Notes to the Financial Statements - Cahaya Mata Sarawak Bhd

Notes to the Financial Statements
For the fi nancial year ended 31 December 2011
3. Signifi cant accounting judgements and estimates
The preparation of the Group’s fi nancial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the
disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material adjustment to the carrying amount of the
asset or liability affected in the future.
3.1 Critical judgements made in applying accounting policies
The following are judgements made by management in the process of applying the Group’s accounting
policies that have the most signifi cant effect on the amounts recognised in the fi nancial statements.
Classifi cation between investment properties and property, plant and equipment
The Group has develop certain criteria based on FRS 140 in making its judgement on whether a property
qualifi es as an investment property. An investment property is a property held to earn rentals or for capital
appreciation or both.
Some properties comprise a portion that is held to earn rentals and another portion that is held for use
in the production or supply of goods or services or for administrative purposes. If these portions could
be sold separately, the Group would account for the portions separately. If the portions could not be
sold separately, the property is an investment property only if an insignifi cant portion is held for use in
the production or supply of goods or services or for administrative purposes. Judgement is made on an
individual property basis to determine whether ancillary services are so signifi cant that a property does not
qualify as an investment property.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next fi nancial year are discussed below.
(a) Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over the assets’
estimated economic useful lives. Management estimates the useful lives of these property, plant and
equipment to be within 3 to 50 years. These are common life expectancies applied in the industry.
Changes in the expected level of usage and technological developments could impact the economic
useful lives and the residual values of these assets, therefore, future depreciation charges could be
revised. The carrying amount of the Group’s property, plant and equipment at the reporting date
is disclosed in Note 13. A 10% difference in the expected useful lives of the property, plant and
equipment from management’s estimates would result in approximately 3.22% (2010: 2.28%) and
0.27% (2010: 1.67%) variance in the Group’s and the Company’s profi t for the year.
(b) Impairment of goodwill
Goodwill is tested for impairment annually and at other times when such indicators exist. This requires
an estimation of the value in use of the cash-generating units to which goodwill is allocated.
When value in use calculation is undertaken, management must estimate the expected future
cash fl ows from the asset or cash-generating unit and choose a suitable discount rate in order
to calculate the present value of those cash fl ows. Further details of the carrying value, the key
assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes
in the assumptions are given in Note 18.
Annual Report 2011 101