Eng - IOI Group

3 SIGNIFICANT ACCOUNTING POLICIES cont’d3.16 Income Tax cont’dDeferred tax is recognised in the income statement, except when it arises from a transaction which isrecognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, orwhen it arises from a business combination that is an acquisition, in which case the deferred tax is includedin the resulting goodwill or negative goodwill.Prior to the adoption of MASB 25, Income Taxes, deferred tax was provided for using the liability method inrespect of material timing differences. Deferred tax assets were recognised only when there was reasonableexpectation of their realisation. This change in accounting policy has been accounted for retrospectively andthe effects are dealt with as a prior year adjustment as stated in Note 45.3.17 Research and Development ExpenditureAll general research and development expenditure are charged to the income statements in the financialyear in which the expenditure is incurred.3.18 Cash and Cash EquivalentsCash and cash equivalents include cash and bank balances, bank overdrafts, deposits and other short term,highly liquid investment and short term funds with maturity of less than three months which have aninsignificant risk of changes in value.3.19 Impairment of AssetsThe carrying values of assets, other than inventories, deferred tax assets, assets arising from constructioncontracts, assets arising from employee benefits and financial assets (other than investments in subsidiariesand associates) are reviewed at each balance sheet date to determine whether there is any indication ofimpairment. If such indication exists, impairment is measured by comparing the carrying values of the assetswith their recoverable amounts. Recoverable amount is the higher of net selling price and value in use, whichis measured by reference to discounted future cash flows. Recoverable amounts are estimated for individualassets or, if it is not possible, for the cash-generating unit to which the assets belongs.An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.The impairment loss is charged to the income statement unless it reverses a previous revaluation in whichcase it will be charged to equity. Any subsequent increase in recoverable amount is recognised in the incomestatement unless it reverses an impairment loss on revalued asset in which case it is taken to equity.145IOI Corporation BerhadAnnual Report 2003