Annual Report 2007 - Hmdatalink.com hm datalink

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Notes to the consolidated financial statementsfor the year ended 31 December 20074. SIGNIFICANT ACCOUNTING POLICIES (Continued)(l)Equity-settled share-based transactions (Continued)For share options granted to suppliers in exchange for goods or services, they are measured at thefair value of the goods or services received. The fair values of the goods or services are recognised asexpenses immediately, unless the goods or services qualify of recognition as assets. Correspondingadjustments have been made to equity (share options reserve).(m)Retirement benefit costsPayments to the Group’s Mandatory Provident Fund Scheme (“MPF Scheme”) in Hong Kong and thestate-managed retirement benefit scheme in the People’s Republic of China are charged as expensesas they fall due.(n)LeasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.Rentals payable under operating leases are charged to income statement on a straight-line basisover the term of the relevant lease. Benefits received and receivable as an incentive to enter into anoperating lease are recognised as a reduction of rental expense over the lease term on a straight-linebasis.(o)Related partiesA party is related to the Group if:(i)directly, or indirectly through one or more intermediaries, the party controls, is controlledby, or is under common control with, the Group; or has an interest in the Group that gives itsignificant influence over the Group; or has joint control over the Group;(ii)the party is an associate of the Group;(iii)the party is a joint venture in which the Group is a venturer;(iv)the party is a member of the key management personnel of the Group or its shareholders;(v)the party is a close member of the family of any individual referred to in (i) or (iv);GEELY AUTOMOBILE HOLDINGS LIMITED73ANNUAL REPORT 2 0 0 7
Notes to the consolidated financial statementsfor the year ended 31 December 20074. SIGNIFICANT ACCOUNTING POLICIES (Continued)(o)Related parties (Continued)(vi)the party is an entity that is controlled, jointly controlled or significantly influenced by or forwhich significant voting power in such entity resides with, directly or indirectly, any individualreferred to in (iv) or (v); or(vii)the party is a post-employment benefit plan for the benefit of employees of the Group, or anyentity that is a related party of the Group.5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTYIn the application of the Group’s accounting policies, which are described in note 4, management is requiredto make judgements, estimates and assumptions about the carrying amounts of assets and liabilities thatare not readily apparent from other sources. The estimates and associated assumptions are based onhistorical experience and other factors that are considered to be relevant. Actual results may differ from theseestimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.Key sources of estimation uncertaintyThe following are the key assumptions concerning the future, and other key sources of estimation uncertaintyat the balance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year.Impairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generatingunits to which goodwill has been allocated. The value in use calculation requires the entity to estimate thefuture cash flows expected to arise from the cash-generating unit and a suitable discount rate in order tocalculate present value.Fair value of derivatives and other financial instrumentsAs described in notes 19 and 31, the valuation techniques applied by the external valuers for financialinstruments not quoted in an active market have been agreed with the directors. The directors use theirjudgement to determine whether valuation techniques applied are appropriate to the circumstances of theGroup.GEELY AUTOMOBILE HOLDINGS LIMITED74ANNUAL REPORT 2 0 0 7
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