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TEHO INTERNATIONAL INC LTD Annual Report 2012 33
Notes to the
Financial Statements
30 June 2012
2. Summary of Signifcant Accounting Policies (Continued)
Basis of Presentation (Continued)
Changes in the group’s ownership interest in a subsidiary that do not result in the loss
of control are accounted for within equity. When the group loses control of a subsidiary
it derecognises the assets and liabilities and related equity components of the former
subsidiary. Any gain or loss is recognised in profit or loss. Any investment retained in
the former subsidiary is measured at its fair value at the date when control is lost and is
subsequently accounted as available-for-sale financial assets in accordance with FRS
39.
The company’s financial statements have been prepared on the same basis, and as
permitted by the Companies Act, Chapter 50, no statement of income is presented for
the company.
The equity accounting method is used for associates in the group financial statements.
Basis of Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted accounting
principles requires the management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting year. Actual results could differ from those estimates.
The estimates and assumptions are reviewed on an ongoing basis. Apart from those
involving estimations, management has made judgements in the process of applying the
entity’s accounting policies. The areas requiring management’s most difficult, subjective
or complex judgements, or areas where assumptions and estimates are significant to
the financial statements, are disclosed at the end of this footnote, where applicable.
Revenue Recognition
The revenue amount is the fair value of the consideration received or receivable from
the gross inflow of economic benefits during the reporting year arising from the course
of the activities of the entity and it is shown net of any related sales taxes, estimated
returns, discounts and rebates. Revenue from the sale of goods is recognised when
significant risks and rewards of ownership are transferred to the buyer, there is neither
continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold, and the amount of revenue and the costs incurred
or to be incurred in respect of the transaction can be measured reliably. Revenue from
rendering of services that are of short duration is recognised when the services are
completed. Interest is recognised using the effective interest method. Dividend from
equity instruments is recognised as income when the entity’s right to receive payment
is established. Rental revenue is recognised on a time-proportion basis that takes into
account the effective yield on the asset on a straight-line basis over the lease term.
2. Summary of Signifcant Accounting Policies (Continued)
Employee Benefits
Contributions to defined contribution retirement benefit plans are recorded as an
expense as they fall due. The entity’s legal or constructive obligation is limited to the
amount that it agrees to contribute to an independently administered fund which is the
Central Provident Fund in Singapore (a government managed retirement benefit plan).
For employee leave entitlement the expected cost of short-term employee benefits in the
form of compensated absences is recognised in the case of accumulating compensated
absences, when the employees render service that increases their entitlement to future
compensated absences; and in the case of non-accumulating compensated absences,
when the absences occur. A liability for bonuses is recognised where the entity is
contractually obliged or where there is constructive obligation based on past practice.
Income Tax
The income taxes are accounted using the asset and liability method that requires the
recognition of taxes payable or refundable for the current year and deferred tax liabilities
and assets for the future tax consequence of events that have been recognised in the
financial statements or tax returns. The measurements of current and deferred tax
liabilities and assets are based on provisions of the enacted or substantially enacted
tax laws; the effects of future changes in tax laws or rates are not anticipated. Income
tax expense represents the sum of the tax currently payable and deferred tax. Current
and deferred income taxes are recognised as income or as an expense in profit or loss
unless the tax relates to items that are recognised in the same or a different period
outside profit or loss. For such items recognised outside profit or loss the current tax
and deferred tax are recognised (a) in other comprehensive income if the tax is related
to an item recognised in other comprehensive income and (b) directly in equity if the tax
is related to an item recognised directly in equity. Deferred tax assets and liabilities are
offset when they relate to income taxes levied by the same income tax authority. The
carrying amount of deferred tax assets is reviewed at each end of the reporting year
and is reduced, if necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realised. A deferred tax amount is recognised for all
temporary differences, unless the deferred tax amount arises from the initial recognition
of an asset or liability in a transaction which (i) is not a business combination; and (ii)
at the time of the transaction, affects neither accounting profit nor taxable profit (tax
loss). A deferred tax liability or asset is recognised for all taxable temporary differences
associated with investments in subsidiaries and associates except where the reporting
entity is able to control the timing of the reversal of the taxable temporary difference and
it is probable that the taxable temporary difference will not reverse in the foreseeable
future or for deductible temporary differences, they will not reverse in the foreseeable
future and they cannot be utilised against taxable profits.