DEFINING DESIGN
QUALITY
46
2.
Summary of significant accounting policies (cont’d)
Construction contracts (cont’d)
The Group’s contracts are typically negotiated for the construction of a single asset or a group of assets which are
closely interrelated or interdependent in terms of their design, technology and function. In certain circumstances,
the percentage of completion method is applied to the separately identifiable components of a single contract or to
a group of contracts together in order to reflect the substance of a contract or a group of contracts. Assets covered
by a single contract are treated separately when: (i) separate proposals have been submitted for each asset; and (ii)
each asset has been subject to separate negotiation and the contractor and customer have been able to accept or
reject that part of the contract relating to each asset - the revenue and costs of each asset can be identified. A group
of contracts are treated as a single construction contract when: (i) the group of contracts are negotiated as a single
package; the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit
margin; and (ii) the contracts are performed concurrently or in a continuous sequence.
Borrowing costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. The interest expense
is calculated using the effective interest rate method. Borrowing costs are recognised as an expense in the period in
which they are incurred except that borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use
or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the
qualifying asset for its intended use or sale are complete.
Employee benefits
Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The
Group’s legal or constructive obligation is limited to the amount that it agrees to contribute to independently
administered funds, such as the Central Provident Fund in Singapore and the Employees Provident Fund in Malaysia.
For employee leave entitlement, the expected cost of short-term employee benefits in the form of compensated
absences is recognised in the case of accumulating compensated absences, when the employees render service
that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated
absences, when the absences occur. A liability for bonuses is recognised where the Group is contractually obliged or
where there is constructive obligation based on past practice.
Share-based compensation
Benefits to employees are also provided in the form of share-based payment transactions, whereby employees
render services in exchange for shares. As there is no vesting period, the fair value of the employee services rendered
is measured by reference to the fair value of the shares granted on the date of the grant which is expected to be the
prevailing market price per share on the date of grant multiplied by the number of shares under each grant. This fair
value amount is charged to profit or loss on the date of grant as an expense in the Group’s income statement with a
corresponding adjustment to the share capital account when new shares are issued, or to treasury shares account
when treasury shares are re-issued to the employees.
Income tax
Income taxes are accounted for using the asset and liability method that requires the recognition of taxes payable
or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events
that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax
liabilities and assets are based on provisions of the enacted or substantively enacted tax laws at the end of each
reporting period; the effects of future changes in tax laws or rates are not anticipated. Tax expense/(tax income) is
the aggregate amount included in the determination of profit or loss for the reporting period in respect of current
tax and deferred tax. Current and deferred taxes are recognised as income or as an expense in profit or loss unless
the tax relates to items that are recognised in the same or a different period outside profit or loss. For such items
recognised outside profit or loss, the current tax and deferred tax are recognised (a) in other comprehensive income
if the tax is related to an item recognised in other comprehensive income and (b) directly in equity if the tax is related
to an item recognised directly in equity. Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at the end
of each reporting period and is reduced, if necessary, by the amount of any tax benefits that, based on available
evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless
the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a
business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit/(tax
loss). A deferred tax liability or asset is recognised for all taxable temporary differences associated with investments
in subsidiaries and associates except where the Group is able to control the timing of the reversal of the taxable
temporary difference and it is probable that the taxable temporary difference will not reverse in the foreseeable
future or for deductible temporary differences, they will not reverse in the foreseeable future and they cannot be
utilised against taxable profits.
Notes to the Financial Statements
31 December 2014
