Osim FR 050407.indd

Notes to the Financial Statements - 31 December 2006 (cont’d)2. Summary of significant accounting policies (cont’d)2.3 Significant accounting estimates and judgments (cont’d)a) Key sources of estimation uncertainty (cont’d)ii)Income taxes (cont’d)The carrying amount of the Group’s tax payables, deferred tax liabilities, deferred tax assets and income taxrecoverable as at 31 December 2006 were summarised as follows:Provision for income tax : $9,933,000 (2005: $7,383,000)Deferred tax liabilities : $4,254,000 (2005: $4,084,000)Deferred tax assets : $4,910,000 (2005: $3,281,000)Income tax recoverable : $1,188,000 (2005: $2,452,000)iii)iv)Depreciation of fixed assetsFixed assets are depreciated on a straight-line basis over their estimated useful lives. Management estimatesthe useful lives of these fi xed assets, except for freehold and leasehold buildings, to be within 1 to 10 years.The carrying amount of the Group’s fi xed assets at 31 December 2006 was $49,038,000 (2005: $42,136,000).Changes in the expected level of usage and technological developments could impact the economic usefullives and the residual values of these assets, therefore future depreciation charges could be revised.Provision for warrantiesProvision for warranties is accrued based on the estimated costs of fulfi lling the total obligation, includinghandling and transportation costs. The amount of the provision for warranty is estimated based on salesvolumes and past experience of the level of repairs and return. The estimation basis is reviewed on an ongoingbasis and revised where appropriate. The provision for warranties at 31 December 2006 was $1,716,000(2005: $1,383,000).v) Provision for redemption of customers’ reward pointsProvision for redemption of customers’ reward points is accrued based on the estimated value of thereward points given to customer upon purchase, which approximates the cost of the products to the Group.The provision for redemption of customers’ reward point at 31 December 2006 was $1,028,000 (2005:$679,000).vi)Provision for restoration costsProvision for restoration costs is accrued based on the expected cost of restoring the leasehold premises,retails outlets and warehouse to their state and condition as at the commencement of the lease and to thesatisfaction of the landlord. The provision for restoration costs at 31 December 2006 was $3,783,000 (2005:$3,735,000).Notes to the Financial Statements 86Annual Report 2006