NOTES TO FINANCIAL STATEMENTS
December 31, 2015
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Exchange differences on foreign currency borrowings relating to assets under construction for future productive use,
are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign
currency borrowings.
Exchange differences on transactions entered into in order to hedge certain foreign currency risks are described in
the hedge accounting policies above.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the entities in the
Group which do not have RMB as the functional currency (including comparatives) are expressed in RMB using
exchange rates prevailing at the end of each reporting period. Income and expense items (including comparatives)
are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that
period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any,
are classified as other comprehensive income and transferred to the Group’s currency translation reserve.
CASH AND CASH EQUIVALENTS IN THE CONSOLIDATED STATEMENT OF CASH FLOWS – Cash and cash
equivalents in the consolidated statement of cash flows comprise cash on hand, cash at bank and fixed deposits and
are subject to an insignificant risk of changes in value.
3
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2 above, management is required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (see below), that management
has made in the process of applying the Group’s accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
Taxation
The Group accounts for income taxes under the provisions of FRS 12
Income Taxes
. The Group has recorded deferred
tax assets on tax losses of RMB1.301 billion (2014 : RMB898 million) because the management believes it is more
likely than not that such tax losses can be utilised (Note 15). Should future taxable profits not be sufficient to utilise
the tax losses, an adjustment to the Group’s deferred tax assets would decrease the Group’s income in the period
where such determination is made. Likewise, if the management determines that the Group is able to utilise all or
part of the Group’s tax losses of RMB358 million (2014 : RMB886 million), which is currently not expected to be
utilised in the future, it would result in future recognition of additional deferred tax assets and increase the Group’s
income after tax in the period where such determination is made. The Group records deferred tax at the rates that
have been enacted by the end of the reporting period.
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