Powering growth - Aztech Group Ltd - Investor Relations

62a 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 s3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)Estimated valuation of the investment propertiesAs described in Note 2, investment properties are stated at fair value based on the valuation performed by independent professional valuers. Indetermining the fair value, the valuers have determined the fair values using various methods of valuation which involve the making of certainassumptions and the use of estimates. In relying on the valuation reports of the professional valuers, the management has exercised judgementin arriving at a value which is reflective of the current market conditions. As at December 31, 2009, the fair value of investment properties were$12,323,000 (2008 : $12,656,000).Depreciation of property, plant and equipmentThe Group depreciates its property, plant and equipment over their estimated useful lives and after taking into account their estimated residualvalues using the straight line method. The estimated useful life reflects the management’s estimate of the periods that the Group intends to derivefuture economic benefits from the use of the Group’s property, plant and equipment. The residual values reflect the management’s estimatedamount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the assets werealready of the age and in the condition expected at the end of its useful life. As at December 31, 2009, the carrying amounts of property, plantand equipment was $77,747,000 (2008 : $62,193,000).Estimated service life, scrap value and recoverable amount of vesselsThe estimated service life and scrap value of the vessels are assessed annually and adjusted if necessary. Irrespective of indications ofimpairment, the recoverable values of vessels are determined at least annually based on an independent broker’s valuations and calculated valuein use. Significant changes in the estimated service life and scrap values and the result of the impairment test of vessels and of vessels underconstruction may have an impact on operating income. The book value of vessels is disclosed in Note 13 and the contractual commitmentsregarding acquisition of vessels are disclosed in Note 32.According to the impairment test, no vessels or vessels under construction have been determined as having a risk of impairment as at December31, 2009. The recoverable amount of the vessels is estimated based on the calculated value in use. The key assumptions for the calculation of thevalue in use are the vessel’s estimated future earnings generated from the materials supply contract worth a total of approximately $250 millionand operating costs and a risk adjusted weighted average cost of capital of 5% (2008: 5%).