NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2014 (CONT’D)
2.
BASIS OF PREPARATION (CONT'D)
2.6
Significant Accounting Estimates and Judgements (cont'd)
2.6.1
Judgements made in applying accounting policies
There are no significant areas of critical judgement in applying accounting policies that have
any significant effect on the amount recognised in the financial statements, other than the
following:
Classification of leasehold land
In applying the classification of leases in MFRS 117, management considers the leases of
leasehold land as finance lease arrangements. The lease transaction is not always conclusive,
and management uses judgement in determining whether the lease is a finance lease
arrangement that transfers substantially all the risks and rewards incidental to ownership, in
accordance with MFRS 117 Leases.
2.6.2
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at
the reporting date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
(i)
Useful lives of depreciable assets
Machineries and equipment are depreciated on a straight line basis over their estimated
useful lives. Management estimates that the useful life of the machineries and equipment
to be between 3 to 10 years. Changes in the expected level of usage and technological
developments could impact the economic useful lives and residual values of machineries
and equipment. Therefore the future depreciation charges could be revised.
(ii)
Impairment of property, plant and equipment and intangible assets
The Group performs an impairment review as and when there are impairment indicators
to ensure that the carrying amount of the property, plant and equipment and intangible
assets do not exceed their recoverable amount. The recoverable amount represents
the present value of the estimated future cash flows expected to arise from the cash
generating units to which the assets belongs. Therefore, in arriving at the recoverable
amount, management exercises judgement in estimating the future cash flows, growth
rate, product life cycle and discount rate.
(iii)
Deferred tax assets
Deferred tax assets are recognised for unused tax losses and other deductible temporary
differences to the extent that it is probable that taxable profit will be available against
which the tax losses and other deductible temporary differences can be utilised.
Significant management judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and level of future taxable
profits together with tax planning strategies.
Assumptions about generation of future taxable income depend on management’s
estimates of future cash flows. These depend on estimates of future production and
sales volume, operating costs, capital expenditure, dividends and other capital
management transactions. Judgement is also required on the application of income tax
legislation. These judgements and assumptions are subject to risks and uncertainties,
hence there is a possibility that changes in circumstances will alter expectations, which
may impact the amount of deferred tax assets recognised in the financial statements and
the amount of unrecognised tax losses and unrecognised temporary differences.
•
Pentamaster Corporation Berhad
(572307-U)
Annual Report 2014
47
