Annual Report 2006 - Thai Beverage Public Company Limited

(p) ExpensesOperating leasesPayments made under operating leases are recognised in the statement of income on a straight line basis over the term ofthe lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease paymentsmade. Contingent rentals are charged to the statement of income in the accounting period in which they are incurred.127Finance costsInterest expenses and similar costs are charged to the statement of income in the period in which they are incurred, exceptto the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an assetwhich necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component offinance lease payments is recognised in the statement of income using the effective interest rate method.Research and developmentResearch and development costs, including costs of developing new drinks products and package design is expensed inthe period in which it is incurred.Other income and expenses are recognised on an accrual basis.(q) Income taxIncome tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable on the taxableincome for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years.4. Business restructuringThe Company was formed in 2003 to combine the separate beverages businesses of the ultimate controlling shareholdergroup, the Siriwadhanabhakdi family, which were held as part of the operations of 89 separate companies, into a single groupof companies. Of these, 65 businesses were transferred between 2003 and 2004, four businesses were transferred during2005 and 20 businesses were transferred during 2006. Prior to the restructuring these business were under the commoncontrol of the ultimate controlling shareholder of the Company. As the same ultimate controlling shareholder controlled the businesses and operations transferred to the Company both beforeand after the recent restructuring, the consolidated financial statements have been prepared on the basis of a businesscombination involving entities and businesses under common control. Accordingly, the transfer of businesses and operationshas been accounted for in a manner similar to a pooling of interests and the assets, liabilities and contingent liabilitiestransferred have been accounted for at book values. The difference between the cost of the combination and the carrying amounts of net identifiable assets at the date ofcombination (except for businesses acquired that were not under common control, whereby net identifiable assets weremeasured at their fair value) was recorded as “Difference arising from common control transactions”, which is shown as a reduction in shareholders’ equity.