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Tenaga Nasional Berhad 222 Annual Report 2009Notes to the financial statements (Cont’d.)31 August 20092 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D.)(ae) Rural electrification and projects under the Malaysia Plan(i)Rural electrification projects are capitalised as property, plant and equipment.The costs of the projects under the Malaysia Plan in the State of Sabah are only capitalised and accounted for as property, plant andequipment upon receipt of formal handover documentation. The corresponding amounts are recorded as Government development grants andsuch grants are credited to the income statement on a straight line basis over the same period as the expected economic life of theprojects.3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations offuture events that are believed to be reasonable under the circumstances.(a)Critical judgement in applying the Group’s accounting policiesIn determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materiallyaffect the reported results and financial position of the Group. The accounting policy to classify between investment properties and property, plantand equipment requires subjective judgements, often as a result of the need to make estimates about the effect of matters that are inherentlyuncertain.Investment property is a property held to earn rentals or for capital appreciation or both.Several properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the productionor supply of goods or services or for administrative purposes. If these portions could be sold (or leased out under a finance lease) separately, thenthese portions would be accounted separately by the Group.If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the productionor supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillaryservices are so significant that a property does not qualify as an investment property.(b)Critical accounting estimates and assumptionsThe Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equate to therelated actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have a material impact onthe Group’s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptionsthat have a significant risk of 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 the carrying amount of an assetmay not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount.
Tenaga Nasional Berhad 223 Annual Report 20093 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS(b)Critical accounting estimates and assumptions (Cont’d.)(i)Impairment of Property, Plant and Equipment (Cont’d.)Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is thenet present value of the projected future cash flow derived from that asset discounted at an appropriate discount rate. Projected future cashflows are based on Group’s estimates calculated based on historical, sector and industry trends, general market and economic conditions,changes in technology and other available information. The assumptions used, results and conclusion of the impairment assessment are statedin the Note 13 to these financial statements.(ii)Estimated Useful Lives of Property, Plant and EquipmentThe Group regularly reviews the estimated useful lives of property, plant and equipment based on factors such as business plan andstrategies, expected level of usage and future technological developments. Future results of operations could be materially affected bychanges in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property,plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.(iii)Share-based PaymentEquity settled share-based payment (share options) is measured at fair values at the date they are granted. The assumptions used in thevaluation to determine these fair values are stated in Note 35 to these financial statements.(iv)Contingent LiabilitiesDetermination of the treatment of contingent liabilities is based on management’s view of the expected outcome of the contingencies afterconsulting legal counsel for litigation cases and internal and external experts to the Group for matters in the ordinary course of business.(v)Allowance for ReceivablesThe allowance is established when there is objective evidence that the Group will not be able to collect all amount dues according to theoriginal term of receivables. This is determined based on the ageing profile and collection patterns.4 REVENUEGroupCompany2009 2008 2009 2008RM’million RM’million RM’million RM’million(Restated)Sales – electricity 28,083.8 24,190.1 26,426.4 22,761.6– goods and services 345.4 220.1 0 0Release of deferred income (Note 33) 356.4 345.1 317.2 307.628,785.6 24,755.3 26,743.6 23,069.2
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