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3. Define contribution plans
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
The Group pays contributions to the Public Authority for Social Insurance for their employees based on the rules
of the social insurance law no. 79 for the year 1975. The employees and employers contribute under this law with a
fixed percentage of wages. The Group›s commitment is limited to the value of their contribution. And the Group’s
contribution amount expensed in profits and losses according to accrual basis.
4. Termination benefits
Termination benefits are expensed at the earlier of when theGroup can no longer withdraw the offer of those benefits
and when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12
months of the reporting date, then they are discounted - before tax – to reflect the time value of money.
F. Finance income and finance costs
The Group’s finance income and finance costs include:
•
interest income.
•
interest expense.
•
Foreign currency gains or loss on financial assets and financial liabilities.
Interest income or expense is recognised using the effective interest method.
G. Income Tax
The recognition of the current tax and deferred tax as income or expense in the profit or loss for the period, except
in cases in which the tax comes from process or event recognized - at the same time or in a different period - outside
profit or loss, whether in other comprehensive income or in equity directly or business combination.
1. Current income tax
The recognition of the current tax for the current period and prior periods and that have not been paid as a liability,
but if the taxes have already been paid in the current period and prior periods in excess of the value payable for these
periods, this increase is recognized as an asset.The taxable current liabilities (assets) for the current period and prior
periods measured at expected value paid to (recovered from) the tax authority, using the current tax rates (and tax
laws) or in the process to issue in the end of the financial period. Dividends are subject to tax as part of the current tax.
But do not be offset for tax assets and liabilities only when certain conditions are met.
2. Deferred tax
Deferred tax is recognised in respect of 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:
•
Taxable temporary differences arising on the initial recognition of goodwill.,
•
Temporary differences on the initial recognition of assets or liabilities in a transaction that is not:
1. A business combination.
2. And not affects neither accounting nor taxable profit or loss.
Temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that
the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not
reverse in the foreseeable future.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences
to the extent that it is probable that future taxable profits will be available against which they can be used. Future
taxable profits are determined based on business plans for individual subsidiaries in the Group. deferred tax assets
are reassessed at each reporting date, and recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences.
The measurement of deferred tax 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 only if certain criteria are met.
H. Inventories
Inventories are valued at cost or net realisable value whichever is lower. Cost is determined by the weighted average
method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs
and an appropriate share of production overheads (based on normal operating capacity) but excludes borrowing
costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses.
I. Property, plant and equipment
1. Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated
impairment losses.
If significant parts of an itemof property, plant and equipment have different useful lives, then they are accounted for
as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an itemof property, plant and equipment is recognised in profit or loss.
The modified cost model was adopted which the cost and accumulated depreciation for some categories of fixed
assets (Machinery and equipment, Vehicles, Furniture and office equipment, Tools and supplies) are modified us-
ing modification factors stated in annex (A) of EAS no. (13). The increase of net fixed assets which are qualified to
modification, were recognized in other comprehensive income items and was presented as a separate item in equity
under the name of «modification surplus of fixed assets”. The realized portion of modification surplus of fixed assets
is transferred to retained earnings or losses in case of disposal or abandonment of the asset which qualified for
modification or usage (depreciation difference resulting from the adoption of the special accounting treatment) , as
described in details in note no.(7).
2. Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the
expenditure will flow to the Group.
100 • 2017 ANNUAL REPORT
2017 ANNUAL REPORT • 101
GB Auto (S.A.E.)
Notes to the consolidated financial statements for the financial year ended December 31, 2017
(In the notes all amounts are shown in Thousand Egyptian Pounds unless otherwise stated)