NewWorld Development Company Limited
FINANCIAL SECTION
124
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(u) Current and deferred income tax
The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated
income statement, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity,
respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at
the end of the reporting period in the countries where the Group, joint ventures and associated companies
operate and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the
deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted
by the end of the reporting period and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on interests in subsidiaries, joint ventures
and associated companies, except where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to
income taxes levied by the same taxation authority on either the taxable entity or different taxable entities
where there is an intention to settle the balances on a net basis.
(v) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the consolidated income statement or capitalised on the basis set out in note 3(y) over
the period of the borrowings using the effective interest method where appropriate.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the end of the reporting period.
