Change - S P Setia Berhad

84
Annual report 2008
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)
(ii)
Key sources of estimation uncertainty (cont’d)
Provision for stock obsolescence and inventories write down
Inventories are stated at the lower of cost and net realisable value. The Group estimates the net realisable value of
inventories based on an assessment of committed sales prices.
Inventories are reviewed on a regular basis and the Group will make a provision for excess or obsolete inventories based
primarily on historical trends and management estimates of expected and future product demand and related pricing.
The carrying amounts of the Group’s inventories as at 31 October 2008 were RM29,630,000 (2007 : RM19,320,000).
Demand levels, technological advances and pricing competition could change from time to time. If such factors result
in an adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories and
additional provisions for slow moving inventories may be required.
Allowance for doubtful debts
The collectibility of receivables is assessed on an ongoing basis. An allowance for doubtful debts is made for any
receivables considered to be doubtful of collection.
The carrying amounts of the Group’s and Company’s trade and other receivables as at 31 October 2008 were
RM313,403,000 and RM1,600,977,000 (2007 : RM331,690,000 and RM1,312,588,000), respectively.
The allowance for doubtful debts is made based on a review of all outstanding amounts as at the balance sheet date.
A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the
creditworthiness and the past collection history of each customer. If the financial condition of customers of the Group were
to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Income taxes
Significant judgement is involved in determining the capital allowances and deductibility of certain expenses during the
estimation of the provision for income tax. There are certain transactions and computations for which the ultimate tax
determination is uncertain during the ordinary course of business.
The Group and the Company recognise liabilities for expected tax issues based on estimates of whether additional
taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially
recognised, such differences will impact the income tax and deferred tax provisions in the period in which such
determination is made.
The carrying amounts of the Group’s and the Company’s tax assets as at 31 October 2008 were RM37,969,000 and
RM10,862,000 (2007 : RM45,576,000 and RM10,962,000), respectively.
The carrying amounts of the Group’s tax liabilities as at 31 October 2008 were RM10,668,000 (2007 :
RM23,365,000).
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and unutilised tax losses to the extent that
it is probable that taxable profit will be available in future against which the deductible temporary differences and tax
losses 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.
The carrying amounts of the Group’s recognised and unrecognised deferred tax assets as at 31 October 2008 were
RM14,520,000 (2007 : RM21,926,000) and RM11,229,000 (2007 : RM11,555,000), respectively.