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49 Annual Report 2012
2 Signifcant Accounting Policies (cont’d)
(o) Financial Guarantees
The Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These guarantees
are fnancial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make
principal or interest payments when due in accordance with the terms of the borrowings.
Financial guarantee contracts are initially recognised at their fair values plus transaction costs. Subsequent
to initial recognition, fnancial guarantees are recognised as income in proft or loss over the period of
the guarantee. If it is probable that the liability will be higher than the amount initially recognised less
amortisation, the liability is recorded at the higher amount with the difference charged to proft or loss.
(p) Leases
Finance Lease
Finance leases are leases where theGroup assumes substantially all risks and rewards incidental to ownership
of the leased assets.
The leased assets and the corresponding lease liabilities (net of fnance charges) under fnance leases are
recognised on the balance sheet as property, plant and equipment and borrowings respectively, at the
inception of the leases based on the lower of the fair value of the leased assets and the present value of
the minimum lease payments.
Each lease payment is apportioned between the fnance expense and the reduction of the outstanding
lease liability. The fnance expense is recognised in proft or loss on a basis that refects a constant periodic
rate of interest on the fnance lease liability.
Operating Leases
Operating leases are offce premises’ leases where a signifcant portion of the risks and rewards of ownership
are retained by the lessor. Payments made under operating leases are charged to proft or loss on a straight-
line basis over the term of the leases.
Leases of investment properties where the Group retains substantially all risks and rewards incidental to
ownership are classifed as operating leases. Rental income from operating leases (net of any incentives
given to the lessees) is recognised in proft or loss on a straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to the
carrying amount of the leased assets and recognised as an expense in proft or loss over the lease term on
the same basis as the lease income.
(q) Revenue Recognition
Sale of Development Properties
Revenue from sales of development properties is recognised using the percentage of completion method
when the Group determines that (a) control and the signifcant risks and rewards of ownership of the
work-in-progress transfer to the buyer in its current state as construction progresses; (b) sales price is fxed
and collectible; (c) the percentage of completion can be measured reliably; (d) there is no signifcant
uncertainty as to the ability of the Group to complete the development; and (e) costs incurred or to be
incurred can be measured reliably.
The percentage of completion is measured by reference to the physical surveys of construction work
completed. Profts are recognised only in respect of fnalised sales contracts to the extent that such profts
relate to the progress of the construction work.
In all other instances, revenue from sales of development properties is only recognised upon the transfer of
control and signifcant risks and rewards of ownership of the property to the buyer. This generally coincides
with the point in time when the development unit is delivered to the buyer.
Notes to the Financial Statements
30 September 2012