NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)  2.  Basis of preparation and accounting policies (cont’d) 2.3  Summary of significant accounting policies (cont’d) Current income tax Deferred tax Current income tax assets and liabilities for the current period are measured at the amount expected to be  recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount  are those that are enacted or substantively enacted, at the reporting date in the countries where the Group  operates and generates taxable income. Current income tax relating to items recognized directly in equity is recognized in equity and not in the  statement of profit or loss. Management periodically evaluates positions taken in the tax returns with respect  to situations in which applicable tax regulations are subject to interpretation and establishes provisions where  appropriate. Deferred tax is provided using the liability method on temporary differences between the tax bases of assets  and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except: Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax  credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that  taxable profit will be available against which the deductible temporary differences, and the carry forward of  unused tax credits and unused tax losses can be utilized, except: The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it  is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset  to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the  extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. l When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a  transaction that is not a business combination and, at the time of the transaction, affects neither the  accounting profit nor taxable profit or loss; l  In respect of taxable temporary differences associated with investments in subsidiaries, associates  and interests in joint ventures, when the timing of the reversal of the temporary differences can be  controlled and it is probable that the temporary differences will not reverse in the foreseeable future. l When the deferred tax asset relating to the deductible temporary difference arises from the initial  recognition of an asset or liability in a transaction that is not a business combination and, at the time of  the transaction, affects neither the accounting profit nor taxable profit or loss; l  In respect of deductible temporary differences associated with investments in subsidiaries, associates  and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable  that the temporary differences will reverse in the foreseeable future and taxable profit will be available  against which the temporary differences can be utilized. China Yuchai International Limited | Annual Report 2013 45 (h) Taxes