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NOBLE DEVELOPMENT PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,1998 AND 1997 1. GENERAL The Company was approved by The Stock Exchange of Thailand to be a listed company in The Stock Exchange of Thailand on November22,1996.The stock of the company began trading on June 12,1997. 2. PRESENTATION OF FINANCIAL STATEMENTS The financial statements were presented according to the Ministerial Regulation No.7 (B.E.2539) declared on October25,1996 as empowered underthe Public Companies Limited ACT B.E.2535. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Principles of consolidation The consolidated accounts incorporate the accounts of the Company and its majority own (over50%) subsidiaries either directly or indirectly.Significant intercompany transactions are eliminated. The Company has eight subsidiaries with 64.9% and 99.9% holdings of which is treated 65% and 100% respectively in the consolidation, as follows : Kind of business Percentage of shareholding Bang Plee View Co.,Ltd. real estate 99.99 Ban Suk Sabai Co.,Ltd. real estate 99.98 Bannsiam Co.,Ltd. real estate 99.99 Wipa View Co.,Ltd. real estate 99.99 Continental City Co., Ltd. real estate 99.99 World Time Holding Co., Ltd. real estate 99.99 S & P Property Management Co.,Ltd. (Formerly Noble Property Management Co.,Ltd.) real estate 99.99 Research & Consultant Co., Ltd. real estate 64.99 The excess of the aggregated cost of the investments in subsidiary companies over the aggregated book value was presented as "Goodwill"in the Consolidated Balance Sheets and amortized on the straight-line method over a period of 10 years. 3.2 Revenue recognition Income on sales of Condominium,Property Development Projects and income from construction are recognized when the contract was signed,calculated based on the percentage of completion method. Instalment payment due according to the contracts but not yet received is shown as "Accounts receivable".The excess or lower of revenue recognized under the percentage of completion method overor under the amount of instalment payment due according to the contracts is shown as "Unbilled completed work" or "Unearned income" respectively in consolidated balance sheets. Sales and service revenues are recognized when goods are delivered and services are rendered. 3.3 Cost of sales and Cost of construction Cost of sales and Cost of construction included the allocation of the cost of land,development cost and costruction cost as expected to be incurred for the whole projects to units of the project calculated on the same basis of income recognition which based on the percentage of completion method. 3.4 Inventories Inventories-machinery should be measured at the lower of cost (FIFO) or net realisable value. Supplies for construction are stated at the lower of weighted average cost or net realisable value. 3.5 Real estate development cost Real estate development cost comprised of costs of land development,cost of construction, promotion expenses and other related cost,are stated at cost. In 1998,in the consolidated financial statements and in the company's financial statements, the deferred promotion cost of Baht 86,804,176 and Baht 22,614,751 respectively were amortized,due to development has been suspended for an indefinite period. 3.6 Construction in progress Construction in progress comprised of costs of construction,related interest cost,promotion expenses,project management cost and other related cost,are stated at cost. 3.7 Interest capitalization The Company capitalized,as part of the cost of land and land development for sales,interest on loans for the acquisition of the said items.The capitalization will be discontinued when the land is completed for sales. In 1998,in the consolidated financial statements and in the company's financial statements, the interest on loans for the acquisition of land and land development of Baht 201,445,963 and Baht 65,654,392 respectively were amortized,due to the development has been suspended for an indefinite period. BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 The interest capitalized for The year 41,283,518 188,855,453 1,941,901 58,750,425 3.8 Investments in related and other companies Investments in related companies are recorded under equity method. Investment in other company is recorded under cost method. 3.9 Land bank Land bank comprised of costs of land development, related interest cost and other related cost,are stated at cost. 3.10 Property, plant and equipment Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method based on the estimated useful lives of 5 - 20 years. 3.11 Pre-operating expenses and deferred charges Pre-operating expenses and deferred charges are amortized on the straight-line method over a period of 1-5 years. In 1998, in the consolidated financial statement and in the company's financial statements, the pre-operating expenses and deferred charges of Baht 84,157,141 and Baht 42,990,562 respectively were amortized, due to the development has been suspended for an indefinite period. BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Pre-operating expenses and Deferred charges write off for the year 95,265,374 15,387,051 53,819,205 10,598,141 3.12 Deferred income tax The Company adopts the generally accepted practice of providing for deferred income tax resulting from time difference between accounting and taxable income. The time difference arise primarily from the accounting income being recognized on the percentage of completion method where as the taxable income are recognized according to the installment payments dued. 3.13 Foreign currency transaction Foreign currency transactions during the year are converted into Baht at the rates ruling on the transaction dates. Assets and liabilities in foreign currencies at the end of the year are converted into Baht at the bank buying and selling rate on the consolidated balance sheet date. Gain or loss from translation are included in determining earnings. 3.14 Provident fund Under Provident Fund Act.(B.E.2530) the Company set up a new employee provident fund scheme in October 1994. This fund is managed by an approved finance company. Each employee contributes a fixed percentage of the gross salary and the company contributes an amount depending on the employee services. The company had been approved to temporary stop the payment contribute into the provident fund from October 1, 1997 to December 31,1999, by the registrar of the provident fund on November 26,1997. 3.15 Loss per share Loss per share is determined by dividing net loss by weighted average of shares outstanding. 4. SHORT-TERM INVESTMENT - FINANCIAL INSTITUTIONS Short-term investment are consisted of fixed deposit at banks, short-term promissory notes of a local financial institution with interest at the rate of 4.50% - 6.00% per annum in 1998 and short-term and callable promissory notes of a local financial institution with interest at the rate of 10.50% - 15.75% per annum in 1997. Fixed deposit at bank are used as a guarantee for letter of guarantee from bank to the Metropolitan Electricity Authority and for customers' housing loan. 5. ACCOUNTS ECEIVABLE-TRADE BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Total value of contracts signed 4,705,299,410 4,862,851,153 2,333,062,842 2,420,169,251 The percentage of total sales projects 78.57 78.11 85.76 87.10 Installments due 3,654,077,336 3,320,490,036 1,968,805,112 1,906,980,685 Less Received (3,636,337,339) (3,269,583,339) (1,960,512,679) (1,898,000,530) Accounts receivable from Instalments dued 17,739,997 50,906,697 8,292,433 8,980,155 6. UNBILLED COMPLETED WORK BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Recognized as income 4,089,153,554 4,141,733,982 2,173,916,243 2,212,907,352 Less Instalments due (3,654,077,336) (3,320,490,036) (1,968,805,112) (1,906,980,685) Unbilled completed work 435,076,218 821,243,946 205,111,131 305,926,667 7. SHORT-TERM LOANS AND ADVANCE TO RELATED COMPANIES BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Short-term loans to related companies Wipa View Co.,Ltd. - - 242,250,000 262,850,000 Bannsiam Co.,Ltd. - - 189,814,945 184,573,645 Continental City Co.,Ltd. - - 62,489,981 83,729,290 Ban Suk Sabai Co.,Ltd. - - 58,600,000 73,367,609 Bang Plee View Co.,Ltd. - - 43,093,863 51,850,000 Research & Consultant Co.,Ltd. - - 2,860,000 7,230,000 Total Short-term loans to related companies - - 599,108,789 663,600,544 Accrued interest from Related companies Wipa View Co., Ltd. - - 68,487,604 50,209,741 Bannsiam Co., Ltd. - - 44,727,899 28,870,542 Continental City Co., Ltd. - - 19,423,831 14,618,515 Ban Suk Sabai Co., Ltd. - - 9,345,049 5,885,035 Bang Plee View Co., Ltd. - - 17,358,326 14,243,549 Research & Consultant Co., Ltd. - - 244,060 - Total accrued interest From related Companies - - 159,586,769 113,827,382 BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Advance to related companies Wipa View Co.,Ltd. - - 30,520,854 30,432,781 Bannsiam Co.,Ltd. - - 15,695 - Continental City Co., Ltd. - - 8,074 - Ban Suk Sabai Co.,Ltd. - - 11,196,734 11,201,903 Bang Plee View Co.,Ltd. - - 31,086 50,000 S & P Property Management Co.,Ltd - - (Formerly Noble Property Management Co.,Ltd.) - - - 87,472 World Time Holding Co.,Ltd. - - - 21,243 Research & Consultant Co.,Ltd. - - 67,938 48 Total advance to related companies - - 41,840,381 41,793,447 Total Short-term loans and advance to related companies - - 800,535,939 819,221,373 These loans are callable promissory notes with interest at the rate of 5.00% - 17.25% per annum in 1998 and 5.50% - 19.75% per annum in 1997. 8. INVENTORIES BAHT CONSOLIDATED THE COMPANY ONLY 1998 1997 1998 1997 Merchandise - 993,329 - - Supplies for construction 1,972,407 4,179,699 - - Total 1,972,407 5,173,028 - - (More)