Change - S P Setia Berhad

83
S P Setia Berhad Group
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2008
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(d)
Significant accounting judgements and estimates (cont’d)
(i)
Critical judgement made in applying accounting policies (cont’d)
Classification between investment properties and owner-occupied properties
The Group determines whether a property qualifies as an investment property, and has developed certain criteria based
on FRS 140 in making that judgement.
In making its judgement, the Group considers whether a property generates cash flows largely independently of other
assets held by the Group. Owner-occupied properties generate cash flows that are attributable not only to the property,
but also to other assets used in the production or supply process.
Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that is
held for use in the production or supply of goods and services or for administrative purposes.
If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the
portions separately.
If the portions could not be sold separately, the property is accounted for as an investment property only if an insignificant
portion is held for use in the production and supply of goods and services or for administrative purposes.
Judgement is made on an individual property basis to determine whether ancillary services are so significant that a
property does not qualify as investment property.
Revenue recognition of property development activities and construction contracts
The Group recognises property development activities and construction contracts based on the percentage of
completion method. The stage of completion of the property development activities and construction contracts is
measured in accordance with the accounting policies set out in (n) and (o) below.
Significant judgement is required in determining the percentage of completion, the extent of the development project and
contract costs incurred, the estimated total revenue and total costs and the recoverability of the development project
and contract. In making these judgements, management relies on past experience and the work of specialists.
(ii)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources associated with 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 period are discussed below:
Depreciation of property, plant and equipment and investment properties
Property, plant and equipment and investment properties are depreciated on a straight-line basis to write off their costs
to their residual values over their estimated useful lives. Management estimates the useful lives of these assets to be
within 3 to 50 years for property, plant and equipment and 50 to 96 years for investment properties.
The carrying amounts of the Group’s and Company’s property, plant and equipment as at 31 October 2008 were
RM80,226,000 and RM200,000 (2007 : RM63,185,000 and RM278,000), respectively.
The carrying amounts of the Group’s and Company’s investment properties as at 31 October 2008 were RM167,931,000
and RM1,157,000 (2007 : RM95,032,000 and RM1,552,000), respectively.
Changes in the expected level of usage, physical wear and tear and technological development could impact the
economic useful lives and residual values of these assets, and therefore future depreciation charges could be revised.