Rising Above

NOTES TO FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)2.17 Income taxes (Continued)(b)Deferred TaxDeferred tax assets/liabilities are recognised for all deductible and taxable temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the financial statements except when the deferred tax assets/liabilities arise from the initial recognition of an asset or liability in a transaction that is not a business combination and atthe time of the transaction, affects neither accounting nor taxable profit or loss.Deferred tax liability is recognised on temporary differences arising on investment in subsidiaries, except where the Groupis able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference willnot reverse in the foreseeable future.Deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against whichthe temporary differences can be utilised.Deferred tax assets and liabilities are measured at:(i)(ii)the tax rates that are expected to apply when the related deferred tax asset is realised or the deferred tax liability issettled, based on tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date;andthe tax consequence that would follow from the manner in which the Group expects, at the balance sheet date, torecover or settle the carrying amounts of its assets and liabilities.Current and deferred taxes are recognised as income or expenses in the income statement for the year, except to the extentthat the tax arises from a business combination or a transaction which is recognised directly in equity.(c)Sales Tax2.18 ProvisionsRevenue, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on apurchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised aspart of the cost of acquisition of the asset or as part of the expense item as applicable, and receivables and payables thatare stated with amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxationauthority is included as part of receivables or payables in the balance sheet.Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is morelikely than not that an outflow of economic resources will be required to settle the obligation and the amount has been reliablyestimated.Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probablethat an outflow of economic resources will be required to settle the obligation, the provision is reversed.Provision for warrantiesThe Group recognises the estimated liability to repair or rectify any defect caused by faulty design done. A provision is recognisedat the balance sheet date for expected warranty claims based on estimate from technical engineers and past experience of theprobable level of repairs and rectifications.Provision for liquidated damages on construction contractsThe Group recognises provision for liquidated damages in respect of anticipated claims from project owners for constructioncontracts of which deadlines are overdue or are not expected to be delivered on time in accordance with contractualobligations.ANNUAL REPORT 2007 55