Untitled - Swissco Holdings Limited

NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2005
3. Effects on Financial Statements on Adoption of New or Revised FRS (continued)
(a) FRS 39 (revised 2004) Financial Instruments: Recognition and Measurement and FRS 32
(revised 2004) Financial Instruments: Disclosure and Presentation (continued)
(ii)
Previously, the Group’s trade and other payables and bank borrowings were stated at
cost. Bank borrowings were stated at the proceeds received and transaction costs on
borrowings were classified as deferred charges and amortised on a straight-line basis
over the period of the borrowings. These financial liabilities are not held for trading
and have not been designated as fair value through profit or loss at inception on
adoption of FRS 39 (revised 2004). In accordance with FRS 39 (revised 2004), they are
initially recognised at fair value less transaction costs and subsequently accounted
for at amortised cost using the effective interest method (note 2(j) and note 2(k)).
This change did not materially affect the financial statements for the year ended
31 December 2005.
(b)
FRS 102 Share-based Payments
On adoption of FRS 102, an expense is recognised in the income statement for share
options issued with a corresponding increase in the share option reserve (Note 2(p)(3)).
The Group recognised a share option expense of $30,000 in the income statement with a
corresponding increase in the share option reserve in the balance sheet for the financial
year ended 31 December 2005.
4. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under
the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions
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)
Estimated impairment of goodwill included in investments in associated companies
The Group tests whether goodwill has suffered any impairment, in accordance with the
accounting policy stated in Note 2(g). The recoverable amounts of cash-generating units
have been determined based on value-in-use calculations. These calculations use cash flow
projections based on financial budgets approved by management of the associated company
covering a five-year period.
The key assumptions used for value-in-use calculations for the five-year cash flow projection
are as follows:
Growth rate 10%
Discount rate 5%
If the management’s estimated growth rate had been lower by 10% and the discount rate
applied to discounted cash flows had been raised by 1% from management estimation, the
carrying amount of the goodwill will still not impair.
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