Annual Report 2011 - QuamIR

Notes to the Consolidated Financial StatementsFor the year ended 31 March 20114. Critical Accounting Judgments and Key Sources of EstimationUncertainty (continued)Critical judgments in applying accounting policies (continued)Carrying value of mining rights (continued)As at 31 March 2011, there was no impairment indication noted for the mining rights. Had impairmenttest been performed, the recoverable amounts of the cash generating unit to which the mining rightsbelong, would have been determined based on value in use calculations using cash flow projections, whichwould have been compiled based on financial budgets approved by senior management and management’sassumptions and estimates including forecast of selling price, discount rate and inflation rate.Impairment of exploration and evaluation assetsThe carrying value of exploration and evaluation assets is reviewed for impairment when events orchanges in circumstances indicate that the carrying value may not be recoverable. The Group considersall facts and circumstances occurred to judge whether these facts and circumstances would suggestthat the carrying amount of the exploration and evaluation assets may exceed its recoverable amount(i.e. impaired). Based on the judgment of the directors there was no impairment on the explorationand evaluation assets and no impairment loss is recognized for the years ended 31 March 2010 and2011. Management reassesses the impairment of exploration and evaluation assets at the end of thereporting period.Key sources of estimation uncertaintyThe following are the key assumptions concerning the future, and other key sources of estimationuncertainty at the end of the reporting period, that have a significant risk of causing a material adjustmentto the carrying amounts of assets and liabilities within the next financial year.Impairment loss of trade and other receivablesThe Group’s policy for doubtful receivables is based on the on-going evaluation of the collectabilityand aging analysis of the trade and other receivables and on management’s judgments. Considerablejudgment is required in assessing the ultimate realization of these receivables, including the currentcreditworthiness and the past collection history of each debtor, and the present values of the estimatedfuture cash flows discounted at the effective interest rates. If the financial conditions of the Group’sdebtors were to deteriorate, resulting in an impairment of their ability to make payments, additionalimpairment loss of trade and other receivables may be required.Estimated impairment of property, plant and equipmentThe Group evaluates whether items of property, plant and equipment have suffered any impairmentwhenever events or changes in circumstances indicate that the carrying amount of the assets may notbe recoverable, in accordance with the stated accounting policy. The recoverable amounts of cashgeneratingunits have been determined based on value in use calculations. These calculations requirethe use of estimates.Sino Prosper State Gold Resources Holdings Limited72