NOTES TO FINANCIAL STATEMENTS
30 June 2015
Karin Technology Holdings Limited
Annual Report 2015
74
3.
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group’s financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities
affected in the future.
JUDGEMENTS
In the process of applying the Group’s accounting policies, management has made the following judgements,
apart from those involving estimations, which have the most significant effect on the amounts recognised in the
financial statements:
Classification between investment properties and owner-occupied properties
The Group determines whether a property qualifies as an investment property, and has developed criteria in
making that judgement. Investment property is a property held to earn rentals or for capital appreciation or
both. Therefore, the Group considers whether a property generates cash flows largely independently of the other
assets held by the Group.
Whether the presumption that investment properties stated at fair value are recovered through sale
is rebutted in determining deferred tax
Investment properties are properties held to earn rentals or for capital appreciation or both. The Group has
investment properties located in Hong Kong and Mainland China which are measured at fair value. In considering
whether the presumption in IAS 12
Income Taxes
that an investment property measured at fair value will be
recovered through sale is rebutted in determining deferred tax, the Group has developed certain criteria in making
that judgement, such as whether an investment property is held within a business model whose objective is to
consume substantially all of the economic benefits embodied in the investment property over time or through
sale. The presumption is rebutted only in the circumstance that there is sufficient evidences such as historical
transaction, future development plan and management’s intention to demonstrate the investment property is
held with the objective to consume substantially all of the economic benefits over time, rather than through
sale. Based on the above assessment, the presumption for the investment properties located in Mainland China
is rebutted. Continuous assessments on the presumption will be made by management at each reporting date.
Deferred tax liabilities on unremitted earnings
Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to
foreign investors from the foreign investment enterprises established in Mainland China. The requirement is
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the unremitted earnings that are subject to withholding taxes of the Group’s subsidiaries established in Mainland
China. In the opinion of the directors, it is not probable that these subsidiaries will distribute such earnings in
the foreseeable future.
At 30 June 2015, the aggregate amount of temporary differences associated with investments in subsidiaries
in Mainland China for which deferred tax liabilities have not been recognised in the consolidated statement of
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25(b) to the financial statements.
