EXCEL FORCE MSC BERHAD Annual Report 2018

63 ANNUAL REPORT 2018 2. Basis of Preparation (cont’d) (c) Significant accounting judgments, estimates and assumptions (cont’d) Inventories valuation Inventories are measured at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories based on an assessment of expected sales prices. Demand levels and pricing competition could change from time to time. If such factors result in an adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories. Details of the inventories are disclosed in Note 10. Determination of transactions prices The Group is required to determine the transaction price in respect of each of its contracts with customers. In making such judgment, the Group assesses the impact of any variable consideration in the contract, due to discounts or penalties, the existence of any significant financing component and any non-cash consideration in the contract. There is no estimation required in determining the transaction price, as revenue from sale of goods or services are based on invoiced values. Discounts are not considered as they are only given in rare circumstances. Impairment of trade receivables The Group review the recoverability of its receivables at each reporting date to assess whether an impairment loss should be recognised. The impairment provisions for receivables are based on assumptions about risk of default and expected loss rates. The customer’s credit worthiness is evaluated by reviewing, amongst others, the Group’s historical collection experience. The carrying amounts at the reporting date for trade receivables are disclosed in Note 11. Income taxes Judgement is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these tax matters is different from the amounts that were initially recognised, such differences will impact the income tax and/or deferred tax provisions in the period in which such determination is made. As at 31 December 2018, the Group and the Company have tax recoverable of RM3,710 (2017: RM400) and RM3,660 (2017: RMNil) and tax payable of RMNil (2017: RM249,881) and RMNil (2017: RM249,881) respectively. Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the Note 31(c) regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the end of the reporting period. Notes To The Financial Statements 31 December 2018 (cont’d)