Page 56 - CPC 2018 Annual Report

54 CPC Corporation, Taiwan 2018
Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately. When the fair value of a derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments in negative, the derivative is recognized as a financial liability.
(g) Inventories
Inventories include raw materials, finished goods, work in process, semi-finished goods, merchandise, construction in progress, merchandise in transit-crude oil, and merchandise in transit-fuel oil. Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to Company similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale.
Inventories are recorded at weighted-average cost on the balance sheet date. (h) Investment in associates
An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture.
The Company uses the equity method to account for its investments in associates.
Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of equity of associates.
If the cost of acquisition exceeds the Company’s share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition, this excess is recognized as goodwill, which is included in the carrying amount of the investment and is not amortized. If the Company’s share of the net fair value of the identifiable assets and liabilities exceeds the cost of acquisition, after reassessment, this excess is recognized immediately in profit or loss.
The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.
When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s financial statements only to the extent of interests in the associate that are not related to the Company.
(i) Property, plant and equipment
1. Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes professional fees and borrowing costs eligible for capitalization.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately unless the useful life and depreciation method of that significant part are the same as those of another significant part of that same item.
The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit or loss.
2. Subsequent cost
Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure will flow to the Company. The carrying amount of those parts of fixed assets that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.