Powering growth - Aztech Group Ltd - Investor Relations

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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 $250 millionand operating costs and a risk adjusted weighted average cost of capital of 5% (2008: 5%).
F i n a n c i a l S t a t e m e n t sa z t e c h a n n u a l r e p o r t 2 0 0 9634 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT(a)Categories of financial instrumentsThe following table sets out the financial instruments as at the end of the reporting period:GROUPCOMPANY2009 2008 2009 2008$’000 $’000 $’000 $’000Financial assetsDerivative financial instruments - 205 - -Trade and other receivables(including cash and cash equivalents) 71,600 84,233 54,922 48,497Available-for-sale financial assets 555 556 516 516Financial liabilitiesDerivative financial instruments 34 85 - -Trade and other payables(including loans and finance leases) 81,303 102,836 20,190 19,591(b)Financial risk management policies and objectivesThe Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managingthe risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance betweenrisk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions andthe Group activities.The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures andreviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted inits oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management control and procedures,the results of which are reported to the Audit Committee.
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AztecH’S GLOBAL REACHAztech at a
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HEAD OFFICEAZTECH GROUP LTD31 Ubi R
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