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NOTES TO THE FINANCIAL STATEMENTS (CONT.)
cycle; it is held primarily for the purpose of trading; it Cash flow hedges
is expected to be realised within 12 months after the Cash flow hedges are used to cover the consolidated
reporting period; or the asset is cash or cash equivalent entity’s exposure to variability in cash flows that is
unless restricted from being exchanged or used to settle attributable to particular risk associated with a recognised
a liability for at least 12 months after the reporting period. asset or liability or a firm commitment which could affect
All other assets are classified as non-current. profit or loss. The effective portion of the gain or loss on
the hedging instrument is recognised directly in equity,
A liability is current when: it is expected to be settled in whilst the ineffective portion is recognised in profit or loss.
normal operating cycle; it is held primarily for the purpose Amounts taken to equity are transferred out of equity and
of trading; it is due to be settled within 12 months after included in the measurement of the hedged transaction
the reporting period; or there is no unconditional right when the forecast transaction occurs.
to defer the settlement of the liability for at least 12
months after the reporting period. All other liabilities are Cash flow hedges are tested for effectiveness on a
classified as non-current. regular basis both retrospectively and prospectively to
ensure that each hedge is highly effective and continues
Deferred tax assets and liabilities are always classified as to be designated as a cash flow hedge. If the forecast
non-current. transaction is no longer expected to occur, amounts
recognised in equity are transferred to profit or loss.
Cash and cash equivalents
If the hedging instrument is sold, terminated, expires,
Cash and cash equivalents includes cash on hand, exercised without replacement or rollover, or if the hedge
deposits held at call with financial institutions, other short- becomes ineffective and is no longer a designated hedge,
term, highly liquid investments with original maturities of amounts previously recognised in equity remain in equity
three months or less that are readily convertible to known until the forecast transaction occurs.
amounts of cash and which are subject to an insignificant
risk of changes in value. Call options
Call options are used to cover the consolidated entity’s
Other receivables exposure to fluctuations in cotton prices which could
affect cost of goods sold. At the end of each reporting
Other receivables are recognised at amortised cost, less period, the recognised asset is subsequently measured at
any provision for impairment. fair value through profit or loss.
Inventories Property, plant and equipment
Inventories are stated at the lower of cost and net Plant and equipment is stated at historical cost less
realisable value. Cost comprises purchase and delivery accumulated depreciation and impairment. Historical
costs, net of rebates and discounts received or cost includes expenditure that is directly attributable to
receivable. Costs are assigned to individual items of the acquisition of the items.
inventory on the basis of weighted average costs. Costs
also include transfer from equity of any gains/losses Depreciation is calculated on a straight-line basis to
on qualifying cashflow hedges relating to purchases write off the net cost of each item of property, plant and
of inventories. equipment (excluding land) over their expected useful
lives as follows:
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of Plant and equipment 3-10 years
completion and the estimated costs necessary to make
the sale. The residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at
Derivative financial instruments each reporting date.
Derivatives are initially recognised at fair value on the date Leasehold improvements and plant and equipment under
a derivative contract is entered into and are subsequently lease are depreciated over the unexpired period of the
remeasured to their fair value at each reporting date. The lease or the estimated useful life of the assets, whichever
accounting for subsequent changes in fair value depends is shorter.
on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. An item of property, plant and equipment is derecognised
upon disposal or when there is no future economic benefit
Derivatives are classified as current or non-current to the consolidated entity. Gains and losses between the
depending on the expected period of realisation.
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