ANNUAL REPORT 2012 - Wawasan TKH Holdings Berhad

WAWASAN TKH HOLDINGS BERHAD (540218-A)
ANNUAL REPORT 2012
059
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2012 (cont’d)
6. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)
6.2 Critical judgements made in applying accounting policies (cont’d)
(b) Classification of non-current bank borrowings
Term loan agreements entered into by the Group include repayment on demand clauses at the
discretion of financial institutions. The Group believes that in the absence of a default being
committed by the Group, these financial institutions are not entitled to exercise its right to demand
for repayment. Accordingly, the carrying amount of the term loans have been classified between
current and non-current liabilities based on their repayment period.
(c) Contingent liabilities
The determination of treatment of contingent liabilities is based on management’s view of the
expected outcome of the contingencies for matters arising in the ordinary course of the business.
(d) Contingent liabilities on corporate guarantees
The Directors are of the view that the chances of the financial institutions to call upon the corporate
guarantees are remote.
6.3 Key sources of estimation uncertainty
The following are key assumptions concerning the future and other key sources of estimation uncertaity at
the end of the reporting period that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
(a) Impairment of goodwill on consolidation
The Group determines whether goodwill on consolidation is impaired at least on an annual basis.
This requires an estimation of the value in use of the subsidiaries 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 subsidiaries and also to choose a suitable discount rate in order to calculate
the present value of those cash flows.
Value in use of mining unit is based on the key assumptions as stated in Note 8 to the financial
statements.
(b) Impairment of property, plant and equipment
The Group determines whether property, plant and equipment is impaired at the end of each
reporting period. If an indication of impairment exists, the recoverable amount is estimated.
Recoverable amount of an asset or cash generating unit (‘CGU’) is the higher of its fair value less
cost to sell and its value in use.
Estimating a value in use requires management to make an estimate of the expected future cash
flows to be derived from continuing use of the asset and from its ultimate disposal, expectations
about possible variations in the amount, timing of those cash flows, the time value of money, price
for inherent uncertainty risk and other relevant factors.
As at 31 December 2012, management assessed that the recoverable amounts of property, plant
and equipment of mining unit, based on value in use calculations, exceeded their carrying amounts
of RM5,970,000 and thus, no impairment is required.
Management also assessed that the recoverable amounts of land and buildings and plant and
machineries of the disposable foodwares unit, based on valuations performed by independent
professional valuers, exceeded their carrying amounts of RM77,843,000 and thus, no impairment
is required.
As for the Group’s other property, plant and equipment, the Directors are of the view that the
recoverable amounts of these assets are equal or higher than their carrying amounts as all these
assets are currently in use.