FRONTLINE COVER FA 070606 CR2.indd

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frontline technologies corporation ltd
annual report 2006
> notes to the financial statement
for the year ended 31 march 2006
2. Significant accounting policies (cont’d)
(q) Leases (cont’d)
(iii) Finance lease
When assets are leased out under a finance lease, the present value of the lease payments is recognized as a
receivable. The difference between the gross receivable and the present value of the receivable is recognised
as unearned finance income. Lease income is recognized in the profit and loss account over the term of the
lease using the net investment method, which reflects a constant periodic rate of return. Initial direct costs
are charged to profit and loss account as an expense at the commencement of the lease period.
(r)
Borrowings and loans
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly
attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing
costs commences when the activities to prepare the asset for its intended use or sale are in progress and the
expenditures and borrowing costs are being incurred. Borrowing costs are capitalised until the assets are
ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded.
Loans and borrowings are initially recognised at cost and subsequently measured at amortised cost using the
effective interest rate method. The difference between net proceeds and redemption value being recognised in
the profit and loss account in the period over the life of the borrowings.
(s)
Income tax
Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the
income statement except to the extent that it relates to items recognised directly to equity, in which case it is
recognised in equity.
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.
Deferred income tax is provided using the liability method, on all temporary differences at the balance sheet
date arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Currently enacted tax rates are used in the determination of deferred income tax.
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 are charged or credited to equity if the tax relates to items that are credited or charged, in the same
or a different period, directly to equity.
(t)
Club memberships
Club memberships, are held on a long-term basis and are stated at cost less impairment losses, if any.