Sunny Tew

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(p)Leases (Continued)When the Group and the Company is the lessee of an operating leaseLeases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments madeunder the lease (net of any incentives received from the lessor) are recognised in the income statement on a straight-line basis over the period of the lease.When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as anexpense in the financial year in which termination takes place.(q)Employee benefitsDefined contribution planContributions to defined contribution plans are recognised as an expense in the income statement in the same financial year as the employment that gives rise tothe contributions.Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for the estimated liability for unutilised annual leave asa result of services rendered by employees up to the balance sheet date.(r)Income tax expenseIncome tax expense for the financial year comprise current and deferred taxes. Income tax is recognised in the income statement except to the extent that it relatesto items recognised directly in equity, in which case such income tax is recognised in equity.Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantially enacted at the balance sheet date, andany adjustment to tax payable in respect of previous financial years.Deferred tax is provided, using the liability method, for temporary differences at the balance sheet date between the carrying amounts and tax bases of assets andHG METAL MANUFACTURING LIMITED ANNUAL REPORT 200755