Page 93 - SAR141018_Forterra AR 2013

FORTERRA
ANNUAL REPORT 2013
NOTES TO THE
FINANCIAL STATEMENTS
91
3 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised
as it accrues in profit or loss, using the effective interest method.
Finance costs comprise interest expenses on borrowings and amortisation of transaction
costs. Borrowing costs that are not directly attributable to the acquisition, construction or
production of a qualifying asset are recognised in profit or loss using the effective interest
method.
(m) Taxation
Income tax expense comprises current and deferred tax. Current tax and deferred tax
are recognised in profit or loss except to the extent that they relate to items recognised
directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for
the year, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years. As the Group’s property portfolio
is located in the PRC, the foregoing tax rate refers to the prevailing corporate income tax
rate of 25% in the PRC.
Deferred tax is recognised in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or liabilities in a transaction
that is not a business combination and that affects neither accounting nor taxable
profit or loss;
• temporary differences related to investments in subsidiaries to the extent that it is
probable that they will not reverse in the foreseeable future.
The measurement of deferred taxes reflects the tax consequences that would follow the
manner in which the Group expects, at the end of the reporting period, to recover or settle
the carrying amount of its assets and liabilities. For investment property that is measured
at fair value, the presumption that the carrying amount of the investment property will be
recovered through sale has been rebutted. Deferred tax is measured at the tax rates that
are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.