NOTES TO THE FINANCIAL STATEMENTS
For The Financial Period From 1 January 2014 To 31 March 2015 (Cont’d)
64
Annual Report 2015
4.
SIGNIFICANT ACCOUNTING POLICIES
4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated by the directors and management and
are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. The estimates and judgements
that affect the application of the Group’s accounting policies and disclosures, and have a
significant risk of causing a material adjustment to the carrying amounts of assets, liabilities,
income and expenses are discussed below:-
(a) Depreciation of Property, Plant and Equipment
The estimates for the residual values, useful lives and related depreciation charges for the
property, plant and equipment are based on commercial factors which could change
significantly as a result of technical innovations and competitors’ actions in response to
the market conditions. The Group anticipates that the residual values of its property, plant
and equipment will be insignificant. As a result, residual values are not being taken into
consideration for the computation of the depreciable amount. Changes in the expected
level of usage and technological development could impact the economic useful lives
and the residual values of these assets, therefore future depreciation charges could be
revised.
(b) Income Taxes
There are certain transactions and computations for which the ultimate tax determination
may be different from the initial estimate. The Group recognises tax liabilities based on its
understanding of the prevailing tax laws and estimates of whether such taxes will be due
in the ordinary course of business. Where the final outcome of these matters is different
from the amounts that were initially recognised, such difference will impact the income
tax and deferred tax provisions in the period in which such determination is made.
(c) Impairment of Non-Financial Assets
When the recoverable amount of an asset is determined based on the estimate of the
value-in-use of the cash-generating unit towhich the asset is allocated, themanagement is
required to make an estimate of the expected future cash flows from the cash-generating
unit and also to apply a suitable discount rate in order to determine the present value of
those cash flows.
(d) Amortisation of Development Expenditures
Changes in the expected level of usage and technological development could impact
the economic useful lives and therefore, future amortisation charges could be revised.
(e) Write-down of Inventories and Projects-in-progress
Reviews aremade periodically by management on damaged, obsolete and slow-moving
inventories and projects-in-progress. These reviews require judgement and estimates.
Possible changes in these estimates could result in revisions to the valuation of inventories
and projects-in-progress.
(f) Impairment of Trade and Other Receivables
An impairment loss is recognised when there is objective evidence that a financial asset
is impaired. Management specifically reviews its loans and receivables financial assets
and analyses historical bad debts, customer concentrations, customer creditworthiness,
current economic trends and changes in the customer payment terms when making a
judgement to evaluate the adequacy of the allowance for impairment losses. Where
there is objective evidence of impairment, the amount and timing of future cash flows are
estimated based on historical loss experience for assets with similar credit risk characteristics.
If the expectation is different from the estimation, such difference will impact the carrying
value of receivables.
