Annual Report 2006 - Venture Corporation Limited

notes to financial statements
December 31, 2006
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Cont’d)
Management is of the opinion that there are no critical judgements involved that have a significant effect on the
amounts recognised in the financial statements apart from those involving estimates, where are dealt with below.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of 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 year, are discussed below.
Allowance for inventories
In determining the net realisable value of the group inventories, an estimation of the recoverable amount of inventories
on hand is performed based on the most reliable evidence available at the time the estimates are made. This represents
the value of the inventories which are expected to realise as estimated by management. These estimates take into
consideration the fluctuations of price or cost, or any inventories on hand that may not be realised, directly relating to
events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the
period.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units
(“CGU”) to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future
cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present
value. No impairment loss was recognised during the financial year.
Recoverability of intangible assets
Management has considered the recoverability of the group’s intangible assets, including customer relationships
acquired in a business combination during the year. The valuation of the customer relationships takes into consideration
projected future revenue stream of customers with contracts as at the date of acquisition, with expected renewals, and
applying suitable churn rates and discount rates in order to calculate the present value of cashflows. The customer
relationships are amortised over the estimated remaining useful life of 10 years which reflect the pattern in which the
asset’s future economic benefits are expected to be consumed. Based on management’s assessment of the intangible
assets, no indication of impairment was noted.
Share-based payments
Determining the fair value of share-based payments requires estimations using valuation models and inputs that attempt
to capture the intrinsic value of such options. Key inputs into the valuation models in determining the fair value of
share-based payments are disclosed in Note 22.
Impairment of available-for-sale investments
At each balance sheet date, management will assess whether there is any objective evidence that available-for-sale
investments are impaired, as evidenced by the occurrence of one or more loss events. Based on the management’s best
estimate of the future cash flow of each investment, and taking into consideration all credit exposure, the impairment
loss for the financial year amounting to $500,000 (2005: $9,997,000) as recognised in the profit and loss statement
(Note 28) is considered adequate.
52 venture corporation limited