NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.29 TAXES (CONT’D)
(b)
DEFERRED TAX (cont’d)
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, would be recognised subsequently if new information about facts and circumstances changed. The
adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it is incurred
during the measurement period or in profit or loss.
(c)
GOODS AND SERVICES TAX
Revenues, expenses and assets are recognised net of the amount of goods and services tax except:
•
Where the goods and services tax incurred on a purchase of assets or services is not recoverable from the
taxation authority, in which case the goods and services tax is recognised as part of the cost of acquisition
of the asset or as part of the expense item as applicable; and
•
Receivables and payables that are stated with the amount of goods and services tax included.
The net amount of goods and services tax recoverable from, or payable to, the taxation authority is included as
part of receivables or payables in the balance sheet.
2.30 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
Initial recognition and subsequent measurement
The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and forward
commodity contracts, to manage their foreign currency risks, interest rate risks and commodity price risks respectively.
Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is
entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value
is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the
effective portion of cash flow hedges, which is recognised in other comprehensive income.
For the purpose of hedge accounting, hedges are classified as:
– Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an
unrecognised firm commitment
– Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular
risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency
risk in an unrecognised firm commitment
– Hedges of a net investment in a foreign operation
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THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
