Annual Report 2016
125
Financial Section
3 Principal Accounting Policies
(continued)
(s) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it
is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an
outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognised as interest expense.
(t) Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed
by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the
Group. It can also be a present obligation arising from past events that is not recognised because it is not probable
that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.
A contingent liability, other than that assumed in a business combination, is not recognised but is disclosed in the
notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, it
will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.
A contingent asset is not recognised but is disclosed in the notes to the financial statements when an inflow of
economic benefits is probable. When inflow is virtually certain, an asset is recognised.
(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 investments 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.
