DOOSAN HEAVY INDUSTRIES & CONSTRUCTION CO., LTD. AND ...

Doosan Heavy Industries & Construction Co., Ltd. and SubsidiariesNotes to the Consolidated Financial StatementsFor the years ended December 31, 2012 and 20113. Significant Accounting Policies, Continued(23) Income taxesIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognized inprofit or loss except to the extent that it relates to a business combination, or items recognized directly inequity or in other comprehensive income.(i) Current taxCurrent tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax ratesenacted or substantively enacted at the end of the reporting period and any adjustment to tax payable inrespect of previous years. The taxable profit is different from the accounting profit for the period since thetaxable profit is calculated excluding the temporary differences, which will be taxable or deductible indetermining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from theaccounting profit.(ii) Deferred taxDeferred tax is recognized, using the asset-liability method, in respect of temporary differences between thecarrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxationpurposes. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax asset isrecognized for all deductible temporary differences to the extent that it is probable that taxable profit will beavailable against which they can be utilized. However, deferred tax is not recognized for the followingtemporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initialrecognition of assets or liabilities in a transaction that is not a business combination and that affects neitheraccounting profit or loss nor taxable income.The Group recognizes a deferred tax liability for all taxable temporary differences associated with investmentsin subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able tocontrol the timing of the reversal of the temporary difference and it is probable that the temporary differencewill not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductibletemporary differences arising from investments in subsidiaries and associates, to the extent that it isprobable that the temporary difference will reverse in the foreseeable future and taxable profit will beavailable against which the temporary difference can be utilized.The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and reduces thecarrying amount to the extent that it is no longer probable that sufficient taxable profit will be available toallow the benefit of part or all of that deferred tax asset to be utilized.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period whenthe asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted orsubstantively enacted by the end of the reporting period. The measurement of deferred tax liabilities anddeferred tax assets reflects the tax consequences that would follow from the manner in which the Groupexpects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the relatedcurrent tax liabilities and assets, and they relate to income taxes levied by the same tax authority and theyintend to settle current tax liabilities and assets on a net basis.32