Notes to the Financial Statements
(Cont’d)
For the year ended 30 April 2015
(In Singapore Dollars)
ANNUAL REPORT 2015
62
BUILDING ON OUR EXTENSIVE NETWORK
3.
Significant accounting estimates and judgements (cont’d)
(a)
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
end of each reporting period, 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. The
Group based its assumptions and estimates on parameters available when the financial statements
was prepared. Existing circumstances and assumptions about future developments, however, may
change due to market changes or circumstances arising beyond the control of the Group. Such
changes are reflected in the assumptions when they occur.
(i)
Useful lives of plant and equipment
The cost of plant and equipment is depreciated on a straight-line basis over their respective
estimated economic useful lives. Management estimates the useful lives of these plant
and equipment to be within 3 to 20 years. The carrying amount of the Group’s total plant
and equipment as at 30 April 2015 was $22,568,000 (2014: $21,927,000). Changes in the
expected level of usage, technological developments as well as consumer preferences could
impact the economic useful lives and the residual values of these assets, therefore future
depreciation charges could be revised and could have an impact on the profit in future
years.
(ii)
Allowance for inventories’ obsolescence
Allowance for inventories’ obsolescence is estimated based on the best available facts
and circumstances at the end of each reporting period, including but not limited to, the
inventories’ own physical conditions, their expected market selling prices, estimated costs of
completion and estimated costs to be incurred for their sales. The allowance is re-evaluated
and adjusted as additional information received affects the amount estimated. The carrying
amount of the inventories as at 30 April 2015 is $103,747,000 (2014: $102,575,000).
(iii) Impairment of non-financial assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds
its recoverable amount, which is the higher of its fair value less costs to sell and its value
in use. The fair value less costs to sell calculation is based on available data from binding
sales transactions in an arm’s length transaction of similar assets or observable market
prices less incremental costs for disposing the asset. The value in use calculation is based
on a discounted cash flow model. The cash flows are derived from the budget for the next
five years and do not include restructuring activities that the Group is not yet committed
to or significant future investments that will enhance the asset’s performance of the cash
generating unit being tested. The recoverable amount is most sensitive to the discount rate
used for the discounted cash flow model as well as the expected future cash inflows and the
growth rate used for extrapolation purposes.
