annual report - Tenaga Nasional Berhad

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Cont’d.)(a)Critical judgement in applying the Group’s accounting policies (Cont’d.)If the portions could not be sold separately, the property is an investment property only if an insignificant portionis held for use in the production or supply of goods or services or for administrative purposes. Judgement is madeon an individual property basis to determine whether ancillary services are so significant that a property does notqualify as an investment property.During the year, the Group has leased out several land and office space but these do not meet the definition ofan investment property either due to immateriality or classification. Accordingly, these properties continue to beclassified as property, plant and equipment.(b)Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, bydefinition, rarely equate to the related actual results. To enhance the information content of the estimates, certainkey variables that are anticipated to have a material impact on the Group’s results and financial position are testedfor sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant riskof causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year areoutlined below.(i)Impairment of Property, Plant and EquipmentThe Group assesses impairment of assets whenever the events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than therecoverable amount.Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its valuein-use.The value-in-use is the net present value of the projected future cash flow derived from that assetdiscounted at an appropriate discount rate. Projected future cash flows are based on Group’s estimatescalculated based on historical, sector and industry trends, general market and economic conditions, changesin technology and other available information. The assumptions used, results and conclusion of the impairmentassessment are stated in the Note 13 to these financial statements.(ii)(iii)(iv)Estimated Useful Lives of Property, Plant and EquipmentThe Group regularly reviews the estimated useful lives of property, plant and equipment based on factors suchas business plan and strategies, expected level of usage and future technological developments. Future resultsof operations could be materially affected by changes in these estimates brought about by changes in thefactors mentioned above. A reduction in the estimated useful lives of property, plant and equipment wouldincrease the recorded depreciation and decrease the value of property, plant and equipment.Share-based PaymentEquity settled share-based payment (share options) is measured at fair values at the date they are granted.The assumptions used in the valuation to determine these fair values are explained in Note 34 to thesefinancial statements.Contingent LiabilitiesDetermination of the treatment of contingent liabilities is based on management’s view of the expectedoutcome of the contingencies after consulting legal counsel for litigation cases and internal and external expertsto the Group for matters in the ordinary course of business.[ Tenaga Nasional Berhad ] [ Annual Report 2008 ]199