China XLX Fertiliser Ltd

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NOTES TO THE FINANCIAL STATEMENTS31 December 20082. Summary of significant accounting policies (cont’d)2.20 Income taxes (cont’d)(b)Deferred tax (cont’d)- In respect of deductible temporary differences and carry-forward of unused tax credits andunused tax losses, if it is not probable that taxable profit will be available against which thedeductible temporary differences and carry-forward of unused tax credits and unused taxlosses can be utilised.The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the deferred income tax asset to be utilised. Unrecognised deferred tax assets are reassessedat each balance sheet date and are recognised to the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to be utilised.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the yearwhen the asset is realised or the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the balance sheet date.Deferred taxes are recognised in the income statement except that deferred tax relating to itemsrecognised directly in equity is recognised directly in equity and deferred tax arising from a businesscombination is adjusted against goodwill on acquisition.(c)Value-added-tax (“VAT”)2.21 Segment reportingThe Group’s sales of goods in the PRC are generally subjected to VAT at the applicable tax rates of13% (for Urea and Compound fertiliser segments) and 17% (for Methanol segment) for PRC domesticsales. However, as part of government subsidies for the fertiliser industry, full VAT exemption is givento Urea and Compound fertiliser.Revenues, expenses and assets are recognised net of the amount of VAT except:Where the VAT incurred on a purchase of assets or services is not recoverable from the taxationauthority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as partof the expense item as applicable; andReceivables and payables that are stated with the amount of VAT included.The net amount of VAT recoverable from, or payable to, the taxation authority is included as part ofreceivables or payables in the balance sheet.A business segment is a distinguishable component of the Group that is engaged in providing productsor services that are subject to risks and return that are different from those of other business segments. Ageographical segment is a distinguishable component of the Group that is engaged in providing products orservices within a particular economic environment and that is subject to risk and returns that are differentfrom those of components operating in other economic environment.Annual Report 200858
NOTES TO THE FINANCIAL STATEMENTS31 December 20082. Summary of significant accounting policies (cont’d)2.22 Share capital and share issue expensesProceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directlyattributable to the issuance of ordinary shares are deducted against share capital.2.23 ContingenciesA contingent liability or asset is a possible obligation or asset that arises from past events and whoseexistence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) notwholly within the control of the Group.Contingent liabilities and assets are not recognised on the balance sheet of the Group.2.24 Derivative financial instruments and hedging activitiesDerivative financial instruments are initially recognised at fair value on the date on which a derivativecontract is entered into; attributable transaction costs are recognised in the income statement whenincurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein areaccounted for as described below.Derivative financial instruments are carried as assets when the fair value is positive and as liabilities whenthe fair value is negative. Any gains or losses arising from changes in fair value on derivative financialinstruments that do not qualify for hedge accounting are taken to the income statement for the financialyear.The fair value of forward currency contracts is calculated by reference to current forward exchange rates forcontracts with similar maturity profiles. The fair value of interest rate derivative contracts is determined byreference to market values for similar instruments.Hedge accountingFor the purpose of hedge accounting, hedges are classified as:- Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset orliability or an unrecognised firm commitment; or- Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to aparticular risk associated with a recognised asset or liability or a highly probable forecast transactionor the foreign currency risk in an unrecognised firm commitment; or- Hedges of a net investment in a foreign operation.- Economic hedges that economically hedge monetary assets and liabilities denominated in foreigncurrencies.At the inception of a hedge relationship, the Group formally designates and documents the hedgerelationship to which the Group wishes to apply hedge accounting and the risk management objective andstrategy for undertaking the hedge. Such hedges are expected to be highly effective in achieving offsettingchanges in fair value or cash flows and are assessed on an ongoing basis to determine that they actuallyhave been highly effective throughout the financial reporting periods for which they were designated.Hedges which meet the strict criteria for hedge accounting are accounted for as follows:China XLX Fertiliser Ltd.59
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ChinaXLXFertiliser Ltd.ureacompound
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will still remain a necessity with
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Agriculture forms thefoundation of
Page 9 and 10: OUR PRODUCTSFruits ofour LaborAll o
Page 11 and 12: Compound fertilisers can be categor
Page 13 and 14: Financial SnapshotRMB Million FY 20
Page 15 and 16: OUR DISTRIBUTION NETWORK13
Page 17 and 18: Third plant near completion with 40
Page 19 and 20: Social ResponsibilityTesting of soi
Page 21 and 22: Sewage treatment 污水处理FGD
Page 23 and 24: 2003 with a Degree in Accountancy.
Page 25: Corporate InformationBoard of Direc
Page 28 and 29: CORPORATE GOVERNANCE REPORTThe foll
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Page 36 and 37: CORPORATE GOVERNANCE REPORTDealing
Page 38 and 39: DIRECTORS’ REPORTBy virtue of Sec
Page 40 and 41: STATEMENT BY DIRECTORSWe, Liu Xingx
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Page 44 and 45: BALANCE SHEETSas at 31 December 200
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China XLX Fertiliser Ltd

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