Annual Report 2010 - SBM Offshore

Financial Review / Financial Statements 2010
contract once the system has been brought into service.
Turnover of finance lease contracts is, as of the
commencement date of the lease contract, recognised
over the term of the lease using the net investment
method, which reflects a constant periodic rate of
return.
Services rendered
Revenue from services rendered is recognised using
the ‘percentage-of-completion method’. The stage of
completion is measured by reference to the total cost
incurred up to the end of the reporting period as a percentage
of the total estimated cost for each contract,
unless the physical progress significantly differs. An
expected loss on a contract is recognised immediately
in the income statement.
Variations in contract work, claims and incentive payments
are included in the contract revenue to the
extent negotiations with the customer are sufficiently
far advanced and the outcome is capable of being reliably
measured.
Income tax
The tax expense for the period comprises current and
deferred tax. Tax is recognised in the 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 Company is subject to income taxes in numerous
jurisdictions. Significant judgement is required in
determining the worldwide provision for income taxes.
There are many transactions and calculations for which
the ultimate tax determination is uncertain during the
ordinary course of business. The Company recognises
liabilities for anticipated tax audit issues based on estimates
of whether additional taxes will be due. Where
the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences
will influence the income tax and deferred tax
provisions in the period in which such determination is
made.
126 SBM Offshore – Annual Report 2010
Income tax on the profit or loss for the period presented
comprises current and deferred tax. Income
tax is recognised in the income statement except to
the extent that it relates to items recognised directly in
equity.
Income tax expenses comprise corporate income tax
due in countries of incorporation of the Company’s
main subsidiaries levied on actual profits. Corporate
income taxes which are levied on a deemed profit
basis, revenue basis or other taxes not based on taxable
profits are treated as project taxes and included in
gross margin.
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantially
enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous years.
Dividend distribution
Dividend distribution to the Company’s shareholders is
recognised as a liability in the period in which the dividends
are approved by the Company’s shareholders.