Rex International Holding Limited 193 NOTES TO THE FINANCIAL STATEMENTS 2 MATERIAL ACCOUNTING POLICY INFORMATION (CONTINUED) 2.14 Finance income and finance expense The Group’s finance income and finance expense include: • interest income; • interest expense; • the net gain or loss on financial assets at FVTPL; • bank charges, which are inclusive of cash management and processing fees; • the unwinding of discount on decommissioning receivables and provision; and • foreign currency gain or loss on financial assets and financial liabilities. Interest income or expense is recognised using the effective interest method. The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to: • the gross carrying amount of the financial asset; or • the amortised cost of the financial liability. In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer creditimpaired, then the calculation of interest income reverts to the gross basis. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. 2.15 Tax Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. Current tax also includes any tax arising from dividends. The Group is subjected to the Norwegian oil taxation regime. Companies subject to special tax may, without time limitations, carry forward corporate losses. Special petroleum tax losses are reimbursed by the state in the following year as part of the ordinary tax assessment. The tax position can be transferred on realisation of the Company or merger. The calculated tax receivables are based on judgements and understanding by the Group regarding items allowable for tax deduction, and the view may differ from the Norwegian tax authorities’ practice in the final tax settlement.
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