Sunny Tew

NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2007 (Continued)2. Summary of significant accounting policies (Continued)(r)Income tax expense (Continued).liabilities in the financial statements. The amount of deferred tax provided is based on the manner of realisation or settlement of the carrying amount of assets andliabilities, using tax rates enacted or substantively enacted at the balance sheet date.A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferredtax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relateto the same tax authority and the Group and the Company intends to settle its current tax assets and liabilities on a net basis.Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of thetemporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.(s)Finance costsInterest expenses and similar charges are expensed in the income statement in the financial year in which they are incurred. The interest component of finance leasepayments is recognised in the income statement at the effective interest rate applicable.(t)DividendsEquity dividends are recognised when they become legally payable. Interim dividends are recorded in the financial year in which they are declared payable. Finaldividends are recorded as a liability in the financial year in which the dividends are approved by the shareholders.3. Critical accounting judgements and key sources of estimation uncertaintyCritical judgements made in applying the accounting policiesIn the process of applying the accounting policies, the Directors of the Company are of the opinion that there are no critical judgements involved that have a significant effecton the amounts recognised in the financial statements except as discussed below.56 HG METAL MANUFACTURING LIMITED ANNUAL REPORT 2007