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