NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
Financial Statements
98
COSCO Corporation (Singapore) Limited
2.
Significant accounting policies
(continued)
2.17 Leases (continued)
(a)
When the Group is the lessee:
(continued)
(ii)
Lessee - Operating leases
Leases of property, plant and equipment where substantially all risks and rewards incidental
to ownership are retained by the lessors are classified as operating leases. Payments made
under operating leases (net of any incentives received from the lessors) are recognised in
profit or loss on a straight-line basis over the lease term.
(b)
When the Group is the lessor:
The Group leases certain items of property, plant and equipment and investment properties to non-
related parties and related parties.
(i)
Lessor - Operating leases
Leases of property, plant and equipment and investment properties where the Group retains
substantially all risks and rewards incidental to ownership are classified as operating leases.
Rental income from operating leases (net of any incentives given to lessees) is recognised in
profit or loss on the straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are
added to the carrying amount of the leased asset and recognised as an expense in profit or
loss over the lease term on the same basis as the lease income.
2.18 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted
average method. The cost of finished goods and work-in-progress comprises raw materials, direct labour,
other direct costs and related production overheads (based on normal operating capacity) but excludes
borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and applicable variable selling expenses.
2.19 Income taxes
Current income tax for current and prior periods is recognised at the amount 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.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries
and associated companies, except where the Group is able to control the timing of the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable
future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be
available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i)
at the tax rates that are expected to apply when the related deferred income tax asset is realised or
the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted
or substantively enacted by the balance sheet date; and
