notes to the financial statements - Far East Orchard Limited

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2008
3. Critical accounting estimates, assumptions and judgements (continued)
(a) Uncertain tax positions (continued)
Significant judgement is required in determining the capital allowances and deductibility of certain expenses
during the estimation of the provision for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company
recognise liabilities for anticipated tax audit issues based on estimates of whether the additional tax will be due.
Where the final outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the income tax and deferred income tax provisions in the period in which such determination is
made.
(b) Valuation of investment properties
The Group’s investment properties, with a carrying amount of $168,957,000 (Note 21) as at 31 December 2008,
are stated at their estimated fair values which are determined annually by independent professional valuers.
These estimated fair values may differ from the prices at which the Group’s investment properties could be sold
at a particular time, since actual selling prices are negotiated between willing buyers and sellers. Also, certain
estimates require an assessment of uncontrollable factors, such as overall market conditions. As a result, actual
results of operations and realisation of these investment properties could differ from the estimates set forth in these
financial statements, and the difference could be significant.
If the actual fair values of investment properties differ by 10% from the estimates used for these financial statements,
the investment properties as at 31 December 2008 would be reduced or increased by $16,896,000 and the profit
before income tax for the year then ended would be increased or reduced by the same amount.
4. Sales, other income and other gains/(losses) - net
The Group
2008 2007
$’000 $’000
Hospitality revenue 55,305 48,580
Rental income 10,844 9,697
Dividend income 676 784
Management fees charged to a joint venture 383 -
Sale of financial assets at fair value through profit or loss - 212
Sale of development properties 1,763 25,987
Total 68,971 85,260
Hotel service fees and other related income 6,915 5,902
Interest income - fixed deposit 104 152
Marketing, accounting and administrative fees 21 52
Other miscellaneous income 474 400
Total other income 7,514 6,506
ORCHARD PARADE HOLDINGS LIMITED ANNUAL REPORT 2008 43