Financial Statements - Mewah Group

Building Capabilities
Notes to the Financial Statements
For the financial year ended 31 December 2011
2. Significant accounting policies (continued)
2.15 Leases (continued)
(b)
When the Group is the lessor:
2.16 Inventories
Lessor - Operating leases
Leases 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 the lessees) is recognised in profit or loss
on a 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 assets and recognised as an expense in profit or loss over the lease term on the same basis as
the lease income.
Contingent rents are recognised as income in profit or loss when earned.
Inventories are carried at the lower of cost and net realisable value. Cost is determined on weighted average basis. 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. Stores, spares and consumables are stated
at cost and are determined on a weighted average basis. 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.
2.17 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 statement of
financial position 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 associates,
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.
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