Annual Report - QuamIR

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Notes to the Consolidated Financial Statements (Continued) 4 Critical accounting estimates and judgements (Continued) (c) Estimated impairment of goodwill The Group tests annually whether goodwill is subject to any impairment losses, in accordance with the accounting policy. The recoverable amounts of cash-generating units with goodwill being allocated have been determined based on the higher of fair value less cost to sell and value-in-use calculations. (d) Estimated impairment of plant and equipment Plant and equipment are reviewed by management for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is the higher of fair value less costs to sell and value in use of the plant and equipment. Management makes judgements on whether such events or changes in circumstances have occurred, and makes estimates in determining the recoverable amount. In the situation where the value in use of plant and equipment cannot be assessed due to the uncertainties of the operation model in the future, management has assessed the respective recoverable amount solely based on the fair value less costs to sell. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be recovered. 4 (c) (d) If the recoverable amount of the plant and equipment had been 10% higher or lower than management’s estimates, the profit for the year arising from the Group’s plant and equipment would have been increased by HK$54.7 million or remained unchanged (2010: the loss for the year arising from the Group’s plant and equipment would have been decreased by HK$59.5 million or remained unchanged). (e) Income taxes The Group is subject to income taxes in the Mainland China. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determined is uncertain during the ordinary course of business. The Group recognises liabilities for potential tax exposures 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 recorded, such differences will affect the income tax and deferred tax provision in the period in which such determination is made. 10% 54,700,000 59,500,000 (e) 120 HKC (Holdings) Limited • <strong>Annual</strong> <strong>Report</strong> 2011
Notes to the Consolidated Financial Statements (Continued) 4 Critical accounting estimates and judgements (Continued) (f) Fair value of derivatives, financial assets/ liabilities at fair value through profit or loss and other financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The Group uses discounted cash flow analysis for various available-for-sale financial assets that were not traded in active markets. (g) Construction work (i) Revenue recognition The Group uses the percentage-of-completion method in accounting for its fixed-price contracts to deliver construction services. The use of the percentage-ofcompletion method requires the Group to estimate the services performed to date as a proportion of the total services to be performed. 4 (f) (g) (i) (ii) Estimate over the cost provision (ii) A considerable amount of judgement is required in estimating the cost provision which may have impact on profit or loss. During the year, certain cost provision has been reversed and reflected in other income. (h) Determination of fair value of share-based compensation The Group uses the Binomial Model to determine the fair value of share options issued during the year. Under this model, the value of the share options is subject to a number of assumptions such as the risk-free interest rate, the expected life of the options and historical volatility based on annualised volatility of the closing price of the share. Therefore the value may be subjective and would change should any of the assumptions change. (h) • 121
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HKC (HOLDINGS) LIMITED (incorporat
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Contents 2 Corporate Information
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Corporate Information (Continued)
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Chairman’s Statement (Continued)
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Chairman’s Statement (Continued)
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Management Discussion and Analysis
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Corporate Governance Report (Contin
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Directors and Senior Management (Co
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Report of the Directors (Continued)
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Notes to the Consolidated Financial
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Principal Subsidiaries, Associated
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Five-Year Financial Summary 2011 2
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Schedule of Principal Properties (C
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HKC (HOLDINGS) LIMITED 9/F., Tower
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Annual Report - QuamIR

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