Annual Report - Bina Puri

Notes to and Forming Part of the Financial Statements (Cont’d)1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)(y) Borrowing costsAll interest and other costs incurred in connection with borrowings are expensed as incurred as part of financecosts except to the extent that they are directly attributable to the acquisition and construction of developmentproperties or construction contracts, in which case, they are capitalised as part of the property development costsor contract costs.Finance costs comprise interest paid and payable on borrowings. Borrowing costs incurred on constructioncontracts and development properties that take a substantial period of time for completion are capitalised into thecarrying value of the assets. Capitalisation of borrowing costs will cease when the assets are completed or duringextended periods in which active development is interrupted. The amount of borrowing costs eligible forcapitalisation is the actual borrowing costs incurred on borrowings obtained specifically for the purpose of theproject.The interest component of hire purchase payments is charged to the income statement over the hire purchaseperiods so as to give a constant periodic rate of interest on the remaining hire purchase liabilities.(z) Tax expenseThe tax expense in the income statement comprises current tax and deferred tax. Current tax is an estimate oftax payable in respect of taxable profit for the year based on tax rate enacted at the balance sheet date and anyadjustment to tax payable in respect of previous years.Deferred tax is recognised in full, based on the liability method for taxation deferred in respect of all materialtemporary differences arising from differences between the tax bases of the assets and liabilities and their carryingamounts in the financial statements. Deferred tax is not recognised if the temporary difference arises from theinitial recognition of an asset or liability in a transaction which at the time of the transaction, affects neitheraccounting profit nor taxable profit.Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available againstwhich the deductible temporary differences, unused tax losses and unused tax credits can be utilised.Deferred tax is calculated at the tax rate that is expected to apply to the period when the asset is realised or theliability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.Current and deferred tax is recognised as an income or an expense in the income statement or is credited orcharged directly to equity if the tax relates to items that are credited or charged, whether in the same or differentperiod, directly to equity.(aa) Cash and cash equivalentsCash and cash equivalents comprise cash and bank balances, bank overdrafts, fixed and time deposits whichexclude those pledged to secure banking facilities and other short term, highly liquid investments that are readilyconvertible to known amounts of cash, and which are subject to insignificant risk of changes in value.BINA PURI HOLDINGS BHDAnnual Report 200759