Vision - Alibaba

106 Annual Report 2007
Notes to the Financial Statements
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.15 Revenue recognition (Continued)
(c) Interest income
Interest income is recognized on a time-proportion basis using the effective interest method.
(d) Business tax and related surcharges levied on revenue earned in PRC
The Group is subject to business tax and related surcharges on the revenue earned for services
provided in the PRC. The applicable rate of business tax is 5%. In the income statement,
business tax and related surcharges for revenue earned by the Group are included in cost of
revenue.
2.16 Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance
that the grant will be received and the Group will comply with all conditions to the grant.
Government grants relating to costs are deferred and recognized in the income statement over the
year necessary to match them with the costs that they are intended to compensate.
2.17 Product development expenditure
Product development expenditure is recognized as an expense as incurred. Expenditures incurred on
development projects (relating to the design and testing of new or improved products) are recognized
as intangible assets when the following criteria are fulfi lled:
(a) it is technically feasible to complete the development of the intangible asset so that it will be
available for use or sale;
(b) management intends to complete the intangible asset and use or sell it;
(c) there is an ability to use or sell the intangible asset;
(d) how the intangible asset will generate probable future economic benefi ts can be demonstrated;
(e) there is adequate technical, fi nancial and other resources to complete the development and to
use or sell the intangible asset; and
(f) the expenditure attributable to the intangible asset during its development can be reliably
measured.