Notes to the Financial Statements

113 

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(1)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1.

General

The Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principal place of business is 51 Cuppage Road #09-08, StarHub Centre, Singapore 229469.

The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated in Singapore.

The principal activities of the Company are those of an investment holding company and the provision of engineering and related services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements.

The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Technologies Engineering Ltd and its subsidiaries (collectively referred to as the “Group”) as at 31 December 2010 and for the year then ended were authorised and approved by the Board of Directors for issuance on 15 February 2011.

2.

Basis of financial statements preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below.

The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

Except for changes in accounting policies discussed in Note 3(s) and Note 12(e), the accounting policies set out below have been consistently applied by the Company and the Group and are consistent with those used in the previous year.

3.

Summary of significant accounting policies

(a) Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

(2)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(a) Basis of consolidation (continued) (ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Consistent accounting policies are applied to like transactions and events in similar circumstances. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less accumulated impairment losses.

(iii) Acquisitions of entities under amalgamation

The Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred to as the “Scheme Companies”) resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter 50 in 1997.

As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has been adopted in the preparation of the consolidated financial statements in connection with the amalgamation.

Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded at their existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired is recorded as merger reserve. The merger reserve had been utilised in prior years to partially write off the goodwill on acquisition of Founders Industries Pte Ltd and its subsidiaries. Founders Industries Pte Ltd was subsequently liquidated in 2007.

(iv) Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date

(3)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(a) Basis of consolidation (continued)

(v) Investments in associates and joint ventures (equity-accounted investees) (continued)

The consolidated financial statements includes the Group’s share of the profit or loss and other comprehensive income from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. The reporting dates for the associates and joint ventures and the Group are identical and the accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

For this purpose, the audited financial statements of the associates and joint ventures are used. Where audited financial statements are not available, the share of results is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting period.

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

In the Company’s separate financial statements, investments in associates and joint ventures are accounted for at cost less accumulated impairment losses.

(vi) Acquisition of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the fair value of the consideration paid and the carrying value of the additional interest acquired will be recognised as “Premium paid on acquisition of non-controlling interests” within equity.

(vii) Transactions eliminated on consolidation

All significant inter-company balances and transactions are eliminated on consolidation.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. The major functional currencies of the Group entities are Singapore dollar, United States dollar and Euro. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(4)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(b) Foreign currency (continued)

(i) Foreign currency transactions (continued)

Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are also taken directly to other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Singapore dollars at exchange rates at the reporting date. The income and expenses of foreign operation are translated to Singapore dollars at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity. However, if the foreign operation is a non wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is re-attributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains or losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity.

(c) Financial instruments

(i) Non-derivative financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. All regular way purchases and sales of financial assets are recognised on the trade date

(5)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(c) Financial instruments (continued)

(i) Non-derivative financial assets (continued)

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end.

Financial assets at fair value through profit or loss

Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading are financial assets acquired principally for the purpose of selling in the near term. Financial assets at fair value through profit or loss are measured at fair value and gains or losses arising from change in the fair values are recognised in profit or loss. Attributable transaction costs are recognised in profit or loss as incurred.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Loans and receivables comprise cash and cash equivalents and trade and other debtors. Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents also include bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.

Held-to-maturity financial assets

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the financial assets to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in the income statement when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

(6)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(c) Financial instruments (continued)

(i) Non-derivative financial assets (continued) Available-for-sale financial assets

Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. After initial recognition, an available-for-sale financial asset is measured at fair value, with gains or losses being recognised in other comprehensive income and presented in the fair value reserve in equity, except for impairment losses and foreign exchange differences on available-for-sale debt instruments, until the financial asset is derecognised. Upon derecognition, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to income statement as a reclassification adjustment.

The fair value of available-for-sale financial assets that are actively traded in organised financial markets is determined by reference to quoted market prices at the close of business on the balance sheet date. For those financial assets where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.

For those financial assets where there is no active market and where fair value cannot be reliably measured, they are measured at cost.

Available-for-sale financial assets comprise equity securities. (ii) Non-derivative financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(7)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(c) Financial instruments (continued)

(iii) Derivative financial instruments and hedge accounting

The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and cross currency swaps to hedge its risks associated with foreign currency and interest rate fluctuations. From time to time, the Group also uses monetary assets and liabilities and embedded derivatives as hedging instruments to hedge its risks associated with foreign currency fluctuations.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivatives are not closely related, a separate instrument with the same terms as the embedded derivatives would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and the methods used in assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect profit or loss.

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into. Attributable transaction costs are recognised in profit or loss as incurred. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Subsequent to initial recognition, derivatives are measured at fair value, changes therein are accounted for as described below.

Fair value hedges

The gain or loss from re-measuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount measured in accordance with Note 3(b)(i) (for a non-derivative hedging instrument) is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk is recognised in profit or loss. For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through profit or loss over the remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used is amortised in the income statement. Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

(8)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(c) Financial instruments (continued)

(iii) Derivative financial instruments and hedge accounting (continued) Cash flow hedges

The portion of the gain or loss on a derivative designated as the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and presented in the fair value reserve in equity, while the ineffective portion is recognised immediately in profit or loss.

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedged item is a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. If the hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is then transferred to profit or loss.

Hedge of net investment in foreign operations

The Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investment hedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translation differences on the financial liabilities relating to the effective portion of the hedge are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity, while the ineffective portion of the hedge are recognised immediately in profit or loss. On the disposal or partial disposal of the foreign operation, the amounts previously recognised in equity are transferred to profit or loss as part of the gain or loss on disposal.

Separable embedded derivatives and other derivatives

Any gains or losses arising from changes in fair value on derivatives that are not designated in hedging relationships are recognised immediately in profit or loss.

(9)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(d) Property, plant and equipment and depreciation (continued) (i) Recognition and measurement (continued)

Subsequent to initial measurement, except for certain property, plant and equipment which were subject to a one-time revaluation in 1972 (“1972 assets”), property, plant and equipment are measured at cost, net of depreciation and any impairment loss. The 1972 assets stated at valuation are exempted from conducting a regular frequency of revaluation but are measured net of depreciation, and any impairment loss.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income in profit or loss. The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised.

(ii) Depreciation

Depreciation is based on the cost of an asset less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Property, plant and equipment purchased specifically for projects are depreciated over the useful life of the class of property, plant and equipment or the duration of the project, whichever is shorter. Construction-in-progress is not depreciated until each stage of development is completed and becomes operational. Freehold land is not depreciated.

The estimated useful lives for the current period are as follows:

Buildings – 15 to 50 years

Leasehold land – Over the period of the lease of between 5 to 50 years

Improvements to premises – 3 to 30 years

Wharves and slipways – 20 years

Syncrolift and floating docks – 15 years

Boats and barges – 10 years

Plant and machinery – 5 to 25 years

Production tools and equipment – 3 to 15 years

Furniture, fittings, office equipment and computers – 2 to 5 years

Transportation equipment and vehicles – 5 years

Aircraft and aircraft engines – 15 to 30 years

The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the

(10)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(e) Intangible assets

(i) Goodwill

Goodwill represents the excess of:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus

• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

(ii) Research and development expenditure

Research expenditure is recognised in profit or loss as and when incurred.

Development expenditure on an individual project are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the development so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Other development costs are recognised in profit or loss as incurred.

Development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Film cost inventory

Film cost inventory comprise film production costs which are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the film so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the film production. Other film production costs are recognised in profit or loss as incurred.

(11)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(e) Intangible assets (continued) (vi) Amortisation

Amortisation is calculated based on the cost of the asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and film cost inventory, from the date that they are available for use.

Film cost inventory is amortised using the individual-film-forecast computation method which amortises the film costs in the same ratio that current gross revenue bear to anticipated total gross income for the film. Amortisation commences when each film begins to earn revenue.

The estimated useful lives for the current and comparative periods are as follows:

Dealer network – 7 years

Development expenditure – 5 years

Commercial and intellectual property rights – 2 to 16 years

Brands – 20 to 70 years

Film cost inventory – 20 years

The useful lives and amortisation methods are reviewed at the end of each financial year-end to ensure that the amount, method and period of amortisation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the intangible assets. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense is recognised in the expense category consistent with the function of the intangible asset.

(f) Investment properties

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost, net of depreciation and any impairment loss. Depreciation is recognised in profit or loss on a straight-line basis so as to write-off the cost of the investment property over its estimated useful life of 30 years.

Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the carrying value at the date of change in use becomes the cost for subsequent accounting. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 3(d) up to the date of change in use.

(12)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(g) Inventories and work-in-progress

Inventories are measured at the lower of cost and net realisable value. Cost is calculated on a first-in, first-out basis or by weighted average cost depending on the nature and use of the inventories. Cost includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete and slow-moving inventories.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Work-in-progress is measured at cost plus profits recognised to date less progress billings and recognised losses. Cost includes all direct material and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses and may also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases. Provision for foreseeable losses on uncompleted contracts is made in the year in which such losses are determined.

Work-in-progress is included in current assets in the balance sheet for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as “progress billings in excess of work-in-progress” and is included in current liabilities in the balance sheet.

(h) Impairment

(i) Non-derivative financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not carried at fair value through profit or loss is impaired.

To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, default or significant delay in payments, significant adverse changes in the business environment where the debtor/issuer operates and disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Financial assets carried at amortised cost

(13)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(h) Impairment (continued)

(i) Non-derivative financial assets (continued)

Financial assets carried at amortised cost (continued)

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Financial assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The loss recognised is not reversed in future periods.

Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to profit or loss.

Reversals in respect of impairment losses on equity instruments classified as available-for-sale are recognised in other comprehensive income. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(ii) Other non-financial assets

The Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investment properties, inventories and deferred tax assets, may be impaired. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An impairment loss is recognised if the carrying amount

(14)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(h) Impairment (continued)

(ii) Other non-financial assets (continued)

The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU or group of CGUs, and then to reduce the carrying amounts of other assets in the CGU or group of CGUs on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. If that is the case, the impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation or amortisation charged is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

(i) Provisions

(15)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(j) Employee benefits

(i) Employee equity compensation benefits

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

(ii) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.

(iii) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under cash bonus plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(k) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable, net of any returns, trade discounts and volume rebates.

Revenue is recognised using the following methods:

(i) Revenue from sale of goods and services rendered is recognised when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.

The timing of the transfer of risks and rewards usually occurs upon delivery of goods/services and acceptance by customers. (ii) Revenue from long-term contracts is recognised by reference to stage of completion, which is measured by either:

(a) a combination of different cost components or a single cost component that would provide the most reliable indication of the stage of completion of a contract; or

(16)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(k) Revenue (continued)

(iii) Management fee income is recognised on an accrual basis over the duration upon which management services are rendered. (iv) Where it is probable that a portion of the commission income may not materialise, a certain percentage of the total commission

received is treated as downpayment and is deferred and taken up in the income statement only upon the discharge of specified contractual obligations. Commission income in excess of the certain percentage of the total amount received is taken up in the income statement as and when it is billed.

(v) Rental income from investment properties is accounted for on a straight-line basis over the duration of the lease terms.

(l) Government grants

Government grants are recognised when the Group complies with the conditions associated with the grants. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income in the same periods in which the expenses are recognised. Grants relating to depreciable assets are deferred and recognised in profit or loss as other income over the period in which such assets are depreciated and used in the projects subsidised by the grants.

(m) Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss when the shareholder’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, losses on disposal of available-for-sale financial assets, fair value losses on financial assets at fair value through profit or loss, impairment losses recognised on financial assets (other than trade receivables), and losses on hedging instruments that are recognised in profit or loss.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

(17)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(o) Finance leases

(i) As lessee

Finance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the lease items. Assets financed under such leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Assets acquired on finance lease arrangements are depreciated in accordance with the policy set out in Note 3(d) above.

(ii) As lessor

Leases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, are classified as finance leases.

The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs for negotiating and arranging the lease) is recognised on the balance sheet. The difference between the gross receivables and the present value of the lease receivables is recognised as unearned finance income.

Each lease payment received is applied against the gross investment in the finance lease receivables to reduce both the principal and the unearned finance income. The finance income is recognised in profit or loss on a basis that reflects a constant periodic rate of return on the net investment in the finance lease receivables.

Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance lease receivables and recognised as an expense in profit or loss over the lease term on the same basis as the leased income.

(p) Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. Operating lease payments are recognised as an expense in the profit or loss on a straight-line basis over the lease term.

The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(q) Income taxes

(i) Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

(18)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(q) Income taxes (continued) (ii) Deferred tax

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries and interests in associates and joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.

At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised.

Deferred income tax relating to items recognised outside profit or loss is recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same tax authority.

(r) Operating segments

For management purposes, the Group is organised on a worldwide basis into four major operating segments. The management of the Company reviewed the segments’ operating results regularly in order to allocate resources to the segments and to assess the segment ‘s performance. Additional disclosures on each of these operating segments are shown in Note 46, including the factors used to identify the

(19)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(s) Changes in accounting policies (continued) Accounting for acquisitions of non-controlling interests

From 1 January 2010, the Group has applied FRS 27 Consolidated and Separate Financial Statements (2008) in accounting for acquisitions of non-controlling interests. See Note 3(a)(vi) for the new accounting policy.

Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction. The change in accounting policy has been applied prospectively and has no impact on earnings per share.

Accounting for business combinations

From 1 January 2010, the Group has applied FRS 103 Business Combinations (2009) in accounting for business combinations. Business combinations are now accounted for using the acquisition method as at the acquisition date (see Note 3(a)(i)).

Previously, business combinations were accounted for under the purchase method. The cost of an acquisition was measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition was credited to profit or loss in the period of acquisition. For business acquisitions that were achieved in stages, any existing equity interests in the acquiree were not re-measured to their fair value. Contingent consideration was recognised as an adjustment to the cost of acquisition only when it was probable and can be measured reliably.

The change in accounting policy has been applied prospectively and has no material impact on earnings per share.

(t) Significant accounting estimates and judgements

Estimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.

(i) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other intangible asset are tested for impairment annually and at other times when such indicators exist. Other non-financial

(20)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(t) Significant accounting estimates and judgements (continued) (i) Key sources of estimation uncertainty (continued)

Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 48 to the financial statements.

Depreciation charge

Property, plant and equipment and investment properties are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment and investment properties to be within 2 to 50 years. The carrying amount of the Group’s property, plant and equipment and investment properties at 31 December 2010 was $1,303,209,000 (2009: $1,168,254,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these property, plant and equipment and investment properties, and therefore future depreciation charges could be revised.

Revenue recognition and provision for foreseeable losses

The Group has recognised revenue from long-term contracts by reference to the stage of completion. The bases for measuring the stage of completion are described in Note 3(k)(ii). Significant judgement based on management’s knowledge and experience is required in determining the appropriate stage of completion and estimating a reasonable contribution margin or expected losses for revenue and costs recognition.

Allowance for inventory obsolescence

The allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the allowance made. The allowance for inventory obsolescence of the Group as at 31 December 2010 was $195,316,000 (2009: $191,860,000).

(21)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

3.

Summary of significant accounting policies

(continued)

(t) Significant accounting estimates and judgements (continued) (ii) Critical judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made certain judgements, apart from those involving estimations, which have significant effect on the amounts recognised in the financial statements.

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

In addition, certain subsidiaries of the Group have potential tax benefits arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. Significant judgement is involved in determining the availability of future taxable profits against which the Group can utilise the tax benefits therefrom. The use of the potential tax benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax provision and recognised deferred tax assets relating to the potential tax benefits in the period in which such determination is made.

The carrying amount of the Group’s deferred tax assets was $118,794,000 (2009: $127,196,000), tax payables was $187,020,000 (2009: $178,724,000) and deferred tax liabilities was $58,216,000 (2009: $58,355,000) as at 31 December 2010.

(u) Future changes in accounting policies

A number of new standards, amendments to standards and interpretations have been issued but not yet effective, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group, except for the adoption of FRS 24 Related Party Disclosures as described below.

The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control over the entity, or has significant influence over the entity. The Group is currently determining the impact of the changes to the definition of a related party has on the disclosure of related party transaction. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2011.

(22)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

4.

Turnover

Turnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:

Group

2010 2009

$’000 $’000

Sale of goods 2,601,482 2,301,675

Service income 2,660,087 2,581,676

Contract revenue 722,904 664,436

5,984,473 5,547,787

5.

Profit from operations

Profit from operations is arrived at:

Group

Note 2010 2009

$’000 $’000

After charging Auditors' remuneration

- auditors of the Company 1,209 1,782

- other auditors 1,837 2,979

Non-audit fees

- auditors of the Company 553 484

- other auditors 800 1,190

Fees and remuneration of directors 7,666 3,810

Fees paid to a firm of which a director is a member 191 269

Personnel expenses 6 1,576,726 1,470,638

Depreciation charge 12, 17 120,940 150,985

Allowance/(write-back of allowance) for

- Inventory obsolescence 27,642 48,726

- Doubtful debts (trade) 22 467 28,084

(23)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

6.

Personnel expenses

Group

2010 2009

$’000 $’000

Wages and salaries * 1,312,478 1,219,616

Contributions to defined contribution plans 94,658 86,600

Share-based payments 12,181 17,702

Other personnel expenses 157,409 146,720

1,576,726 1,470,638 * Includes directors’ remuneration of $5,246,497 (2009: $1,667,176).

7.

Key management personnel compensation

Group

2010 2009

$’000 $’000

Short-term employee benefits 47,581 34,382

Contributions to defined contribution plans 387 432

Other long-term benefits 12 5

Share-based payments 3,788 4,138

51,768 38,957

8.

Other income, net

Group

2010 2009

$’000 $’000

Gain on disposal of property, plant and equipment and investment property 2,813 1,702

Grant income from Jobs Credit Scheme 7,966 39,118

Government grants 5,387 4,025

Commission income 2,045 371

Rental income 6,610 5,774

Gain/(loss) on disposal of

- subsidiaries 429 (83)

- associate 81

(24)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

9.

Finance costs, net

Group

Note 2010 2009

$’000 $’000

Finance income Dividend income

- quoted equity investments 10 118

- unquoted equity investments 20 63

Interest income

- related corporations 1,823

- bank deposits 6,055 5,731

- staff loans 13 12

- finance lease 721 625

- bonds 12,374 3,202

- others 1,299 1,295

Gain on disposal of investments 10,849 690

Gain on fair value changes of held for trading investments 33 421

Fair value changes of financial instruments

- gain on forward currency contract designated as hedging instrument 12,717 365

Fair value changes of embedded derivatives not designated as hedging instrument 1,977

44,091 16,322

Finance costs Interest expenses

- Bank loans and overdrafts (22,425) (39,653)

- Bonds (32,993) (15,586)

- Finance lease (320) (375)

- Others (452) (506)

Exchange loss, net (8,716) (4,841)

Fair value changes of financial instruments

- ineffective portion of forward currency contract designated as hedging instrument

in cash flow hedges (65) (15)

- loss on embedded derivatives designated as hedging instrument (3,746)

Fair value changes of hedged items (9,915) (590)

(25)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

10.

Taxation

Group

2010 2009

$’000 $’000

Current income tax

Current year 140,432 107,490

Overprovision in respect of prior years (13,098) (17,112)

Associates and joint ventures 6,336 (307)

133,670 90,071

Deferred income tax

Current year (20,527) (7,271)

Underprovision in respect of prior years 9,299 4,951

Effect of reduction in tax rate 181 2,411

122,623 90,162

Deferred income tax related to items charged or credited directly to other comprehensive income:

Net change in fair value of available-for-sale financial assets 51 243

Net change in fair value of derivative financial instruments designated in cash flow hedges (4,345) 160

Effect of reduction in tax rate (152)

(4,294) 251

The Group

Unrecognised tax benefits

As at 31 December 2010, certain subsidiaries of the Group have potential tax benefits of approximately $92,733,000 (2009: $83,064,000) arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. These tax benefits have not been recognised in the financial statements due to the uncertainty of the sufficiency of future taxable profits to be generated for these subsidiaries in the foreseeable future. The use of these potential tax benefits is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate.

Unrecognised temporary differences relating to investments in subsidiaries

As at 31 December 2010, no deferred tax liability (2009: $nil) has been recognised for taxes that would be payable on the undistributed earnings of certain subsidiaries of the Group as the Group has determined that the undistributed profits of some of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organic growth and acquisitions.

(26)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

10.

Taxation

(continued)

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended 31 December is as follows:

Group

2010 2009

$’000 $’000

Profit from operations before taxation 627,475 546,559

Taxation at statutory tax rate of 17% (2009: 17%) 106,671 92,915

Adjustments:

Income not subject to tax (2,988) (8,751)

Expenses not deductible for tax purposes 11,717 10,749

Different effective tax rates of other countries 7,934 4,003

Overprovision in prior years, net (3,799) (12,161)

Effect of change in tax rates 181 2,411

Deferred tax assets not recognised 7,987 10,368

Deferred tax assets previously not recognised now recognised (5,478) (997)

Others 398 (8,375)

122,623 90,162

11.

Earnings per share

Basic earnings per share

The calculation for basic earnings per share is based on:

Group

2010 2009

$’000 $’000

Profit attributable to shareholders 491,005 443,930

(27)

31 December 2010

(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

11.

Earnings per share

(continued)

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOS/ESOP and their exercise prices are set out in Note 39. The average fair value of one ordinary share during the financial year ended 31 December 2010 was $3.23 (2009: $2.63) per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows:

Group

2010 2009

Number of shares (’000)

Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,029,045 3,004,069

Weighted average number of unissued shares under option 67,704 54,150

Number of shares that would have been issued at fair value (53,318) (46,168)

Weighted average number of ordinary shares (diluted) 3,043,431 3,012,051

26,926,006 (2009: 63,870,596) of share options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented.

Figure

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References

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