64
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
2.
Significant accounting policies
(continued)
2.18 Leases
(continued)
(b)
When the Group is the lessor:
The Group leases office and workshop space under operating leases.
Lessor – Operating leases
Leases of office and workshop space where the Group retains substantially all risks and
rewards incidental to ownership are classified as operating leases. Rental income from
operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a
straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are
added to the carrying amount of the leased assets and recognised as an expense in profit or
loss over the lease term on the same basis as the lease income.
Contingent rents are recognised as income in profit or loss when earned.
2.19 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the
first-in, first-out method. The cost of finished goods and work-in-progress comprises raw materials,
direct labour, other direct costs and related production overheads (based on normal operating
capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and applicable variable selling
expenses.
2.20 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid
to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements except when the
deferred income tax arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and affects neither accounting nor taxable profit or
loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in
subsidiaries and joint venture, except where the Group is able to control the timing of the reversal
of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit
will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i)
at the tax rates that are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted by the balance sheet date; and
(ii)
based on the tax consequence that will follow from the manner in which the Group expects, at
the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.
