NOTES TO FINANCIAL STATEMENTS
30 June 2015
Annual Report 2015
Karin Technology Holdings Limited
69
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments, such as forward currency contracts, to manage its foreign
currency risk. Such derivative financial instruments are initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. The fair value of forward currency
contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The Group’s forward currency contracts do not qualify for hedge accounting and accordingly any gains or losses
arising from changes in fair value are taken directly to profit or loss.
TREASURY SHARES
Own equity instruments which are reacquired (treasury shares) are recognised at cost and deducted from equity.
No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own
equity instruments. Any difference between the carrying amount and the consideration is recognised in equity.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average
basis and net realisable value is based on estimated selling prices less any estimated costs to be incurred to
completion and disposal.
CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand
and demand deposits that are subject to an insignificant risk of changes in value, and have a short maturity of
generally within three months when acquired.
For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on
hand and at banks, including term deposits, which are not restricted as to use.
INCOME TAX
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is
recognised outside profit or loss, either in other comprehensive income or directly in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period, taking into consideration interpretations and practices
prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting
period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
