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SEE HUP SENG LIMITED
Annual Report 2012
53
Notes to the Financial Statements
31 DECEMBER 2012
2 Significant Accounting Policies (Continued)
(p) Leases
When a Group is the lessee:
(i) Finance lease
Leases where the Group assumes substantially the risks and rewards incidental to ownership of
the leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance
leases are recognised on the balance sheet as property, plant and equipment and borrowings
respectively, at the inception of the leases at the lower of the fair values of the leased assets and
the present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the
outstanding lease liability. The finance expense is recognised in profit or loss on the basis that
reflects a constant periodic rate of interest on the finance lease liability.
(ii) Operating lease
Leases of land where substantially all risks and rewards incidental to ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases are recognised
in profit or loss on a straight-line basis over the period of the lease.
The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental
expense over the lease term on a straight-line basis.
(q) Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined on a weighted
average basis and includes freight and handling charges. Allowance is made, where necessary, for
obsolete, slow moving and defective inventory in arriving at the net realisable value. Net realisable value
is the estimated selling price in the ordinary course of business, less the estimated costs necessary to
make the sale.
(r) Income Taxes
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as
reported in the consolidated statement of comprehensive income because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible.
Current income tax for current and prior years is recognised at the amounts expected to be paid to
or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements except when the deferred income tax
arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and affects neither accounting nor taxable profit or loss at the time of the transaction.