ANNUAL%20REPORT%202015%20eng

Notes to Consolidated Financial Statements
3 ACCOUNTING JUDGEMENTS AND ESTIMATES (Continued)
(a)
Critical accounting judgements in applying the Group’s accounting policies (Continued)
(i)
Reserves (Continued)
Because the Modifying Factors used to estimate Coal Reserves may change from one estimate
to the next, estimates of Coal Reserves may change from one period to another. Changes in
reported Coal Reserves thus may affect the Group’s financial results and financial position in a
number of ways, including the following:
• Asset recoverable amounts may be affected due to changes in estimated future cash flows.
• Depreciation, depletion and amortisation charged in the income statement may change
where such charges are determined on the units of production basis, or where the useful
economic lives of assets change.
• Overburden removal costs recorded on the balance sheet or charged to the income
statement may change due to changes in stripping ratios or the units of production basis of
depreciation.
• Reclamation and mine closure provisions may change where changes in estimated reserves
affect expectations about the timing or cost of these activities.
• The carrying amount of deferred tax assets may change due to changes in estimates of the
likely recovery of the tax benefits.
(ii)
Useful lives of property, plants and equipment
Management determines the estimated useful lives of and related depreciation charges for its
property, plant and equipment. This estimate is based on the actual useful lives of assets of
similar nature and functions. It could change significantly as a result of significant technical
innovations and competitor actions in response to industry cycles. Management will increase the
depreciation charges where useful lives are less than previously estimated lives, or will write-off or
write-down technically obsolete or non-strategic assets that have been abandoned or sold.
(iii) Impairment of assets
The Group reviews the carrying amounts of the assets at each balance sheet date to determine
whether there is objective evidence of impairment. When indication of impairment is identified,
management prepares discounted future cashflow to assess the differences between the carrying
amount and value in use and provided for impairment loss. Any change in the assumptions
adopted in the cash flow forecasts would increase or decrease in the provision of the impairment
loss and affect the Group’s net asset value.
In relation to trade and other receivables (including the value-added tax (“VAT”) receivables), a
provision for impairment is made and an impairment loss is recognised in profit or loss when there
is objective evidence (such as the probability of insolvency or significant financial difficulties of the
debtor) that the Group will not be able to collect all of the amounts due under the original terms of
the invoice. Management uses judgment in determining the probability of insolvency or significant
financial difficulties of the debtor.
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Annual Report 2015