Financial Statements - Mewah Group

Building Capabilities
Notes to the Financial Statements
For the financial year ended 31 December 2011
3. Critical accounting estimates, assumptions and judgements (continued)
(b)
Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence of impairment on a regular basis. Significant financial
difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments
are considered objective evidence that a receivable is impaired. In determining this, management makes judgement
as to whether there is observable data indicating that there has been a significant change in the payment ability of the
debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or
legal environment in which the debtor operates in.
Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss
should be recorded as an expense. In determining this, management uses estimates based on historical loss experience
for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount
and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss and actual
loss experience.
If the net present values of estimated cash flows increase or decrease by 5% from management’s estimates for all past due
loans and receivables, the Group’s allowance for impairment will decrease or increase by US$1,062,000 or US$3,693,000
and correspondingly to profit or loss.
(c)
Estimated impairment of non-financial assets
Goodwill is tested for impairment annually and whenever there is an indication that the goodwill may be impaired.
Intangible assets, property, plant and equipment and investments in subsidiaries and associates are tested for impairment
whenever there is any objective evidence or indication that these assets may be impaired.
The recoverable amounts of these assets and where applicable, CGU, have been determined based on value-in-use
calculations. These calculations require the use of estimates such as expected cash flows resulting from operating margin
and expenses, discounting rate and growth rate (Note 21).
If the management’s estimated operating margin used in the value-in-use calculation for this CGU at 31 December 2011 is
decreased by 5%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment
of US$410,000.
If the management’s estimated pre-tax discount rate applied to the discounted cash flows at 31 December 2011 is
increased by 5%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment
of US$78,000.
If the management’s estimated growth rate applied to the discounted cash flows at 31 December 2011 is decreased by
5%, the carrying value of goodwill for this CGU would have been decreased, requiring additional impairment of US$36,000.
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