63
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
2.
Summary of significant accounting policies (cont’d)
2.16
Provisions
General
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefit will be required to settle the obligation and the amount of
the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of
the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised
as a finance cost.
A provision for sales returns is recognised for all products sold as at end of the reporting period based on past experience of
the level of returns.
2.17
Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching
conditions will be complied with. Where the grant relates to an asset, the fair value is recognised as deferred capital grant
on the balance sheet and is amortised to profit or loss over the expected useful life of the relevant asset by equal annual
instalments.
Where loans or similar assistance are provided by governments or related institutions with an interest rate below the current
applicable market rate, the effect of this favourable interest is regarded as additional government grant.
Government grant shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as
expenses the related costs for which the grants are intended to compensate. Grants relating to income may be presented as
a credit in profit or loss, either separately or under a general heading such as “Other income”. Alternatively, they are deducted
in reporting the related expenses.
2.18
Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
Financial guarantees are recognised initially at fair value, adjusted for transaction costs that are directly attributable to the
issurance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss
over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less
amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss.
2.19
Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition,
construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the
asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are
capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in
the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing
of funds.
