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GHL Systems Berhad
(293040-D)
Annual report 2015
Notes to the Financial Statements
31 December 2015 (continued)
6.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
6.3 Key sources of estimation uncertainty (continued)
(d) Impairment of investments in subsidiaries
The Directors review the investment in subsidiaries for impairment when there is an indication
of impairment. The recoverable amounts of the investment in subsidiaries are assessed by
reference to the value in use of the subsidiaries.
The value in use is the net present value of the projected future cash flows derived from the
business operations of the respective subsidiaries discounted at an appropriate discount rate.
For such discounted cash flow method, it involves the use of estimated future results and a
set of assumptions to reflect its income and cash flows. Judgement had also been used to
determine the discount rate for the cash flows and the future growth of the businesses of the
subsidiaries.
(e) Impairment of receivables
The Group makes impairment of receivables based on an assessment of the recoverability of
receivables. Impairment is applied to receivables where events or changes in circumstances
indicate that the carrying amounts may not be recoverable. Management specifically
analyses historical bad debt, customer concentration, customer creditworthiness, current
economic trends and changes in customer payment terms when making a judgement to
evaluate the adequacy of impairment of receivables. Where expectations differ from the
original estimates, the differences would impact the carrying amount of receivables.
(f)
Deferred tax assets
Deferred taxassets are recognised for all unused tax losses andunabsorbedcapital allowances
to the extent that it is probable that future taxable profits would be available against which
the losses and capital allowances could be utilised. Significant management judgement is
required to determine the amount of deferred tax assets that could be recognised, based
on the likely timing and extent of future taxable profits together with future tax planning
strategies.
(g) Write down for obsolete or slow moving inventories
The Group writes down its obsolete or slow moving inventories based on assessment of
their estimated net selling price. Inventories are written down when events or changes in
circumstances indicate that the carrying amounts could not be recovered. Management
specifically analyses sales trend and current economic trends when making this judgement
to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where
expectations differ from the original estimates, the differences would impact the carrying
amount of inventories.