Annual Report 2012 - e-KONG Group Limited

e-KONG GROUP LIMITEDNotes to the Consolidated Financial Statements (continued)For the year ended 31 December 20122. PRINCIPAL ACCOUNTING POLICIES (continued)Foreign currency translationItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (“functional currency”). The consolidated financialstatements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency.Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at thedates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactionsand from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreigncurrencies are recognised in the income statement.On consolidation, the financial position of entities denominated in a currency other than Hong Kong dollars, beingthe presentation currency, are translated at the approximate rates of exchange ruling at the end of the reportingperiod while the income statements are translated at average rates for the year. All exchange differences arisingfrom the translation of an entity are recognised in other comprehensive income and accumulated separately in theexchange reserve in equity. On disposal of such entity, the related cumulative amount of the exchange differencesis transferred from equity to the income statement when the gain or loss on disposal is recognised.TaxationThe charge for current income tax is based on the results for the year as adjusted for items that are non-assessableor disallowed. It is calculated using tax rates that have been enacted or substantively enacted at the end of thereporting period.Deferred tax is provided, using the liability method, on all temporary differences at the end of the reportingperiod between the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, any deferred tax arising from initial recognition of an asset or liability in a transaction otherthan a business combination that at the time of the transaction affects neither the accounting profit nor taxableprofit or loss is not recognised.The deferred tax liabilities and assets are measured at the tax rates that are expected to apply to the periodwhen the asset is recovered or the liability is settled, based on the tax rates and tax laws that have been enactedor substantively enacted by the end of the reporting period. Deferred tax assets are recognised to the extent itis probable that future taxable profits will be available against which the deductible temporary differences, taxlosses and credits can be utilised.Deferred tax is provided on temporary differences arising on investments in subsidiaries, associate and a jointlycontrolledentity except where the timing of the reversal of the temporary differences is controlled by the Groupand it is probable that the temporary differences will not reverse in the foreseeable future.46Annual Report 2012