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annual report | 2012 Gunung Capital Berhad (330171-P)
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NOTES TO THE FINANCIAL STATEMENTS (cont’d)
31 DECEMBER 2012
3 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements.
They affect the application of the Group’s and the Company’s accounting policies and reported amounts of assets,
liabilities, income, expenses and disclosures made. They are assessed on an on-going basis and are based on experience and
relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.
3.1 Judgements made in applying accounting policies
There are no critical judgements made by management in the process of applying the Group’s accounting policies
that has significant effect on the amounts recognised in the financial statements.
3.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet
date, that have significant risk of causing a material adjustment to the carrying amount of assets and liabilities
within the next financial year are discussed below:-
(a) Depreciation of property, plant and equipment and investment properties
Property, plant and equipment and investment properties are depreciated on a straight-line basis over their
estimated useful lives. Management estimated the useful lives of these assets to be within 5 to 99 years.
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.
(b) Impairment of property, plant and equipment and investment properties
The Group carries out the impairment test based on a variety of estimation including the value-in-use of the
cash-generating unit (“CGU”) to which the property, plant and equipment, and investment properties are
allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash
flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of
those cash flows.
(c) Impairment of trade and other receivables
An impairment loss is recognised when there is objective evidence that a financial asset is impaired. Management
specifically reviews its loans and receivables financial assets and analyses historical bad debts, customer
concentrations, customer creditworthiness, current economic trends and changes in the customer payment
terms when making judgement to evaluate the adequacy of the allowance for impairment losses. Where
there is objective evidence of impairment, the amount and timing of future cash flows are estimated based
on historical loss experience for assets with similar credit risk characteristics. If the expectation is different
from the estimation, such difference will impact the carrying value of receivables.
(d) Net realisable values of inventories
The management reviews for slow-moving and obsolete inventories. This review requires judgement and
estimates. Possible changes in these estimates could result in revision to the valuation of inventories.