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BAKER TECHNOLOGY LIMITED ANNUAL REPORT 2012
BAKER TECHNOLOGY LIMITED ANNUAL REPORT 2012
3. Significant accounting judgementsand estimates (cont’d)
3.2 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. TheGroup based its assumptions and
estimates on parameters available when the financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due tomarket changes or circumstances arising
beyond the control of theGroup. Such changes are reflected in the assumptions when they occur.
(a)
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 observablemarket 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. Further details of the key assumptions applied in the impairment assessment of
goodwill are given inNote 12 to the financial statements.
(b)
Impairment of loans and receivables
The Group assesses at the end of each reporting period whether there is any objective evidence that a
financial asset is impaired. To determine whether there is objective evidence of impairment, the Group
considers factors such as the probability of insolvency or significant financial difficulties of the debtor and
default or significant delay in payments.
Where there is objectiveevidenceof impairment, theamount and timingof future cash flows areestimated
based on historical loss experience for assets with similar credit risk characteristics. The carrying amount
of the Group’s loans and receivable at the end of the reporting period is disclosed in Note 19 to the
financial statements.
3. Significant accounting judgementsand estimates (cont’d)
3.2 Key sources of estimation uncertainty (cont’d)
(c)
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 inwhich such determination ismade. The carryingamount of theGroup’s income
tax payables and deferred tax assets as at 31December 2012was $4,073,458 and$392,000 (2011:
$3,096,321 and Nil), respectively. The gain on disposal of a subsidiary and associated company are
capital in nature and not taxable.
(d)
Contract revenue
TheGroup recognises contract revenue by reference to the stage of completion of the contract activity at
the end of each reporting period, when the outcome of a construction contract can be estimated reliably.
The stage of completion is measured by reference to the proportion that contract costs incurred for work
performed to date bear to the estimated total contract costs. Significant assumptions are required to
estimate the total contract costsand the recoverable variationworks thatwill affect the stageof completion.
The estimates aremade based on past experience and knowledge of the project engineers. For project in
progress, allowance for foreseeable losses is made when the contract revenue has fallen below contract
cost. The carryingamounts of assets and liabilities arising from construction contracts at the balance sheet
date are disclosed inNote 17 to the financial statements.
for the financial year ended 31december 2012
for the financial year ended 31december 2012
notestothe
financialstatements
notestothe
financialstatements
