KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
ANNUAL REPORT 2014
70
NOTES
TO THE FINANCIAL STATEMENTS
3
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
3.12 Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised as it
accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings. Borrowing costs are recognised in profit or
loss using the effective interest method.
3.13 Leases
Payments made under operating leases are recognised in profit or loss on a straight-line basis over
the term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
Minimum lease payments are apportioned between the finance expense and reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent lease payments are accounted for by revising the minimum lease payments over the
remaining term of the lease when the lease adjustment is confirmed.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a
lease. This will be the case if the following two criteria are met. The fulfilment of the arrangement is
dependent on the use of a specific asset or assets; the arrangement contains a right to use the asset.
At inception or upon reassessment of the arrangement, the Group separates payments and
other consideration required by such an arrangement into those for the lease and those for other
elements on the basis of their relative fair values. If the Group concludes for a finance lease that
it is impracticable to separate the payments reliably, then an asset and a liability are recognised at
an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as
payments are made and an imputed finance charge on the liability is recognised using the Group’s
incremental borrowing rate.
3.14 Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit
or loss except to the extent that it relates to a business combination, or items recognised directly in
equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
