Annual Report 2011/12 - International Entertainment Corporation

Notes to the Consolidated Financial StatementsFor the year ended 31 March 20124. KEY SOURCES OF ESTIMATION UNCERTAINTYIn the application of the Group’s accounting policies, which are described in note 3, the Directors are required to makeestimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from othersources. The estimates and associated assumptions are based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if the revision affects only that period, or in the period of therevision and future periods if the revision affects both current and future periods.The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at theend of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assetsand liabilities within the next financial year.Allowance for bad and doubtful debtsThe provisioning policy for bad and doubtful debts of the Group is based on the evaluation of collectability and ageinganalysis of accounts and on management’s estimation. A considerable estimation is required in assessing the ultimaterealisation of these receivables, including the current creditworthiness and the past collection history of each customerand loan borrower. If the financial conditions of customers and loan borrower of the Group were to deteriorate,resulting in an impairment of their ability to make payments, additional allowance may be required. As at 31 March2012, the carrying amount of the trade receivables and loan receivable were approximately were HK$70,254,000 andHK$73,916,000 respectively (2011: HK$39,942,000 and nil respectively).Deferred income tax assetsAt the end of the reporting period, the Group had unused tax losses amounted to approximately HK$180,160,000(2011: HK$186,187,000) (details disclosed in note 28). No deferred tax assets has been recognised and offset againstdeferred tax liabilities due to the unpredictability of future profit streams. The unused tax losses not recognised may becrystallised if the actual future profits generated are more than expected.5. CAPITAL RISK MANAGEMENTThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilemaximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overallstrategy remains unchanged from prior years.The capital structure of the Group consists of promissory notes which are disclosed in note 26, and equity attributableto owners of the Company, comprising issued share capital and reserves.The Directors review the capital structure on a regular basis. As part of this review, the Directors consider the cost ofcapital and the risks associated with each class of capital. Based on recommendations of the Directors, the Group willbalance its overall capital structure through the payment of dividends, share buy-backs, new share issues and the issueof new debt or the redemption of existing debts.48International Entertainment Corporation - Annual Report 2011/12