inter roller fa final

Notes to the Financial StatementsIncome taxesThe liability method of tax effect accounting is adopted by the Group and the Company. Current taxation isprovided at the current taxation rate based on the tax payable on the income for the financial year that ischargeable to tax. Deferred taxation is provided at the current taxation rate on all temporary differences existingat the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in thefinancial statements.Deferred tax liabilities are recognised for all taxable temporary differences (unless the deferred tax liability arisesfrom goodwill or the initial recognition of an asset or liability in a transaction that is not a business combinationand at the time of the transaction, affects neither the accounting profit nor taxable profit or loss). Deferredincome tax is provided on all temporary differences arising on investment in subsidiary companies, exceptwhere the timing of the reversal of the temporary differences can be controlled and it is probable that thetemporary difference will not reverse in the foreseeable future.Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable thatfuture taxable profit will be available against which the deductible temporary differences can be utilized (unlessthe deferred tax asset relating to the deductible temporary differences arises from goodwill or the initial recognitionof an asset or liability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting profit nor taxable profit or loss).The statutory tax rates enacted at the balance sheet date are used in the determination of deferred income tax.Conversion of foreign currenciesItems included in the financial statements of each entity in the Group are measured using the currency that bestreflects the economic substance of the underlying events and circumstances relevant to that entity (“themeasurement currency”). The consolidated financial statements of the Group and the financial statements ofthe Company are presented in Singapore dollars, which is the measurement currency of the Company.Monetary assets and liabilities in foreign currencies except for foreign currency assets and liabilities hedged byforward exchange contracts are translated into Singapore dollars at rates of exchange closely approximatingthose ruling at balance sheet date. Foreign currency assets and liabilities hedged by forward exchange contractsare translated into Singapore dollars at the contracted forward exchange rates at the date of transaction andare not retranslated at balance sheet date. Other transactions in foreign currencies are converted at ratesclosely approximating those ruling at transaction dates.Except for the situations described below, exchange differences arising from such transactions are recorded inthe income statement.(i)(ii)Where a monetary item in substance forms part of the Company’s net investment in the foreign subsidiarycompanies and associated companies, exchange differences arising on such a monetary item are recordeddirectly to exchange fluctuation reserve to the extent that the net investment is represented by net assetsin the foreign entity until the disposal of the investments.Where foreign currency loans provide an effective hedge against the net investment in foreign subsidiarycompanies and associated companies, exchange differences arising on the loans are recorded directlyin exchange fluctuation reserve until the disposal of the investments.50 inter-roller engineering limited annual report2004