notes to the financial statements - Investor Relations

CWT Limited
78
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2011
4 PROPERTY, PLANT AND EqUIPMENT (CONT’D)
(i) During the year, the Group acquired property, plant and equipment with an aggregate cost of $70,751,000 (2010:
$58,242,000), of which $2,327,000 (2010: $306,000) was acquired under finance lease arrangements. At the
reporting date, the carrying amount of property, plant and equipment of the Group held under finance lease and hire
purchase arrangements amounted to $3,932,000 (2010: $1,201,000).
(ii) Property, plant and equipment with a carrying amount of $78,696,000 (2010: $20,727,000) have been pledged as
security for bank loans and bank overdrafts granted to the Group.
(iii) The following are the significant accounting estimates on the Group’s property, plant and equipment and judgements
used in applying accounting policies:
(a) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on the straight-line basis over their estimated useful lives, after
taking into account the estimated residual values. The Group reviews the estimated useful lives and residual
values of the assets regularly in order to determine the amount of depreciation expense to be recorded in
each financial year. Changes in the expected level of use of the assets and the Group’s historical experience
with similar assets, after taking into account anticipated technological changes, could impact the economic
useful lives and the residual values of the assets; therefore future depreciation charges could be revised.
Any changes in the economic useful lives could impact the depreciation charge and consequently, affect the
Group’s results.
During the year, there were no changes in useful lives or residual values of the Group’s property, plant and
equipment.
(b) Provision for restoration
In some lease agreements, the Group and Company are required to carry out site restoration work upon
expiry of the leases. At 31 December 2011, the Group and Company have provisions for site restoration
amounted to $534,000 (2010: S$534,000) and $284,000 (2010: $284,000), respectively. The expected
site restoration costs are based on estimated costs of dismantling and removing assets and restoring the
premises to their original conditions provided by external contractors.
(c) Impairment assessment
The Group has substantial investments in property, plant and equipment for its logistics and warehousing
businesses. Each of these warehouse properties (including land) and the related plant and equipment forms
a separate cash-generating unit (“CGU”). Management evaluates the performance of the CGUs annually and
performs an impairment assessment for CGUs with impairment trigger. The recoverable amount of a CGU is
determined based on the higher of fair value less costs to sell and value-in-use.
During the financial year, one of the subsidiaries, Pryzma Ltd, carried out a review of the recoverable amount
of its freehold land which has become idle since the termination of the warehouse property project in 2008.
The Group obtained an updated open market valuation of the freehold land conducted by an independent
professional valuer on a willing-buyer-willing-seller basis close to the reporting date. The market value had
decreased and accordingly, an impairment loss of $378,000 was recognised in the financial year.