Ocean Sky International Limited - Ocean Sky International Ltd ...

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, bank deposits and short-term highly liquid
investments which are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and
cash equivalents are presented net of trust receipts and which form an integral part of the Group’s
cash management.
Creditors
Creditors are carried at cost which is the fair value of the consideration to be paid in the future for
goods and services received, whether or not billed to the Group.
Employee benefits
As required by law, the Group make contributions to the state pension scheme. Contributions are
recognised as compensation expense in the same financial year as the employment that gives rise
to the contribution.
Provisions
A provision is recognised in the balance sheet when there is a legal or constructive obligation as a
result of a past event, and it is probable that an outflow of economic benefits will be required to
settle the obligation.
Taxation
Taxation for the financial year comprise current and deferred taxes. Taxation is recognised in the
profit and loss accounts except to the extent that it relates to items recognised directly in equity, in
which case such taxation is recognised in equity.
Current tax is the expected tax payable on the taxable income for the financial year, using tax rates
enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in
respect of previous financial years.
Deferred tax is provided using the balance sheet liability method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially 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. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
Deferred expenditure
Deferred expenditure which consists of quota costs is stated at cost less accumulated amortisation
and write off.
Quotas are the rights acquired under apparel quotas paid by a subsidiary company and is stated at
cost. The rights when utilised or expired are charged to the profit and loss accounts.
Finance leases
Where assets are financed by lease agreements, including hire-purchase agreements, that give
rights approximating to ownership, the assets are capitalised as if they had been purchased
outright at the values equivalent to the present value of the total rental payable during the period of
the leases and the corresponding lease commitments are included under liabilities.
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