Annual Report 2012, PDF - Axiata Group Berhad - Investor Relations

Axiata Group Berhad (242188-H) Annual Report 20124. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)(b) Critical accounting estimates and assumptions (continued)(iv) TaxationIncome taxesThe Group and the Company are subject to income tax in numerous jurisdictions. Judgement isinvolved in determining the group-wide provision for income taxes. There are certain transactions andcomputations for which the ultimate tax determination is uncertain during the ordinary course ofbusiness. The Group and the Company recognise liabilities for tax matters based on estimates ofwhether additional taxes will be due. If the final outcome of these tax matters result in a difference inthe amounts initially recognised, such differences will impact the income tax and/or deferred taxprovisions in the period in which such determination is made.Tax benefit from investment tax incentive is recognised when the tax credit is utilised and no deferredtax asset is recognised when the tax credit is claimed.Deferred tax assetsDeferred tax asset is recognised to the extent that it is probable that future taxable profit will beavailable against which temporary differences can be utilised. This involves judgement regarding futurefinancial performance of a particular entity in which the deferred tax asset has been recognised.(v) Contingent liabilitiesDetermination of the treatment of contingent liabilities is based on the Group’s view of the expectedoutcome of contingencies after consulting legal counsel for litigation cases and experts internal andexternal to the Group for matters in the ordinary course of business. Please refer to Note 37(d) to thefinancial statements for legal proceedings that the Group is involved in as at the end of each reportingperiod.(vi) Fair value of derivatives and other financial instrumentsCertain financial instruments such as investments, derivative financial instruments and certain elementsof borrowings are carried on the statement of financial position at fair value, with changes in fair valuereflected in the profit or loss.Fair values are estimated by reference in part to published price quotations and in part by usingvaluation techniques. The fair value of financial instruments that are not traded in an active market (forexample, over-the-counter derivatives) is determined by using valuation techniques. The Group and theCompany use its judgement to select a variety of methods and make assumptions that are mainlybased on market conditions existing at the end of each financial reporting period. The sensitivity of thefair values of financial instruments is disclosed in Note 40 to the financial statements.(vii) Provision for dismantling costProvision for dismantling cost of the Group is based on management’s best estimate and the past trendof costs for rectification work to be carried out to fulfil regulatory and contractual requirementsimposed after network cell sites were built.Provision for dismantling cost is the estimated costs of dismantling and removing the structure onidentified sites and restoring these sites. This obligation is incurred either when the items are installedor as a consequence of having used the items during a particular period.203