Annual Report 2012 - Dialog

68 l Dialog Axiata PLC l Annual Report 2012
Notes to the Financial Statements
2 Summary of significant accounting policies contd.
2.13 Trade and other payables contd.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
2.14 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, borrowings are
stated at amortised cost using the effective interest method; any difference between proceeds (net of transaction costs) and
the redemption value is recognised in the statement of comprehensive income over the period of the borrowings.
Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported
within finance cost in the statement of comprehensive income.
Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these
preference shares are recognised in the statement of comprehensive income as finance cost.
Borrowings are classified as current liabilities unless the Company and the Group have an unconditional right to defer
settlement of the liability for at least twelve (12) months after the date of statement of financial position.
Identifiable interest costs on borrowing to finance the construction of PPE are capitalised during the period of time that is
required to complete and prepare the asset for its intended use.
2.15 Current and deferred taxes
The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive
income, except to the extent that it relates to items recognised directly in equity. In this case, the tax is recognised in
equity. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulations is subject to interpretation. Management establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax is recognised 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, deferred tax liabilities are 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 the
transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the date of the statement of financial position and are expected to apply
when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred 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 tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the
reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse
in the foreseeable future.
2.16 Employee benefits
(a) Defined benefit plan - Gratuity
Defined benefit plan defines an amount of benefit that an employee will receive on retirement, usually dependent on one or
more factors such as years of service and compensation. The defined benefit plan comprises the gratuity provided under
the Act, No 12 of 1983.