2006 - Eastern Caribbean Securities Exchange

Notes to the Consolidated Financial Statementsfor the year ended 31st December, 2006Expressed in Thousands of Trinidad and Tobago dollars2. Significant accounting policies (continued)w) Impairment of assetsThe Group assesses at each reporting date whether there is an indication that an asset may beimpaired. If any such indication exists, or when annual impairment testing for an asset is required,the Group makes an estimate of the asset’s recoverable amount. Recoverable amount is thehigher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of anasset exceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects current market assessments ofthe time value of money and the risks specific to the assets. Impairment losses are recognised inthe statement of earnings.x) Significant accounting judgements, estimates and assumptionsIn the process of applying the Group’s accounting policies, management makes certain judgements,estimates and assumptions concerning the future that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities. The most significant of these aredescribed below:Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires anestimate of the value in use of the cash generating units to which goodwill is allocated. Estimatingthe value in use requires the Group to make an estimate of the expected future cash flows fromthe cash generating unit and also to choose a suitable discount rate in order to calculate thepresent value of these cash flows.Deferred tax assetsIn recognising a deferred tax asset for unused tax losses, management uses judgement to determinethe probability that future taxable profits will be available to facilitate utilisation of these unusedtax losses.Pension and post-retirement benefitsThe cost of defined benefit pension plans and other post retirement benefits is determined usingactuarial valuations. The Group’s independent actuaries use judgement and assumptions indetermining discount rates, expected rates of return on assets, future salary increases and futurepension increases. Due to the long term nature of these plans, such estimates are subject tosignificant uncertainty.14