ANNUAL REPORT 2015
57
Notes to the Combined
Financial Statements
As at 30 September 2015
3
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2 to the financial statements, management is required
to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
Apart from those involving estimates, management is of the opinion that any instance of application of judgement is not expected to have
a significant effect on the amounts recognised in the financial statements.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of each financial year, that have
a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below:
(a)
Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight line basis over their estimated useful lives. Management estimates
the useful lives to be 44 to 50 years for leasehold industrial buildings and 3 to 10 years for others. Changes in the expected
level of usage and technological developments could impact the economic useful lives and the residual values of these assets;
therefore future depreciation charges could be revised. The carrying amount of the property, plant and equipment are set out in
Note 13 to the financial statements.
(b)
Impairment of investments in associates and property, plant and equipment
Investments in associates and property, plant and equipment are stated at cost less any impairment loss. The Group evaluates,
among other factors, the market and economic environment in which the investee companies operates and the financial
performance of the investee companies to determine whether there are indications of impairment loss and if so, whether the
estimated recoverable amount exceeds cost.
The carrying value of the investments in associates and property, plant and equipment are reviewed for impairment in
accordance with FRS 36
Impairment of Assets
. Whenever the investments may be impaired, the recoverable amount of the
investments is measured. This requires an estimation of their value in use. The value in use calculation requires the Group to
estimate future cash flows expected to arise and a suitable discount rate in order to calculate the present value of the future
cash flows. The carrying amount of the investments in associates and property, plant and equipment are set out in Notes 10
and 13 to the financial statements respectively.
(c)
Impairment of trade and other receivables
The Group assesses at the end of each financial year whether there is any objective evidence that a financial asset is impaired.
To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of
insolvency or significant financial difficulties of the debtor and default of significant delay in payments. Where there is objective
evidence of impairment, the amount and timing of future cash flows are estimates based on historical loss experience for assets
with similar credit risk characteristics. The carrying amount of the trade and other receivables are set out in Note 7 to the
financial statements.
(d)
Income tax
Significant assumptions are required 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 expected tax issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income
tax and deferred tax provisions in the period in which such determination is made. The carrying amounts of income tax payable
and deferred tax liability as at the end of each financial year is set out in the statements of financial position and Note 27 to the
financial statements respectively.
