KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
F-139
3.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of tangible assets
At each consolidated statement of financial position date, the Group reviews the carrying amounts of its
tangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment loss (if any). Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell or value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income
immediately.
Taxation
Certain of the Company’s subsidiaries are subject to taxes on income in various foreign jurisdictions. Income
tax expense represents the sum of the tax currently payable and deferred tax.
Current
tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the consolidated statement of income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability
for current tax is calculated using tax rates that have been enacted or substantively enacted by the consolidated
statement of financial position date.
Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements of the relevant subsidiaries and the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which those 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
.
The carrying amount of deferred tax assets is reviewed at each consolidated statement of financial position date
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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the consolidated statement of financial position date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would follow from the manner in which the Group
expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
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.
