewed at each
financial year end to ensure that the amount, method and period of
depreciation are consistent with previous estimates and the
expected pattern of consumption of the future economic benefits
embodied in the items of property and equipment.
An item of property and equipment is derecognised upon disposal
or when no future economic benefits are expected from its use or
disposal. The difference between the net disposal proceeds, if any,
and the net carrying amount is recognised in profit or loss.
The assets' useful lives and methods of depreciation are
reviewed at each financial year end and adjusted prospectively, if
appropriate.
2.13 Impairment of Nonfinancial Assets
Property and Equipment and Prepayments
The Group assesses at each reporting period as to whether there
is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an asset
is required, the Group makes an estimate of the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's
or cash-generating unit's ("CGU") fair value less costs to sell and
its value in use and is determined for an individual asset, unless
the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. Where
the carrying amount of an asset exceeds its recoverable amount, the
asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money
and the risks specific to the asset.
An assessment is made at each reporting period as to whether
there is any indication that previously recognised impairment
losses may no longer exist or may have decreased, If such
indication exists, the recoverable amount is estimated, A
previously recognised impairment loss is reversed only if there has
been a change in the estimates used to determine the asset's
recoverable amount since the last impairment loss was recognised.
If that is the case, the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset
in prior years.
Such reversal is recognised in the profit or loss unless the
asset is carried at a revalued amount, in which case the reversal
is treated as a revaluation increase. After such a reversal, the
depreciation charge is adjusted in future periods to allocate the
asset's revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
2.14 Inventories
Inventories are valued at the lower of cost or net realisable
value ("NRV"). The cost of parts and supplies comprise all costs of
purchase and other costs incurred in bringing the parts and
supplies to their present location and condition. These are
recorded on the first-in-first-out method. NRV of parts and
supplies is the current replacement cost.
2.15 Financial instruments
A financial instrument is recognised in the financial statements
when, and only when, the Group and the Company become a party to
the contractual provisions of the instrument.
A financial instrument is recognised initially, at its fair
value plus directly attributable transaction costs.
(a) Financial assets
The Group and the Company determine the classification of their
financial assets as loans and receivables and they comprise debt
instruments that are not quoted on an active market, trade and
other receivables and cash and cash equivalents.
(i) Subsequent measurement
Financial assets categorised as loans and receivables are
subsequently measured at amortised cost using the effective
interest method.
(ii) Derecognition
A financial asset or part of it is derecognised when, and only
when, the contractual right to receive cash flows from the asset
has expired or the financial asset is transferred to another party
without retaining control or substantially all risks and rewards of
the asset.
(iii) Impairment of financial asset
At each reporting date the Group and the Company assess whether
there is objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is
objective evidence of impairment as a result of one or more events
that have occurred after the initial recognition of the asset or
the group of financial assets and it can be reliably measured.
(b) Financial liabilities
The Group's financial liabilities include other payables and
convertible notes. Financial liabilities are recognised when the
Group becomes a party to the contractual provisions of the
instrument. All interest related charges are recognised as an
expense in finance costs in the profit or loss. A financial
liability is derecognised when the obligation under the liability
is discharged or cancelled or expires.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability, and the
difference in the respective carrying amount is recognised in the
profit or loss.
Trade and other payables
Trade and other payables and accruals are recognised initially
at fair value and subsequently measured at amortised cost, using
the effective interest method.
Convertible note
Convertible notes that will or may not be settled by the
exchange of a fixed amount of cash for a fixed number of the
Company's own equity instruments are accounted as financial
liabilities with embedded derivatives. Derivatives embedded in a
financial instrument are treated as separate derivatives when their
economic risk and characteristics are not closely related to those
of the host contract (the liability component) and the host
contract is not carried at fair value through profit or loss.
Convertible bond issued by the Group that contain both financial
liability and equity components are classified separately into
respective liability and equity components on initial recognition.
On initial recognition, the fair value of the liability component
is determined using the prevailing market interest rate for similar
non-convertible debts. The difference between the proceeds of the
issue of the convertible bond and the fair value assigned to the
liability component, representing the call option for conversion of
the bond into equity, is included in equity as convertible bond
equity reserve.
The liability component is subsequently carried at amortised
cost using the effective interest method. The equity component will
remain in equity until conversion or redemption of the bond.
When the bond is converted, the equity component of convertible
bond and the carrying value of the liability component at the time
of conversion, is transferred to share capital and share premium as
consideration for the shares issued. If the bond is redeemed, the
convertible bond equity reserve is released directly to retained
profits.
Fair values
The carrying amounts of the financial assets and liabilities
such as cash and cash equivalents, receivables and payables of the
Group at the balance sheet date approximated their fair values, due
to relatively short term nature of these financial instruments.
The Group provides financial guarantees to licensed banks for
credit facilities extended to a subsidiary company. The fair value
of such financial guarantees is not expected to be significantly
different as the probability of the subsidiary company defaulting
on the credit lines is remote.
The investments are valued in accordance with the policy stated
above. It is the directors' opinion that the carrying value of
trade receivables and trade payables approximates their fair value
due to their short term maturity. Therefore, the directors consider
all assets to be carried at a valuation, which equates to fair
value.
Investments are made in a combination of equity and fixed rate
financial instruments so as to provide potential high future
capital growth.
In accordance with IAS 39, the Group has reviewed all contracts
for embedded derivatives that are required to be separately
accounted for if they do not meet certain criteria set out in the
standard. No embedded derivatives have been identified by the
Group.
Nova Res. (LSE:NOVA)
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