Annual Report 2011 - QuamIR

Notes to the Consolidated Financial StatementsFor the year ended 31 March 20114. Critical Accounting Judgments and Key Sources of EstimationUncertaintyIn the application of the Group’s accounting policies, which are described in note 3, management isrequired to make judgments, estimates and assumptions about the carrying amounts of assets andliabilities that are not readily apparent from other sources. The estimates and underlying assumptionsare based on historical experience and other factors that are considered to be relevant. Actual resultsmay differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimate is revised if the revision affects only thatperiod, or in the period of the revision and future periods if the revision affects both current and futureperiods.Critical judgments in applying accounting policiesThe following are the critical judgments, apart from those involving estimations (see below), thatmanagement has made in the process of applying the Group’s accounting policies and that have themost significant effect on the amounts recognized in the consolidated financial statements.Renewal of exploration and mining right permitsThe Group owns certain exploration permits and a mining right permit with initial licence period of3 years at date of issue which will be expired in year 2011 and 2012, the renewal is subject to theapproval by the relevant PRC authorities. In the opinion of the directors, after obtaining opinion fromits legal counsel, the Group will be entitled to renew its exploration and mining right permits upon theexpiration at minimal costs.If the Group is not able to obtain approval for renewal upon their expiry, the carrying amount ofthe exploration and evaluation assets and mining rights of approximately HK$1,083,902,000 (2010:HK$1,021,072,000) and HK$144,211,000 (2010: Nil) respectively might be significant reduced and theGroup will increase amortization charges of mining rights and depreciation charges where useful livesare less than previously estimated lives, or it will write off or write down the carrying amounts of theexploration and evaluation assets and the mining rights, which significant impairment loss might berecognized.Carrying value of mining rightsThe Group tests whether the mining rights have been impaired due to events or changes in circumstancesindicate that the carrying amount of the mining rights exceeds its recoverable amount, in accordancewith accounting policies stated in note 3 to the consolidated financial statements.Annual Report 201171