Osim FR 050407.indd

Notes to the Financial Statements - 31 December 2006 (cont’d)2. Summary of significant accounting policies (cont’d)2.20 Borrowing costsBorrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributable to theacquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activitiesto prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred.Borrowing costs are capitalised until the assets are ready for their intended use. If the resulting carrying amount of the assetexceeds its recoverable amount, an impairment loss is recorded.2.21 Derecognition of financial assets and liabilitiesa) Financial assetsA fi nancial asset is derecognised where the contractual rights to receive cash fl ows from the asset have expired.On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of theconsideration received (including any new asset obtained less any new liability assumed) and any cumulative gain orloss that has been recognised directly in equity is recognised in the profi t and loss account.b) Financial liabilitiesA fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.2.22 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event,it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliableestimate can be made of the amount of the obligation.If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, whereappropriate, the risks specifi c to the liability. Where discounting is used, the increase in the provision due to the passage oftime is recognised as fi nance costs.Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longerprobable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation, the provision isreversed.Notes to the Financial Statements 99Annual Report 2006