Download PDF - ChartNexus

092
SapuraCrest Petroleum Berhad
Annual Report 2010
noteS to the FinAnCiAl StAtementS
31 January 2010
2. SigniFiCAnt ACCounting PoliCieS (Cont’D)
2.4 Significant accounting estimates and judgements (cont’d)
(a) Critical judgement made in applying accounting policies (cont’d)
treatment of contract variation
Included in the financial statements are values of change orders that have not yet been approved which are at various
stages of process with the customers. These are included in Note 22. In this respect, the values are estimated based on the
management’s assessment and judgement as to the realisable amount.
The complexity of estimation process, risks and uncertainties will affect the amounts reported in the financial statements.
Depending on the outcome of negotiations with customers, this could result in reduction/increase in attributable profits/
losses.
The directors are of the opinion that the change orders recognised in the financial statements represents the best estimate,
with justifiable grounds for the claims submitted and favourable progress of discussions with the customers.
(b) Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, 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:
(i) impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the
value-in-use of the cash-generating units (“CGU”) to which goodwill is allocated. Estimating a value-in-use amount
requires management to make an estimate of the expected future cash flows from the CGU and also to choose a
suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of goodwill
as at 31 January 2010 were RM149,012,000 (2009: RM149,012,000). Further details are disclosed in Note 14.
(ii) Construction contracts
The Group recognises construction contracts revenue and expenses in the income statement by using the stage of
completion method. The stage of completion is determined by the proportion that construction contracts costs
incurred for work performed to date bear to the estimated total construction contracts costs.
Significant judgement is required in determining the stage of completion, the extent of the construction contracts
costs incurred, the estimated total construction contracts revenue and costs, as well as the recoverability of the
construction projects. In making the judgement, the Group evaluates based on past experience and by relying on the
work of specialists.
(iii) Depreciation of vessels, plant and equipment
The cost of vessels, plant and equipment is depreciated on a straight-line basis over the assets’ useful lives.
Management estimates the useful lives of these vessels, plant and equipment to be within 2 to 30 years. These are
common life expectancies applied in the industry. 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.
(iv) Deferred tax assets
Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences can be utilised. Significant
management judgement is required to determine the amount of deferred tax assets that can be recognised, based
upon the likely timing and level of future taxable profits together with future tax planning strategies.