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Notes to the Financial Statements (cont’d)
For the financial year ended 31 December 2011
2. Summary of significant accounting policies (cont’d)
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2.33 Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the
Group.
Contingent liabilities and assets are not recognised in the statements of financial position of the Group.
3. Significant accounting judgments and estimates
The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at
the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require
a material adjustment to the carrying amount of the asset or liability affected in the future.
3.1 Judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from
those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
(a) Impairment of investment securities
The Group and the Company review its equity investments classified as available-for-sale investments at each
reporting date to assess whether they are impaired. The Group and the Company also record impairment charges
on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value
below their cost.
The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Group
and the Company evaluate, among other factors, historical share price movements and the duration and extent to
which the fair value of an investment is less than its cost. During the year, the Group and the Company impaired
quoted equity instruments with “significant” decline in fair value greater than 30%, and “prolonged” period as
greater than 12 months or more.
For the financial year ended 31 December 2011, the amount of impairment loss recognised in profit or loss for
available-for-sale financial assets was RM16,631,000 (2010: RM472,000).
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting 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:
(a) Depreciation of plant and machinery
The cost of plant and machinery for tin smelting and refining is depreciated on a straight-line basis over the assets’
useful lives. Management estimates the useful lives of these plant and machinery to be within 10 to 40 years. These
are common life expectancies applied in such industry. Changes in the expected level of usage could impact the
economic useful lives and the residual values of these assets, therefore future depreciation charge could be revised.
In the tin mining subsidiaries, plant and equipment used in mining are depreciated using the unit-of-production
method based on economically recoverable ore reserves and resources over the estimated useful lives of the assets.
Changes in estimated economically recoverable ore reserves and resources and useful lives of plant and equipment
are accounted for on a prospective basis from the beginning of the year in which the changes arise. Earthmoving
vehicles are depreciated based on hour worked basis over the estimated useful lives of each asset. Changes in
the estimated economically recoverable ore reserves and resources and expected level of usage could impact the
economic useful lives and the residual values of these assets, therefore future depreciation charge could be revised.
The carrying amount at the reporting date for property, plant and equipment is disclosed in Note 15.
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