Annual report 2010 - plazacenters

Financial statements
Notes to the consolidated financial statements
continued
Note 3 – Summary of significant accounting policies continued
m. Finance income and expenses
Finance income comprises interest receivable on funds invested (including available-for-sale financial debt and equity securities),
changes in the fair value of financial instruments at fair value through profit or loss, gains on derivative instruments that are recognized
in profit or loss, gain on the disposal of available-for-sale financial assets, interest on late payments from receivables and net foreign
exchange gains.
Finance expenses which are not capitalized comprise interest expense on borrowings, changes in the fair value of financial instruments
at fair value through profit or loss, impairment losses recognized on financial assets, net foreign exchange losses and losses on derivative
instruments that are recognized in profit or loss. For capitalization of borrowing costs please refer to note 10.
Interest income and expense which are not capitalized are recognized in the income statement as they accrue, using the effective
interest method. For the Company’s policy regarding capitalization of borrowing costs refer to note 3(e).
n. Taxation
Income tax expense on the profit or loss for the year comprises current and deferred tax. The tax currently payable is based on taxable
profit for the year, and any adjustment to tax payable in respect of previous years. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognized using the statement of financial position method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and
jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future.
In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is
measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right
to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity,
or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that future
taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realized.
o. Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments’ operating results are reviewed regularly by the Group’s CODM (refer to note 39) to make decisions about resources
to be allocated to the segment and assess its performance, and for which discrete financial information is available.
p. Employee benefits
1. Bonuses
The Group recognizes a liability and an expense for bonuses, which are based on agreements with employees or according to
management decisions based on Group performance goals and on individual employee performance. The Group recognizes a liability
where contractually obliged or where past practice has created a constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.
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Plaza Centers N.V. Annual report 2010