confidence - Investing In Africa

Financial StatementsNotes to the Accounts for the year ended 30 June 2005 (cont’d)(o)Leasing (cont’d)(ii) The Group and Bank as lesseeAssets held under finance leases are recognised as assets at their fair value at the date of acquisition and aredepreciated over their estimated useful lives. The corresponding liability to the lessor is included in the Balance Sheetas Obligations under Finance Leases. Lease finance charges are charged to the Statement of Income over the term ofthe leases so as to produce a constant periodic rate of interest on the outstanding obligations under finance leases.(p)Borrowing CostsAll borrowing costs are charged to the Statement of Income in the period in which they are incurred.(q)Deferred TaxationDeferred taxation is provided on the comprehensive basis using the liability method. Deferred tax liabilities are recognisedon temporary differences arising between the tax bases of assets and liabilities and their carrying values for financialreporting purposes. Deferred tax assets are recognised for all deductible temporary differences to the extent that it isprobable that taxable profit will be available against which the deductible temporary differences can be utilised.Deferred tax is charged or credited to the Statement of Income, except when it relates to items credited or charged toequity, in which case the deferred tax is also dealt with in equity.(r)Employee Benefits(i) Pension Benefits for eligible participating employeesEligible participating employees are entitled to retirement pensions under the SBM Group Pension Fund, a final salarydefined benefit scheme. The normal retirement age is 60. The cost of providing benefits is determined using theprojected unit credit method. The assets of the scheme are managed presently by the SBM Mauritius Asset Managers Ltd.The net total of the present value of funded obligations, the fair value of plan assets, any unrecognised actuarialgains and losses and any unrecognised past service cost is recognised in the Balance Sheet either as a liability (ifthere is a deficit) or as an asset (if there is a surplus).The current service cost and any recognised past service cost are included as an expense together with the associatedinterest cost, net of expected return on plan assets.A portion of the actuarial gains and losses will be recognised as income or expense if the net cumulative actuarialgains and losses at the end of the previous financial year exceeded the greater of:- 10% of the present value of the defined benefit obligation at that date; and- 10% of the fair value of any plan assets at that date.(ii) Pension Benefits for Employees appointed under Term ContractsCertain employees appointed under term contracts are entitled to defined contribution personal pensionarrangements. Employer contributions are expensed in the Statement of Income.(iii) Travel Tickets/AllowancesEmployees are periodically entitled to reimbursements of overseas travelling and allowances up to a certain amountdepending on their grade. The expected costs of these benefits are recognised on a straight line basis over theremaining periods until the benefits are payable.(iv) Equity Compensation Benefits for Senior ExecutivesThe Group does not recognise any liability or expense in respect of Phantom share options before they areexercised (Note 30).35