112 C I M F I N A N C I A L S E R V I C E S L T D 2. ACCOUNTING POLICIES (CONT’D) 2.8 Significant accounting policies (Cont’d) (k) Current and deferred income tax (Cont’d) (iii) Corporate Social Responsible (CSR) Tax • Entities in the Group are required to set up a Corporate Social Responsibility (CSR) Fund of 2% of its taxable profit of the preceding year. If the amount spent on CSR activities is less than the amount provided under the Fund, the difference is payable to the tax authorities as a tax (“CSR tax”). The CSR tax is included in income tax expense and the net amount of CSR fund payable is included in other liabilities in the statements of financial position. (iv) Value Added Tax Revenue, expenses and assets are recognized net of the amount of value added tax except: • Where the value added tax incurred on a purchase of asset or service is not recoverable from the taxation authority, in which case, the value added tax is recognized as part of the cost of acquisition of the asset of as part of the expense item as applicable. • Receivables and payables that are stated with the amount of value added tax included. • The net amount of value added taxes recoverable from or payable to the taxation authority is included as part of receivable or payables in the statement of financial position. (l) Impairment of non-financial assets The carrying amounts of assets are assessed at each reporting date to determine whether there is any indication of impairment. Whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, asset is subject to impairment. The recoverable amount of the asset is estimated, being the higher of the asset’s net selling price and its value in use, to determine the extent of the impairment loss, if any, and the carrying amount of the asset is reduced to its recoverable amount. The impairment loss is recognised in profit or loss for the amount by which the asset’s carrying amount exceeds its recoverable amount. Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (m) Post-employment benefits (i) State plan and defined contribution pension plans A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Contributions to the National Pension Scheme and the Group’s defined contribution pension plan are expensed to profit or loss in the period in which they fall due. (ii) Defined benefit pension plans and other retirement benefits The following pension benefits are also in place: • The Group contributes to a pension plan in respect of some employees who have a No Worse Off Guarantee (NWOG) that their benefits would not be worse than what they would have earned under a previous defined benefit plan. • The Group recognises a net liability for employees whose benefits under the current pension plan are not expected to fully offset the retirement gratuity obligations under the Workers Rights Act 2019. • The Group recognises a liability in respect of employees who are not members of any supplementary pension plan and are entitled to retirement gratuities under the Workers Rights Act 2019. • The Group recognises a liability in respect of pensions paid out of the Group’s cash flow for some former employees. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Explanatory Notes 30 SEPTEMBER 2021 E x p l a n a t o r y N o t e s
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