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Notes to the Consolidated Financial Statements

31st March 2017

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.20 Current and deferred income tax (Continued)

(b) Deferred income tax

Inside basis differences

Deferred income tax is recognised, 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. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill, the deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date 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 only to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.

Outside basis differences

Deferred income tax liabilities are provided on taxable temporary differences arising from
investments in subsidiaries, except for deferred income tax liability where the timing of
the reversal of the temporary difference is controlled by the Group and it is probable that
the temporary difference will not reverse in the foreseeable future. Only where there is an
agreement in place that gives the Group the ability to control the reversal of the temporary
difference in the foreseeable future, deferred tax liability in relation to taxable temporary
differences arising from the associate’s undistributed profits is not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from
investments in subsidiaries only to the extent that it is probable the temporary difference will
reverse in the future and there is sufficient taxable profit available against which the temporary
difference can be utilised.

(c) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right
to offset current tax assets against current tax liabilities and when the deferred income taxes
assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on
a net basis.

66 ALCO HOLDINGS LIMITED ANNUAL REPORT 2017