Annual Report 2011 - Mandarin Oriental Hotel Group
Annual Report 2011 - Mandarin Oriental Hotel Group
Annual Report 2011 - Mandarin Oriental Hotel Group
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46 <strong>Mandarin</strong> <strong>Oriental</strong> International Limited<br />
Critical Accounting Estimates and Judgements<br />
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on<br />
historical experience and other factors, including expectations of future events that are believed to be reasonable.<br />
The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and<br />
assumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below:<br />
A Impairment of assets<br />
The <strong>Group</strong> tests annually whether goodwill and other assets that have indefinite useful lives suffered any impairment.<br />
Other assets such as development costs are reviewed for impairment whenever events or changes in circumstances<br />
indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or<br />
a cash generating unit is determined based on the higher of its fair value less cost to sell and its value in use, calculated<br />
on the basis of management’s assumptions and estimates. Changing the key assumptions, including the discount<br />
rates or the growth rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.<br />
B Tangible fixed assets and depreciation<br />
Management determines the estimated useful lives and related depreciation charges for the <strong>Group</strong>’s tangible fixed<br />
assets. Management will revise the depreciation charge where useful lives are different to those previously estimated,<br />
or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned.<br />
C Income taxes<br />
The <strong>Group</strong> is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining<br />
the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax<br />
determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is<br />
different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax<br />
provisions in the period in which such determination is made.<br />
Provision of deferred tax follows the way management expects to recover or settle the carrying amount of the<br />
related assets or liabilities, which the management may expect to recover through use, sale or combination of both.<br />
Accordingly, deferred tax will be calculated at income tax rate, capital gains tax rate or combination of both.<br />
Recognition of deferred tax assets, which principally relate to tax losses, depends on the management’s expectation<br />
of future taxable profit that will be available against which the tax losses can be utilized. The outcome of their actual<br />
utilization may be different.