Notes to the Financial Statements
(Cont’d)
For the year ended 30 April 2015
(In Singapore Dollars)
63
STAMFORD TYRES CORPORATION LIMITED
BUILDING ON OUR EXTENSIVE NETWORK
3.
Significant accounting estimates and judgements (cont’d)
(b)
Critical judgements made in applying accounting policies
In the process of applying the Group’s accounting policies, management has made the following
judgements, apart from those involving estimations, which has the most significant effect on the
amounts recognised in the financial statements:
(i)
Income taxes
Significant judgement is involved in determining the Group-wide provision for income taxes.
There are certain transactions and computations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities for expected
tax issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recognised, such
differences will impact the income tax and deferred tax provisions in the period in which such
determination is made. The carrying amount of the Group’s provision for taxation, deferred
tax assets and deferred tax liabilities at 30 April 2015 were $1,721,000 (2014: $2,502,000),
$2,647,000 (2014: $2,559,000) and $752,000 (2014: $671,000) respectively.
(ii)
Impairment of financial assets
The Group follows the guidance FRS 39 in determining when a financial asset is other-
than-temporarily impaired. This determination requires significant judgement. The Group
evaluates, among other factors, the duration and extent to which the fair value of a financial
asset is less than its cost, and the financial health of and near-term business outlook for the
financial asset, including factors such as industry performance, changes in technology and
operational and financing cash flow. Further details of the impairment of financial assets are
given in Notes 17 and 19 to the financial statements.
(iii) Allowance for doubtful debts
The Group evaluates specific accounts where it has information that certain customers are
unable to meet their financial obligations. In those cases, the Group uses judgement, based
on the best available facts and circumstances at the end of each reporting period, including
but not limited to, the length of its relationship with the customer and the customer’s current
credit status based on third party credit reports and known market factors, to record specific
allowance against amount due from such customers to reduce its receivables to the amount
the Group expects to collect. These specific allowances are re-evaluated and adjusted as
additional information received affects the amounts of allowance for doubtful debts. The
carrying amount of the Group’s trade receivables after allowance for doubtful debts as at
30 April 2015 is $78,861,000 (2014: $74,601,000).
(iv) Determination of functional currency
The Group measures foreign currency transactions in the respective functional currencies
of the Company and its subsidiaries. In determining the functional currencies of the entities
in the Group, judgment is required to determine the currency that mainly influences sales
prices for goods and services and of the country whose competitive forces and regulations
mainly determines the sales prices of its goods and services. The functional currencies of the
entities in the Group are determined based on management’s assessment of the economic
environment in which the entities operate and the entities’ process of determining sales
prices.
