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2. Summary of Significant Accounting Policies (cont’d)
INCOME TAX
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
statement of profit or loss and other comprehensive income because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The
Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively
enacted in countries where the Co-operative and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, except where the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible
temporary differences associated with such investments and interests are only recognised to the extent that it is
probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to
be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items
credited or debited outside profit or loss (either in other comprehensive income or directly to equity), in which case
the tax is also recognised directly outside profit or loss (either in other comprehensive income or directly in equity,
respectively) or where they arise from the initial accounting for a business combination. In the case of a business
combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s
interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
Notes to Financial Statements
December 31, 2014
