Page 132 - Urban Renewal Authority 2023-24 Annual Report

NOTES TO THE FINANCIAL STATEMENTS

(expressed in Hong Kong Dollars)

2. Material accounting policies (Continued)

(n) Provisions, contingencies and onerous contracts (Continued)
(i) Provisions and contingencies (Continued)
A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly
within the control of the Group.

A contingent asset is not recognised but is disclosed in the notes to the consolidated financial
statements when an inflow of economic benefits is probable. When inflow is virtually certain, an
asset is recognised.

A contingent liability is a possible obligation that arises from past events and whose existence
will only be confirmed by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Group. It can also be a present obligation arising
from past events that is not recognised because it is not probable that an outflow of economic
benefits will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to the consolidated financial
statements. When a change in the probability of an outflow of economic benefits occurs so that
the outflow is probable, it will then be recognised as a provision.

(ii) Onerous contracts
An onerous contract exists when the Group has a contract under which the unavoidable costs of
meeting the obligations under the contract exceed the economic benefits expected to be
received from the contract. Provisions for onerous contracts are measured at the present value
of the lower of the expected cost of terminating the contract and the net cost of fulfilling the
contract. The cost of fulfilling the contract includes both the incremental costs of fulfilling that
contract and an allocation of other costs that relate directly to fulfilling that contract.

(o) Current and deferred income tax
Income tax expenses comprise current tax and movements in deferred tax assets and liabilities.
Current tax is the expected tax payable on the taxable profit for the year. Taxable profit differs from
profit as reported in profit or loss because it excludes items of income or expenses that are taxable or
deductible in other years and it further excludes profit or loss items that are never taxable or
deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantially enacted at the end of the reporting period.

Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. Deferred income tax is determined using tax rates and laws that have been enacted or
substantively enacted at the end of the reporting period and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable income
will be available against which the temporary differences can be utilised.

The Group recognised deferred income tax assets and deferred income tax liabilities separately in
relation to its lease liabilities and right-of-use assets.

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