KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
70
Notes to the financial statements
3 Significant accounting policies (Cont’d)
3.13 Lease payments (Cont’d)
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; and
•
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 they relate 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.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for:
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss; and
•
temporary differences related to investments in subsidiaries to the extent that the Group is able to
control the timing of the reversal of the temporary difference and it is probable that they will not reverse
in the foreseeable future.
The measurement of deferred taxes reflects the tax consequences that would follow the manner in which
the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
