Annual report 2014
91
NOTES TO THE FINANCIAL STATEMENTS
31 December 2014 (continued)
6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
6.1 Changes in estimates
Estimates are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The Directors are of the opinion that there are no significant changes in estimates at the end of the
reporting period.
6.2 Critical judgements made in applying accounting policies
The following are judgements made by management in the process of applying the accounting
policies of the Group that have the most significant effect on the amounts recognised in the financial
statements.
(a) Classification of leasehold land
The Group has assessed and classified land use rights of the Group as finance leases based on
the extent to which risks and rewards incidental to ownership of the land resides with the Group
arising from the lease term. Consequently, the Group has classified the unamortised upfront
payment for land use rights as finance leases in accordance with MFRS 117
Leases
.
(b) Classification of non-current bank borrowings
Term loan agreements entered into by the Group include repayment on demand clauses
at the discretion of financial institutions. The Group believes that in the absence of a default
being committed by the Group, these financial institutions are not entitled to exercise its right
to demand for repayment. Accordingly, the carrying amount of the term loans have been
classified between current and non-current liabilities based on their repayment period.
(c) Operating lease commitments - the Group as lessor
The Group has entered into leases on its EDC equipment. The Group has determined that it
retains all the significant risks and rewards of ownership of the equipment which are leased out
as operating leases due to the lease term is not for the major part of the economic life of the
asset.
(d) Contingent liabilities
The determination of treatment of contingent liabilities is based on management’s view of the
expected outcome of the contingencies for matters in the ordinary course of the business.
(e) Contingent liabilities on corporate guarantees
The Directors are of the view that the chances of the financial institution to call upon the
corporate guarantees are remote.
(f) Impairment of available-for-sale financial assets
The Group reviews its available-for-sale financial assets at the end of each reporting period to
assess whether they are impaired. The Group also records impairment loss on available-for-sale
equity investments when there has been a significant or prolonged decline in the fair value
below their cost. The determination of what is “significant” or “prolonged” requires judgement.
In making this judgement, the Group evaluates, among other factors, historical share price
movements and the duration and extent to which the fair value of an investment is less than its
cost.
