AGRIBEL HOLDINGS LTD FINANCIAL REVIEW 2021 iii ) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of land and buildings and plant and equipment ( i . e ., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option ). It also applies the lease of low-value assets recognition exemption to leases of land and buildings and plant and equipment that are considered to be low value . Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term .
2.7 Inventory Inventory represents assets held for resale in the normal course of business , to produce assets for sale , or for use in production processes , or the rendering of services . Included in the cost of inventory are the cost price , production costs and any costs incurred in bringing the inventory to its current position and condition , ready for the intended purpose . Cost of inventory does not include interest , which is accounted for as an expense in the period when incurred .
Included in cost of production are costs directly attributable to units produced , direct costs such as direct wages and salaries , variable overheads , as well as the systematic allocation of fixed production overheads based on the normal capacity of the production facility .
Cost of inventory items is determined in accordance with the weighted average cost method , unless it is more appropriate to apply another basis on account of the characteristics , nature and use of the inventory . Cost of inventory determined on a basis other than weighted average cost is as follows :
Merchandise , processed goods , consumables and other commodities Mechanisation whole goods and vehicles Grain commodities
- Weighted average cost price
- Purchases price - At fair value
Inventory is valued at the lower of cost or net realisable value . Net realisable value is the estimated selling price in the normal course of business , less estimated costs necessary to conclude the sale .
2.8 Inventory held to satisfy firm sales Inventory held to satisfy firm sales represent inventory purchases on behalf of third parties in respect of agricultural produce received from producers , which are payable by the third party on delivery of such agricultural produce to them . This includes sales in terms of sales contracts secured by inventory . Refer to note 12 for measurement .
2.9 Taxes Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities . The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted , at the reporting date in the countries where the group operates and generates taxable income .
Current income tax shall be recognised outside profit and loss if the tax relates to items , in the same or different period , outside profit or loss . Therefore if items are recognised in other comprehensive income the current tax should be recognised in other comprehensive income and if items are recognised directly in equity the current tax should be recognised directly in equity .
Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establish provisions where appropriate .
Tax receivables and tax payables are offset if a legally enforceable right exists to set off the recognised amounts and if there is an intention to settle on a net basis .
Agribel Holdings Limited Reg nr : 1996 / 017629 / 06 AGRIBEL ANNUAL FINANCIAL REVIEW 2021
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