3
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Note 2 includes a summary of the significant accounting policies used in the preparation of the financial statements. The
preparation of financial statements often requires the use of judgements to select specific accounting methods and policies
from several acceptable alternatives. Furthermore, significant estimates and assumptions concerning the future may be
required in selecting and applying those methods and policies in the financial statements. The Group bases its estimates and
judgements on historical experience and various other assumptions that it believes are reasonable under the circumstances.
Actual results may di
er from these estimates and judgements under di
erent assumptions or conditions.
The following is a review of the more significant assumptions and estimates as well as the accounting policies and methods
used in the preparation of the financial statements.
(a) Long lived assets
The Group has made substantial investments in tangible long-lived assets in its container terminal operating business. Changes in
technology or the intended use of these assets may cause the estimated period of use or value of these assets to change.
The Group considers its assets impairment accounting policy to be a policy that requires one of the most extensive
applications of judgements and estimates by management.
Assets that are subject to depreciation are reviewed to determine whether there is any indication that the carrying value of
these assets may not be recoverable and have su
ered an impairment loss. If any such indication exists, the recoverable
amounts of the assets are estimated in order to determine the extent of the impairment loss, if any. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. Such impairment loss is recognised in the income
statement except where the asset is carried at valuation and the impairment loss does not exceed the revaluation surplus for
that asset, in which case it is treated as a revaluation decrease and is recognised in other comprehensive income.
Management’s judgements are required in the area of asset impairment, particularly in assessing: (1) whether an event
has occurred that may indicate that the related asset values may not be recoverable; (2) whether the carrying value of an
asset can be supported by the recoverable amount, being the higher of fair value less costs to sell or net present value of
future cash flows which are estimated based upon the continued use of the asset in the Group; and (3) the appropriate key
assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted
using an appropriate rate. Changing the assumptions selected by management to determine the level, if any, of impairment,
including the discount rates or the growth rate assumptions in the cash flow projections, could materially a
ect the net
present value used in the impairment test and as a result a
ect the Group’s financial condition and results of operations.
If there is a significant adverse change in the projected performance and resulting future cash flow projections, it may be
necessary to take an impairment charge to the income statement.
(b) Goodwill
For the purposes of impairment tests, the recoverable amount of goodwill is determined based on value-in-use calculations.
The value-in-use calculations primarily use cash flow projections based on financial projections approved by management.
There are a number of assumptions and estimates involved for the preparation of cash flow projections. The key assumptions
adopted in the value-in-use calculations are based on management’s best estimates and past experience. Changes to key
assumptions can a
ect significantly the results of the impairment tests.
Notes to the
Financial Statements
OPTIMISING FOR THE FUTURE
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