Powering growth - Aztech Group Ltd - Investor Relations
Powering growth - Aztech Group Ltd - Investor Relations Powering growth - Aztech Group Ltd - Investor Relations
60a z t e c h a n n u a l r e p o r t 2 0 0 9F i n a n c i a l S t a t e m e n t s2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities andwhen they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on anet basis. Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debitedoutside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised directly outside profitor loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a businesscombination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of theacquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each Group entity are measured andpresented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financialstatements of the Group, the statement of financial position and the statement of changes in equity of the Company are presented in Singaporedollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recordedat the rate of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreigncurrencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominatedin foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that aremeasured in terms of historical cost in a foreign currency are not retranslated.Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss forthe period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for theperiod except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly inother comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in othercomprehensive income.Exchange differences which relate to assets under construction for future productive use, are included in the cost of those assets where they areregarded as an adjustment to interest costs on foreign currency borrowings.For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives)are expressed in Singapore dollars using exchange rates prevailing at the end of the reporting period. Income and expense items (includingcomparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period,in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in othercomprehensive income and accumulated in a separate component of equity. On the disposal of a foreign operation, the cumulative amount of theexchange differences relating to that foreign operation accumulated in a separate component of equity, shall be reclassified from equity to profitor loss (as a reclassification adjustment) when the gain or loss is recognised.On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, insubstance, form part of the net investment in foreign entities) are recognised in other comprehensive income and accumulated in foreign currencytranslation reserve (attributed to minority interest, as appropriate).Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operationand translated at the closing rate.CASH AND CASH EQUIVALENTS - Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquidinvestments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
F i n a n c i a l S t a t e m e n t sa z t e c h a n n u a l r e p o r t 2 0 0 9613 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTYIn the application of the Group’s accounting policies, which are described in Note 2, management is required to make judgements, estimates andassumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associatedassumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from theseestimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period inwhich the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects bothcurrent and future periods.Critical judgements in applying the Group’s accounting policiesManagement is of the opinion that any instances of application of judgements are not expected to have a significant effect on the amountsrecognised in the financial statements (apart from those involving estimations which are dealt with below).Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussedbelow.Estimated impairment of deferred development costsDetermining whether deferred development cost is impaired requires an estimation of the value in use of the development projects. The value inuse calculation requires the Group to estimate the future cash flows expected to arise from such projects and a suitable discount rate in order tocalculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at December31, 2009, the carrying amount of deferred development cost is $4,214,000 (2008 : $4,984,000).Estimated impairment of receivablesWhen there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount ofthe impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effectiveinterest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.As at December 31, 2009, the carrying amount of trade receivables is $27,277,000 (2008 : $36,132,000) (net of allowance for doubtful debtsof $552,000 (2008 : $539,000).Estimated allowance for inventoriesAt the end of the reporting period, the management of the Group carries out a review on a product-by-product and on an aging basis tomake allowance for obsolete and slow-moving inventory items. The management estimates the net realisable value for such inventoryitems based primarily on the current market conditions. As at December 31, 2009, the allowance for inventories was $2,259,000(2008 : $2,369,000).Estimated impairment in value of investment in subsidiariesDetermining whether investment in subsidiaries is impaired involves the consideration of the performance of the subsidiaries and the marketconditions in which the subsidiaries operate in. This affects the Company’s share of net assets of the subsidiaries. During the year, the managementof the Company has considered its investment in its subsidiaries and as at December 31, 2009, the impairment loss balance was $7,192,000(2008 : $43,920,000).If the performance of the subsidiaries and/or market condition was to deteriorate which will affect the Group’s share of net assets of thesubsidiaries, additional impairments may be required.
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F i n a n c i a l S t a t e m e n t sa z t e c h a n n u a l r e p o r t 2 0 0 9613 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTYIn the application of the <strong>Group</strong>’s accounting policies, which are described in Note 2, management is required to make judgements, estimates andassumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associatedassumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from theseestimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period inwhich the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects bothcurrent and future periods.Critical judgements in applying the <strong>Group</strong>’s accounting policiesManagement is of the opinion that any instances of application of judgements are not expected to have a significant effect on the amountsrecognised in the financial statements (apart from those involving estimations which are dealt with below).Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussedbelow.Estimated impairment of deferred development costsDetermining whether deferred development cost is impaired requires an estimation of the value in use of the development projects. The value inuse calculation requires the <strong>Group</strong> to estimate the future cash flows expected to arise from such projects and a suitable discount rate in order tocalculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise. As at December31, 2009, the carrying amount of deferred development cost is $4,214,000 (2008 : $4,984,000).Estimated impairment of receivablesWhen there is objective evidence of impairment loss, the <strong>Group</strong> takes into consideration the estimation of future cash flows. The amount ofthe impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows(excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effectiveinterest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise.As at December 31, 2009, the carrying amount of trade receivables is $27,277,000 (2008 : $36,132,000) (net of allowance for doubtful debtsof $552,000 (2008 : $539,000).Estimated allowance for inventoriesAt the end of the reporting period, the management of the <strong>Group</strong> carries out a review on a product-by-product and on an aging basis tomake allowance for obsolete and slow-moving inventory items. The management estimates the net realisable value for such inventoryitems based primarily on the current market conditions. As at December 31, 2009, the allowance for inventories was $2,259,000(2008 : $2,369,000).Estimated impairment in value of investment in subsidiariesDetermining whether investment in subsidiaries is impaired involves the consideration of the performance of the subsidiaries and the marketconditions in which the subsidiaries operate in. This affects the Company’s share of net assets of the subsidiaries. During the year, the managementof the Company has considered its investment in its subsidiaries and as at December 31, 2009, the impairment loss balance was $7,192,000(2008 : $43,920,000).If the performance of the subsidiaries and/or market condition was to deteriorate which will affect the <strong>Group</strong>’s share of net assets of thesubsidiaries, additional impairments may be required.
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