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3 SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
3.12 Finance income and finance cost (cont’d)
Finance cost comprises interest expense on borrowings, unwinding of the discount on non-current rental deposits,
net foreign currency losses and losses on hedging instruments that are recognised in the statement of total return or
statement of comprehensive income (as the case may be). All borrowing costs are recognised in the statement of total
return or statement of comprehensive income (as the case may be) using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
3.13 Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in the statement of total
return except to the extent that it relates to a business combination, or items recognised directly in other comprehensive
income or unitholders’ funds.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the statement of financial position method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognised for the temporary differences arising from the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable
profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse
in the foreseeable future.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets
and they relate to income taxes levied by the same tax authority on the same taxable entity.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the unused tax losses and credits and temporary differences can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
In the ordinary course of business, there are many transactions and calculations for which the ultimate tax treatment is
uncertain. Therefore, the Stapled Group recognises tax liabilities based on estimates of whether additional taxes and
interest will be due. These tax liabilities are recognised when the Stapled Group believes that certain positions may
not be fully sustained upon review by tax authorities, despite the Stapled Group’s belief that its tax return positions are
supportable. The Stapled Group believes that its accruals for tax liabilities are adequate for all open tax years based
on its assessment of many factors including interpretations of tax law and prior experience. This assessment relies on
estimates and assumptions and may involve a series of multifaceted judgements about future events. New information
may become available that causes the Stapled Group to change its judgement regarding the adequacy of existing tax
liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made.
H-REIT received a tax ruling from the Inland Revenue Authority of Singapore ("
IRAS
") and subject to meeting the terms
and conditions of the tax ruling which includes a distribution of at least 90% of the taxable income of H-REIT, H-REIT
will not be taxed on the portion of taxable income of H-REIT that is distributed to holders of H-REIT units. Any portion
of the taxable income that is not distributed to holders of H-REIT units will be taxed on H-REIT. In the event that there
are subsequent adjustments to the taxable income when the actual taxable income of H-REIT is finally agreed with the
IRAS, such adjustments are taken up as an adjustment to the taxable income for the next distribution following the
agreement with the IRAS.
NOTES TO THE FINANCIAL STATEMENTS
