LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Appendix Bat the balance sheet and fair value dates respectively. All realised and unrealised exchange adjustmentgains and losses are dealt with in the statement of total return. The presentation is in the functionalcurrency.Foreign currency financial statements—The foreign entities determine the appropriate functional currency as it reflects the primary economicenvironment in which the entities operate. In translating the financial statements of a foreign entity forincorporation in the consolidated financial statements the assets and liabilities denominated in currenciesother than the functional currency of the entity are translated at rate of Rp. 1 to S$0.000169 (or S$1 toRp. 5,900) as at 31 December 2006. The same rate has been used in translating the pro formaadjustments set out section E of this report. The resulting translation adjustments (if any) areaccumulated in a separate component of equity until the disposal of the foreign entity.Revenue recognition—The revenue amount is the fair value of the consideration received or receivable from the gross inflow ofeconomic benefits during the year arising from the course of the ordinary activities of the entity and it isshown net of related tax and discounts, if any. Revenue from rendering of services that are of short durationis recognised when the services are completed. Rental revenue is recognised on a time-proportion basisthat takes into account the effective yield on the asset. Rental received in advance is amortised on timeproportionbasis. Interest revenue is recognised on a time-proportion basis using the effective interest ratethat takes into account the effective yield on the asset.A fair value gain or loss on a financial asset or financial liability classified as at fair value through profit orloss that is not part of a hedging relationship is recognised in profit or loss. A fair value gain or loss on anavailable-for-sale financial asset is recognised directly in equity, except for impairment losses and foreignexchange gains and losses until the financial asset is derecognised, at which time the cumulative gain orloss previously recognised in equity is recognised in profit or loss. However, interest calculated using theeffective interest method is recognised in profit or loss. Dividends on equity instrument are recognised inprofit or loss when the entity’s right to receive payment is established. For financial assets and financialliabilities carried at amortised cost, a gain or loss is recognised in profit or loss when the financial asset orfinancial liability is derecognised or impaired, and through the amortisation process. However, hedgeditems are taken to equity.Borrowing costs—All borrowing costs that are interest and other costs incurred in connection with the borrowing of funds arerecognised as an expense in the period in which they are incurred except for borrowing costs that aredirectly attributable to the acquisition, construction or production of a qualifying asset that necessarily takea substantial period of time to get ready for their intended use or sale are capitalised as part of the cost ofthat asset until substantially all the activities necessary to prepare the qualifying asset for its intended useor sale are complete. The interest expense is calculated using the effective interest rate method.Income tax—The income taxes are accounted using the asset and liability method that requires the recognition of taxespayable or refundable for the current year and deferred tax liabilities and assets for the future taxconsequence of events that have been recognised in the financial statements or tax returns. Themeasurements of current and deferred tax liabilities and assets are based on provisions of theenacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are notanticipated. Income tax expense represents the sum of the tax currently payable and deferred tax.Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same incometax authority. The carrying amount of deferred tax assets is reviewed at each balance sheet date and isreduced, if necessary, by the amount of any tax benefits that, based on available evidence, are notexpected to be realised. A deferred tax amount is recognised for all temporary differences, unless thedeferred tax amount arises from (a) goodwill for which amortisation is not deductible for tax purposes; or(b) the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and(ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred taxliability is not recognised for all taxable temporary differences associated with investments in subsidiaries,and interests in joint ventures because (a) the company is able to control the timing of the reversal of theB-14