Notes to Financial Statements

Middle East Development Singapore Ltd.Annual Report 2008 45Notes to Financial Statements30 June 20082 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)REVENUE RECOGNITION (Cont’d)Dividend incomeDividend income is recognised when the shareholder’s right to receive the dividend have been established.BORROWING COSTS – Borrowing costs directly attributable to the acquisition, construction or production ofqualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intendeduse or sale, are added to the cost of those assets, until such time as the assets are substantially ready for theirintended use or sale. Investment income earned on the temporary investment of specifi c borrowings pending theirexpenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.All other borrowing costs are recognised in the profi t and loss statement in the period in which they are incurred.RETIREMENT BENEFIT COSTS – Payments to defi ned contribution retirement benefi t plans are charged as anexpense as they fall due. Payments made to state–managed retirement benefi t schemes, such as the SingaporeCentral Provident Fund, are dealt with as payments to defi ned contribution plans where the Group’s obligationsunder the plans are equivalent to those arising in a defi ned contribution retirement benefi t plan.EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave are recognised when they accrueto employees. A provision is made for the estimated liability for annual leave as a result of services rendered byemployees up to the balance sheet date.INCOME TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in theprofi t and loss statement because it excludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax iscalculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where theCompany and subsidiaries operate by the balance sheet date.Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi nancialstatements and the corresponding tax bases used in the computation of taxable profi t, and is accounted forusing the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts willbe available against which deductible temporary differences can be utilised. Such assets and liabilities are notrecognised if the temporary difference arises from goodwill or from the initial recognition (other than in a businesscombination) of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accountingprofi t.Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries andassociate, except where the Group is able to control the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that itis no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or theasset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balancesheet date. Deferred tax is charged or credited to profi t or loss, except when it relates to items charged or crediteddirectly to equity, in which case the deferred tax is also dealt with in equity.Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assetsagainst current tax liabilities and when they relate to income taxes levied by the same taxation authority and theGroup intends to settle its current tax assets and liabilities on a net basis.