Powering growth - Aztech Group Ltd - Investor Relations

F i n a n c i a l S t a t e m e n t sa z t e c h a n n u a l r e p o r t 2 0 0 9572 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)PROVISIONS - Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it isprobable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditurerequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reportingperiod, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimatedto settle the present obligation, its carrying amount is the present value of those cash flows.When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable isrecognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.WarrantiesProvision for warranty costs are recognised at the date of sale of the relevant products, at the directors’ best estimate of the expenditure requiredto settle the Group’s obligation.LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownershipto the lessee. All other leases are classified as operating leases.The Group as lessorRental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis ismore representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred in negotiatingand arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the leaseterm.Rental income from subletting arrangements is recognised on a straight-line basis over the term of the relevant lease.The Group as lesseeAssets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the presentvalue of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance leaseobligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate ofinterest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable toqualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs (see below). Contingentrentals are recognised as expenses in the periods in which they are incurred.Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless anothersystematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentalsarising under operating leases are recognised as an expense in the period in which they are incurred.In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit ofincentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representativeof the time pattern in which economic benefits from the leased asset are consumed.