58
FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
(cont’d)
3.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Critical Accounting Estimates And Judgements (Cont’d)
(iv) 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 year in which such determination
is made.
(v)
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 to which the asset is allocated, the management 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.
(vi) 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.
(vii) Classification of Leasehold Land
The classification of leasehold land as a finance lease or an operating lease requires the use of judgement
in determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact
that there will be no transfer of ownership by the end of the lease term and that the lease term does
not constitute the major part of the indefinite economic life of the land, management considered that
the present value of the minimum lease payments approximated to the fair value of the land at the
inception of the lease. Accordingly, management judged that the Group has acquired substantially all
the risks and rewards incidental to the ownership of the land through a finance lease.
(viii) Fair Value Estimates for Certain Financial Assets and Liabilities
The Group carries certain financial assets and liabilities at fair value, which requires extensive use of
accounting estimates and judgement. While significant components of fair value measurement were
determined using verifiable objective evidence, the amount of changes in fair value would differ if the
Group uses different valuation methodologies. Any changes in fair value of these assets and liabilities
would affect profit and/or equity.
(ix) Write-down of Inventories
Reviews are made periodically by management on damaged, obsolete and slow-moving inventories.
These reviews require judgement and estimates. Possible changes in these estimates could result in
revisions to the valuation of inventories.
