Download PDF - ChartNexus

Notes to the Financial Statements (cont’d)
For the financial year ended 31 December 2011
3. Significant accounting judgments and estimates (cont’d)
106
3.2 Key sources of estimation uncertainty (cont’d)
(f) Inventories
Inventories are stated at the lower of cost and net realisable value. Significant management judgement and in certain
circumstances estimate on the physical stock quantity are required to determine their cost and net realisable value.
Also, the write down of obsolete or slow moving inventories is based on assessment of their ageing. Inventories are
written down when events or changes in circumstances indicate that the carrying amounts may not be recoverable.
Management specifically analyses sales trend and current economic trends when making a judgement to evaluate
the adequacy of the write down for obsolete or slow moving inventories. Where expectations differ from the original
estimates, the differences will impact the carrying amount of inventories. The carrying amount of inventories at the
reporting date is disclosed in Note 23.
(g) Contingent liabilities
The determination of treatment of contingent liabilities is based on management’s view of the expected outcome of
the contingencies for matters in the ordinary course of the business.
(h) Income taxes and tax recoverable
The Group and Company are subject to income taxes in Malaysia and other overseas jurisdictions. Significant
judgement is required in determining the capital allowances and deductibility of certain expenses during the
estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group and the Company recognise liabilities
for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences will impact the
income tax, tax recoverable and deferred income tax provisions in the period in which such determination is made.
(i) Economically recoverable ore reserves and resources
Economically recoverable ore reserves and resources are estimates of the amount of ore that can be economically
and legally recoverable from the mining properties. The Group estimates its ore reserves and resources based on
information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape
of the ore body, and requires complex geological judgements to interpret the data. The estimation of recoverable
reserves and resources is based upon factors such as estimates of foreign exchange rates, commodity prices, future
capital requirements, and production costs along with geological assumptions and judgements made in estimating
the size and grade of the ore body.
Changes in the reserve or resource estimates may impact upon the carrying value of mining rights, mining assets,
deferred mine development expenditure, deferred exploration and evaluation expenditure, mine properties,
property, plant and equipment, goodwill, provision for rehabilitation, recognition of deferred tax assets and deferred
tax liabilities, and depreciation and amortisation charges.
(j) Impairment of loans and receivables
The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.
To determine whether there is objective evidence of impairment, the Group considers factors such as the probability
of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.
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. The carrying amount of the Group’s loans
and receivable at the reporting date is disclosed in Note 24. If the present value of estimated future cash flows varies
by 10% from management’s estimates, the Group’s allowance for impairment will increase by RM372,000 (2010:
RM818,000).
Building on Success: Developing Resources for the Future