I
annual report 2014
Notes to the Financial Statements
31 December 2014 (Cont’d)
80
6.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)
6.3 Key sources of estimation uncertainty (Cont’d)
(b)
Depreciation of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over the assets’ useful
lives. Management estimates that the useful lives of these property, plant and equipment as disclosed
in Note 4.3 to the financial statements. The useful lives are based on the historical experience of the
Group with similar assets and taking into account anticipated technological changes. The depreciation
charge for future period is adjusted if there are significant changes from previous estimates.
(c)
Income taxes
The Group has exposures to income taxes in PRC. Significant judgement is required in determining the
provision for income taxes. There are also claims 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 would be due. When the final tax outcome of these matters is
different from the amounts that were initially recognised, such differences would impact the income tax
and deferred tax provisions in the year in which such determination is made.
(d)
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 value
of receivables.
(e)
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 recoverable. 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.
(f)
Fair values of borrowings
The fair values of borrowings are estimated by discounting future contractual cash flows at the current
market interest rates available to the Group for similar financial instruments. It is assumed that the
effective interest rates approximate the current market interest rates available to the Group based on
its size and its business risk. Sensitivity analysis of the effects of interest rate risk has been disclosed in
Note 26 to the financial statements.
(g)
Impairment of investments in subsidiaries
Management reviews the investments in subsidiaries for impairment when there is an indication of
impairment.
The recoverable amounts of the investments in subsidiaries are assessed by reference to the higher of
its fair value less cost to sell and its value in use of the respective subsidiaries.
Estimating a value in use requires management to make an estimate of the expected future cash flows to
be derived from continuing use of the asset and from its ultimate disposal, expectations about possible
variations in the amount, timing of those cash flows, the time value of money, price for inherent uncertainty
risk and other relevant factors.
