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Notes to the Consolidated Financial Statements

31st March 2018

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.18 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the consolidated income statement over the
period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to
the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee
is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity
services and amortised over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the end of the reporting period.

2.19 Borrowing costs

All borrowing costs are recognised in the consolidated income statement in the period in which
they are incurred.

2.20 Current and deferred income tax

The tax expense for the year comprises current and deferred tax and is recognised in the
consolidated income statement, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case the tax is also recognised in other
comprehensive income or directly in equity, respectively.

(a) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the Company and
its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.

74 ALCO HOLDINGS LIMITED ANNUAL REPORT 2018