BAKERTECHNOLOGYLIMITED
ANNUALREPORT2013
95
Notes to the
Financial Statements
for the financial year ended 31December 2013
2.
Summaryof significantaccounting policies (cont’d)
2.15
Provisions
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 anoutflowof economic resources embodyingeconomicbenefitswill be required to settle theobligationand the
amount of the obligation can be estimated reliably.
Provisions are reviewed at eachbalance sheet date 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.Whendiscounting is used, the increase in theprovisiondue to thepassageof time is recognised as
a finance cost.
Warrantyprovision
Provisions forwarranty-related costs are recognisedwhen theproduct is soldor serviceprovided. Initial recognition is basedon
historical experience. The initial estimate of warranty-related cost is revised annually.
2.16
Financial guarantee
A financial guarantee contract is a contract that requires the issuer tomake specified payments to reimburse the holder for a
loss it incurs because a specifieddebtor fails tomake payment whendue in accordancewith the terms of a debt instrument.
Financial guarantees are recognised initially at fair value. Subsequent to initial recognition, financial guarantees are recognised
as income in theprofit or loss over theperiodof theguarantee. If it is probable that the liabilitywill behigher than theamount
initially recognised less amortisation, the liability is recorded at the higher amountwith the difference charged to the profit or
loss.
2.17
Employeebenefits
(a)
Defined contributionplan
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 the Central Provident Fund
scheme in Singapore, a defined contribution pension scheme. Contributions to a defined contribution pension scheme
are recognised as an expense in the period inwhich the related service is performed.
(b)
Employee leaveentitlement
Employee entitlements to annual leave are recognised as a liabilitywhen they accrue to the employees. The estimated
liability for leave is recognised for services renderedby employees up to the endof the reporting period.
2.18
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at
inceptiondate:whether fulfilment of thearrangement isdependent on theuseof a specificasset or assetsor thearrangement
conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
