Baker Tech AR 2018 Full (28 Mar 2019)

Notes to the

financial statements

For the financial year ended 31 December 2018

A N N U A L R E P O R T

2 0 1 8

Summary of significant accounting policies (cont’d)

2.17

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 an outflow of economic resources embodying economic benefits

will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting period 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. When discounting is used, the increase in the provision due to the passage

of time is recognised as a finance cost.

Warranty provision

Provisions for warranty-related costs are recognised when the product is sold or service provided.

Initial recognition is based on historical experience. The initial estimate of warranty-related cost is

revised annually.

2.18

Financial guarantee

A financial guarantee contract is a contract that requires the issuer to make specified payments to

reimburse the holder for a loss it incurs because a specified debtor fails to make payment when

due in accordance with the terms of a debt instrument.

Financial guarantees are recognised initially at fair value, adjusted for transaction costs that are

directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial

guarantees are recognised as income in the profit or loss over the period of the guarantee. If it is

probable that the liability will be higher than the amount initially recognised less amortisation, the

liability is recorded at the higher amount with the difference charged to the profit or loss.