2. Summary of significant accounting policies (cont’d)
2.19 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly
attributable to the acquisition, construction or production of that asset. Capitalisation of
borrowing costs commences when the activities to prepare the asset for its intended use
or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing
costs are capitalised until the assets are substantially completed for their intended use or
sale. All other borrowing costs are expensed in the period they occur. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing
of funds.
2.20 Provisions
(a) General
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and the
amount of the obligation can be estimated reliably.
Provisions are reviewed at the end of each reporting period and adjusted to reflect
the current best estimate. If it is no longer probable that an outflow of economic
resources will be required to settle the obligation, the provision is reversed. If the
effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of time
is recognised as finance cost.
(b) Provision for liquidated damages
Provision for liquidated damages is made in respect of anticipated claims from
customers on contracts of which deadlines are overdue or not expected to be
completed on time in accordance with contractual obligations. The utilisation of
provisions is dependent on the timing of claims.
(c) Provision for warranty
Provision for warranty represents the best estimate of the Group’s liability to repair
vessels or replace affected parts during the warranty period. The provision is
calculated based on past experience of the level of repairs and returns.
2.21 Employee benefits
(a) Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of
the countries in which it has operations. In particular, the Singapore companies in
the Group make contributions to Central Provident Fund scheme in Singapore, a
defined contribution pension scheme. Contributions to defined contribution pension
schemes are recognised as an expense in the period in which the related service is
performed.
NOTES TO THE FINANCIAL
STATEMENTS
For the financial year ended 30 June 2015
ASL Marine Holdings Ltd. /Annual Report 2015
92
