137 ANNUAL REPORT 2023 NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2023 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 2.17 Provisions (cont’d) Warranty provisions Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually. Onerous contracts If the Group has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision. However, before a separate provision for an onerous contract is established, the Group recognises any impairment loss that has occurred on assets dedicated to that contract. An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities). 2.18 Employee benefits (a) Defined contribution plans As required by law, the Group’s companies in Singapore, Malaysia, India, Australia and New Zealand make contributions to their respective countries’ state pension schemes, being the Central Provident Fund (“CPF”) in Singapore, the Employees Provident Fund (“EPF”) in Malaysia and India, the Superannuation in Australia and the KiwiSaver in New Zealand. These state pension schemes are defined contribution plans that serve as the national retirement benefits plan for the employees of the Group working in those countries. As required by law, the Group’s companies in the United Kingdom operate a defined contribution pension scheme. Assets of the scheme are held separately from those of the companies in the United Kingdom in an independently administered fund. The contributions that are made towards the above-mentioned contribution pension schemes are recognised as compensation expenses in the same period as the employment that gives rise to the contributions. (b) Employee leave entitlement Employee entitlements to annual leave are recognised as a liability when they are accrued to the employees. The estimated liability for leave is recognised for services rendered by employees up to the balance sheet date.
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