94
Baker Technology LimitedAnnual Report 2014
2.
Summaryof significant accountingpolicies (cont’d)
2.14
Borrowing costs
Borrowing costs are capitalisedaspart of the cost of aqualifyingasset if they aredirectly 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
borrowingcostsare incurred. Borrowingcostsarecapitaliseduntil theassetsare substantiallycompleted for
their intendeduseor sale. All other borrowing costs areexpensed in theperiod theyoccur. Borrowing costs
consist of interest andother costs that anentity incurs in connectionwith theborrowingof funds.
2.15
Provisions
General
Provisionsare recognisedwhen theGrouphasapresentobligation (legal or constructive) asa resultof apast
event, it isprobable that anoutflowof economic resourcesembodyingeconomicbenefitswill be required to
settle theobligationand theamount of theobligation canbeestimated reliably.
Provisionsare reviewedateachbalance sheetdateandadjusted to reflect thecurrentbestestimate. If it isno
longerprobable that anoutflowof economic resourceswill be required to settle theobligation, theprovision
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 recognisedas afinance cost.
Warrantyprovision
Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial
recognition isbasedonhistorical experience. The initial estimateofwarranty-relatedcost is revisedannually.
2.16
Financial guarantee
Afinancial guaranteecontract is acontract that requires the issuer tomake specifiedpayments to reimburse
theholder for a loss it incursbecausea specifieddebtor fails tomakepaymentwhendue inaccordancewith
the termsof adebt instrument.
Financialguaranteesarerecognised initiallyatfairvalue.Subsequentto initial recognition,financialguarantees
are recognisedas income in theprofitor lossover theperiodof theguarantee. If it isprobable that the liability
will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher
amountwith thedifference charged to theprofit or loss.
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31December 2014
