15 URBAN DEVELOPMENT CORPORATION Notes to the Non-Consolidated Financial Statements (Continued) Year ended March 31, 2010 2.
Statement of compliance, basis of preparation and significant accounting policies (contâ€™d) (j)
Income taxes (contâ€™d): A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Inventory of land and development projects: Inventory of land and development, includes projects, unsold apartments, and is stated at the lower of cost and net realisable value. Cost comprises land acquisition, infrastructure works, construction costs, direct administrative expenses and interest charges during the interval between acquisition and construction. These costs are treated as inventory until disposal. The cost of land sales is determined based on the land area sold to the total land area available for sale. Net realisable value represents the estimated selling price less all the estimated costs to completion and costs to be incurred in marketing, selling and distribution. Net realisable value is obtained from valuations conducted by qualified internal valuators based on sample valuations supplied by independent valuators or using market values arising from recent real estate sales.
Accounts receivable: Trade and other receivables are stated at amortised cost less impairment losses.
Cash and cash equivalents: Cash and cash equivalents comprise cash and bank balances, short-term deposits and other monetary investments with maturities ranging between one and three months from the dates of acquisition.
Accounts payable and other current liabilities: Trade and other accounts payable are stated at amortised cost. A provision is recognised when the corporation or its subsidiaries have a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, a provision is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation.
Related parties: A party is related to the corporation, if: (i)
directly, or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with, the corporation (this includes parents, subsidiaries and fellow subsidiaries); has an interest in the corporation that gives it significant influence over the corporation; or has joint control over the corporation;
the party is an associate of the corporation;
the party is a joint venture in which the corporation is a venturer;