accounting&auditing

Cambodia rubber producers are faced with a sharp drop in prices for their product after a slump in the international rubber price during recent months, Agriculture Ministry officials and rubber plantation owner said Tuesday.

Ly Phalla, director-general of the Agriculture Ministry's rubber plantation department, said the price of rubber resin in Cambodia had almost halved during the past few months and is now at a two-year low.

He attributed that sharp drop in rubber prices to decline in demand on global markets, large stockpiles in China - the main end-market for Cambodian rubber - and a seasonal drop in demand from factories in the US.

Ly Phalla went on to say the recent lowering of crude oil prices is boosting the sales of synthetic rubber, which is made from petroleum, thereby lowering the cost of natural rubber.

"I hope and expect that rubber prices will go up again in January and February," Ly Phalla said, adding that US demand usually increases again in November.

Rubber plantation owners in Kompong Cham province said prices had started dropping in the past two month, falling from about $3,000 per ton of rubber in lat August and early September to $1,200 per ton earlier this month.

Mok Kimhong, director-general of Chup Rubber Plantation, said only in recent days had prices risen again slightly, bringing the resin price to $1,610 per ton Tuesday.

His company is keeping 700 tons of rubber in stock until prices rise to about $1,900 per ton, Mok Kimhong said, adding that they were forced to sell 200 tons at low prices in order to pay their workers.

Na Marady, director-general of Memot Plantation, said that in early October, Chinese and Vietnamese companies stopped buying his rubber resin and he had since stockpiled 200 to of resin. "We will sell our rubber resin when we have markets," he said. He added that he fears the price may yet drop below $1,000 per ton.

Source: The Cambodia Daily issued on 22 October 2008.

Accounting Policies

Accounting policies are the principles, bases, conventions, rules and practices applied by an entity which specify how the effects of transactions and other events are reflected in the financial statements.

International Accounting Standards (IAS 8) requires an entity to select and apply appropriate accounting policies complying with International Financial Reporting Standards (IFRSs) and interpretations to ensure that the financial statements provide information that is:

• relevant to the decision-making needs of users.
• reliable.

Changing Accounting Policies

The general rule is that accounting policies are normally kept that same from period to period to ensure comparability of financial statements over time.

IAS 8 requires accounting policies to be changed only if the change:

• is required by IFRSs or
• will result in a reliable and more relevant presentation of evens or transaction.

A change in accounting policy occurs if there has been a change in:

• recognition, e.g. an expense in now recognized rather than an asset.
• presentation, e.g depreciation is now included in cost of sales rather that administrativ expenses, or
• measurement basis, e.g stating assets at replacement cost rather than historical cost

Accounting for Change in Accounting Policy

The required accounting treatment is that:

• the change should be applied retrospectively, with an adjustment to the opening balance of retained earnings in the statement of changes in equity.
• comparative information should be restated unless it is impracticable to do so.
• there will be a prior adjustment to the balance of retained earnings brought forward in the statement of changes in equity
• if the adjustment to opening retained earnings cannot be reasonably determined, the change should be adjusted prospectively, i.e. included in the current period's income statement.

Disclosure

When a change in accounting policy has material effect on the current period or any period presented, or may have a material effect in the subsequent periods, the following disclosures should be made:

• the reasons for the change
• the amounts of the adjustments recognized in the current period and the previous period presented (i.e. the comparative figures)
• the amount of the adjustment relating to periods prior to those included in the financial statement.