SCI Annual Report 2015

SCI Electric Public Company Limited
SCI ELECTRIC PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES
(FORMERLY KNOW AS “SCI ELECTRIC MANUFACTURER COMPANY LIMITED”)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TEAR ENDED 31 DECEMBER 2015
5 Significant Accounting Judgements And Estimates
Estimates and judgements are continually evaluated and are based on historical experience and other factors, in
cluding expectations of future events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.
Revenue recognition
The Group uses the percentage of completion method in accounting for its fixed-price contracts to deliver service.
Use of the percentage-of-completion method requires the Group to estimate the services performed to date as a pro
portion of the total services to be performed.
Allowance for doubtful accounts
In determining an allowance for doubtful accounts, the management needs to make judgement and estimates based
upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition.
Allowance for net realizable value
The Group considers the allowance for net realizable value based on the estimate of selling price in the ordinary
course of business and normal condition of inventory. The net realizable value is the estimate of the selling price in the
ordinary course of business, less the costs of completion and selling expenses.
Property plant and equipment and intangible assets
In determining depreciation of property plant and equipment and intangible assets, the management is required to
make estimates of the useful lives and residual values of the property plant and equipment and intangible assets and to
review estimate useful lives and residual values when there are any changes.
In addition, the management is required to review property, plant and equipment for impairment on a periodical
basis and records impairment losses when it is determined that their recoverable amount is lower than the carrying amount.
This requires judgements regarding forecast of future revenues and expenses relating to the assets subject to the review.
Leases
In determining whether a lease is to be classified as an operating lease or finance lease, the management is required
to use judgement regarding whether significant risk and rewards of ownership of the leased asset has been transferred,
taking into consideration terms and conditions of the arrangement.
Employee benefit obligation
Employee benefit obligation is determined based on actuarial techniques. Such determination is made based on
various assumptions, including discount rate, future salary increase rate, mortality rate and staff turnover rate.
The present value of the employee benefit obligations depends on a number of factors that are determined on
an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for
the employee benefit obligations include the discount rate. Any changes in these assumptions will have an impact
on the carrying amount of employee benfit obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate
that should be used to determine the present value of estimated future cash outflows expected to be required to
settle the employee benefit obligations. In determining the appropriate discount rate, the Group considers the
market yield of government bonds that are denominated in the currency in which the benefits will be paid, and
that have terms to maturity approximating the terms of the related employee benefit obligations.
Other key assumptions for employee benefit obligations are based in part on current market
conditions. Additional information is disclosed in Note 25.
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