HYFLUX LTD AND SUBSIDIARIES

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2002 02. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (N) HIRE PURCHASE AND LEASES Fixed assets acquired under hire purchase or finance lease are capitalised and depreciated over their estimated useful lives. The capital elements of hire purchase or finance lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the lease to produce a constant rate of charge on the balance of capital repayments outstanding. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term. (O) BORROWINGS Borrowings are carried at cost net of transaction costs. (P) REVENUE RECOGNITION When the outcome of a contract can be estimated reliably, revenue from a fixed price contract is recognised using the percentage-of-completion method, measured by the value of work performed to date to estimated total contract value. When the outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that is probable to be recoverable. Dividend income is recognised when the shareholder’s rights to receive payment is established. Group turnover excludes intercompany transactions and turnover of associated companies. (Q) GRANTS These relate to grants received from the National Science and Technology Board (“NSTB”) and Economic Development Board (“EDB”) for certain projects undertaken by the Company. Such grants received are taken to the profit and loss account and matched against related costs incurred during the year which they are intended to compensate. (R) EMPLOYEE BENEFITS (I) DEFINED CONTRIBUTION PLANS As required by law, the Company makes contribution to the Central Provident Fund (CPF). CPF contributions are recognised as compensation expense in the same period as the employment that gives rise to the contribution. (II) EQUITY COMPENSATION BENEFITS Pursuant to the Hyflux Employees’ Share Option Scheme, certain directors and employees have been granted non-transferable options to purchase the Company’s shares. There are no charges to the profit and loss account upon the grant or exercise of options. When the options are exercised, shareholders’ equity is increased by the amount of the proceeds received. (S) DEFERRED TAXATION Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries and associates except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
HYFLUX LTD AND SUBSIDIARIES P.20.21 02. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (S) DEFERRED TAXATION (CONTINUED) Deferred tax assets are recognised for all deductible temporary differences and carry-forward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax losses can be utilised. At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised. (T) FOREIGN CURRENCIES Foreign currency transactions are translated into Singapore dollars at exchange rates closely approximating those ruling at the transaction dates. Foreign currency monetary assets and liabilities at the balance sheet date are translated into Singapore dollars at exchange rates approximating those ruling at that date. All resulting exchange differences are recognised in the profit and loss account. (U) FINANCIAL INSTRUMENTS Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, trade and other accounts receivables and payable, loans and borrowings. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies found in this Note. (V) SEGMENTS For management purposes, the Group is organised into 2 major geographical segments. The divisions are the basis on which the Group reports its primary segment information. Segment revenue, expenses and results include transfers between geographical segments and between business segments. Such transfers are accounted for on an arm’s length basis. (W) CHANGES IN ACCOUNTING POLICIES SAS 12 (2001): Income Taxes During the financial year, the Group applied SAS 12 (2001), Income Taxes, which became effective for financial years beginning on or after 1 April 2001. SAS 12 (2001) requires deferred tax to be calculated using the balance sheet liability method, for all temporary differences at the balance sheet date between the carrying amounts of assets and liabilities and the amounts used for income tax purposes. Deferred tax assets should be recognised when it is probable that sufficient taxable profit will be available against which the deferred tax assets can be utilised. Previously tax was deferred on account of differences only to the extent that a tax liability was expected to materialise in the foreseeable future. There is no significant impact on the current financial statements as a result of this change in accounting policy. During the financial year ended 31 December 2001, the Group retroactively changed its policy from recognising dividends proposed or declared after balance sheet date as a liability to disclosing such dividends as a subsequent event in accordance with SAS 10, Events after the Balance Sheet Date. As a result, as at 1 January 2001, the accumulated profits of the Company decreased by $62,665 while that of the Group’s increased by $644,362.
Page 1 and 2: DIRECTORS Olivia Lum Ooi Lin Deirdr
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Page 9 and 10: HYFLUX LTD AND SUBSIDIARIES P.06.07
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Page 63 and 64: HYFLUX LTD 40 Changi South Street 1

HYFLUX LTD AND SUBSIDIARIES

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