NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
71
CITIC ENVIROTECH LTD.
Annual
Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.23 Income tax (cont’d)
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised on taxable temporary differences arising on investments in
subsidiaries and associates, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments
and interests are only recognised to the extent that it is probable that there will be sufficient taxable
profits against which to utilise the benefits of the temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability
is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. Deferred tax is charged or credited to
profit or loss, except when it relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they
relate to items credited or debited directly to equity, in which case the tax is also recognised directly
in equity, or where they arise from the initial accounting for a business combination. In the case of a
business combination, the tax effect is taken into account in calculating goodwill or determining the
excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities over cost.
2.24 Foreign currency transactions and translation
The individual financial statements of each Group entity are measured and presented in the
currency of the primary economic environment in which the entity operates (its functional currency).
The functional currency of the Company is Chinese Renminbi (“RMB”). The consolidated financial
statements of the Group and the statement of financial position and statement of changes in equity
of the Company are presented in Singapore dollars.
