GLOBAL

2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)(k)Accounting for leasesA distinction is made between ®nance leases which effectively transfer from the lessor tothe lessee substantially all the risks and bene®ts incidental to the ownership of the leasedassets, and operating leases under which the lessor effectively retains substantially all suchrisks and bene®ts. Assets acquired under hire purchase agreements are treated as ®nanceleases.Finance leases and assets on hire purchase are capitalised at the estimated present valueof the underlying lease payments. Each lease or hire purchase payment is allocatedbetween the liability and ®nance charges so as to achieve a constant rate of ®nancecharge on the outstanding liability. The lease or hire purchase obligations, net of ®nancecharges, are included in borrowings. The interest elements of the lease or hire purchasepayments are charged to the pro®t and loss statement over the lease period. Assetsacquired under ®nance leases or hire purchase contracts are depreciated over the usefullife of the assets.Operating lease payments are charged to the pro®t and loss statement on a straight linebasis over the period of the lease.When an operating lease is terminated before the lease period has expired, any paymentrequired to be made to the lessor by way of penalty is recognised as an expense in theperiod in which termination takes place.(l)ProvisionsProvisions are recognised when the Company has a present legal or constructive obligationas a result of past events, it is probable that an out¯ow of resources embodying economicbene®ts will be required to settle the obligation, and a reliable estimate of the amount of theobligation can be made.Redemption of customers' reward pointsThe Company issues ``VIP Cards'' to customers who enrol as VIP members. Customersholding VIP Cards are awarded reward points upon the purchase of the Company'sproducts. These reward points are not transferable or exchangeable for cash. Suchreward points earned are redeemable only upon subsequent minimum purchases of theCompany's products. The Company recognises the estimated liability of the cost of theproducts to be redeemed by the customers using the reward points given on thepurchases made. The provision is calculated based on the estimated value of the rewardpoints, which approximates the cost of the products to the Company.(m)(n)Employee bene®tsEmployee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. Aprovision is made for the estimated liability for annual leave as a result of services renderedby employees up to the balance sheet date.Financial risk managementThe Company's activities are not exposed to signi®cant ®nancial risks, such as the effectsof changes in foreign currency exchange rates and interest rates, credit risk and liquidityrisk.(i)Foreign exchange riskAs the Company operates retail stores primarily in Singapore and its transactions aredenominated in Singapore dollars, which is also the reporting currency, its exposureto exchange risk is minimal.The Company has investments in foreign associated companies, whose net assetsare exposed to currency translation risk.E-59