NOTES TO THE FINANCIAL STATEMENTS
(CONT’D)
31 DECEMBER 2015
2.
SIGNIFICANT ACCOUNTING POLICIES AND OTHER EXPLANATORY INFORMATION (CONT’D)
2B.
Critical judgements, assumptions and estimation uncertainties
The critical judgements made in the process of applying the accounting policies that have the most significant
effect on the amounts recognised in the financial statements and the key assumptions concerning the future,
and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting year are
discussed below. These estimates and assumptions are periodically monitored to make sure they incorporate
all relevant information available at the date when financial statements are prepared. However, this does not
prevent actual figures differing from estimates.
Fair values of investment properties:
Certain judgements and assumptions aremade in the valuation of the investment properties based on calculations
and these calculations require the use of estimates in relation to future cash flows, growth rates, discount rates
and market capitalisation as disclosed in Note 14.
Income tax amounts:
The entity recognises tax liabilities and tax assets based on an estimation of the likely taxes due, which requires
significant judgement as to the ultimate tax determination of certain items. Where the actual amount arising
from these issues differs from these estimates, such differences will have an impact on income tax and deferred
tax amounts in the period when such determination is made. In addition, management judgement is required
in determining the amount of current and deferred tax recognised and the extent to which amounts should or
can be recognised. A deferred tax asset is recognised if it is probable that the entity will earn sufficient taxable
profit in future periods to benefit from a reduction in tax payments. This involves the management making
assumptions within its overall tax planning activities and periodically reassessing them in order to reflect changed
circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or liability reflects
the manner in which the entity expects to recover the asset’s carrying value or settle the liability. As a result, due
to their inherent nature assessments of likelihood are judgmental and not susceptible to precise determination.
The income tax amounts are disclosed in Note 10.
Deferred tax: Recovery of underlying assets:
The deferred tax relating to an asset is dependent on whether the entity expects to recover the carrying amount
of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use
or through sale when the asset is measured using the fair value model in FRS 40 Investment Property or when
fair value is required or permitted by a FRS for a non-financial asset. Management has taken the view that as
there is clear evidence that it will consume the relevant asset’s economic benefits throughout its economic life.
The amount is stated in Note 10.
Determination of functional currency:
Judgement is required to determine the functional currency of the reporting entity. Management considers
economic environment in which the reporting entity operates and factors such as the currency that mainly
influences sales prices for goods and services; the currency of the country whose competitive forces and
regulations mainly determine the sales prices of its goods and services; and the currency that mainly influences
labour, material and other costs of providing goods or services. It also considers other relevant factors that may
also provide evidence of an entity’s functional currency.
ANNUAL REPORT 2015
89
