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Notes to the
financial statements
For the financial year ended 31 December 2018
95
A N N U A L R E P O R T
2 0 1 8
3.
Significant accounting judgements and estimates
The preparation of the Group’s financial statements requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty
about these assumptions and estimates could result in outcomes that require a material adjustment
to the carrying amount of the asset or liability affected in the future periods.
3.1
Judgements made in applying accounting policies
Management is of the opinion that there were no significant judgements made in applying the
accounting policies in the consolidated financial statements.
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 are discussed below. The Group 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 to market changes or
circumstances arising beyond the control of the Group. Such changes are reflected in the
assumptions when they occur.
(a)
Impairment of vessels
The carrying amounts of the group’s vessels are reviewed at the end of the reporting period
to determine whether there is any indication that those vessels have suffered an impairment
loss. In determining the impairment loss to be recorded for the group’s vessels, management
has computed the value-in-use and considered the respective cash generating units (“CGU”)
of the group in deriving the recoverable amount of the Group’s vessels.
CGU is defined by management through the division of the Group’s fleet of vessels by type
of vessel and engine specification (i.e. Brake Horse Power (“Bhp”)).
In current year, management computed the value-in-use by estimating the future cash flows
expected to be generated by the vessels based on the pre–tax discount rate of 9.50% per
annum (2017: 9.50% per annum) which reflects the current market assessment of the time
value of money and the risks specific to the group.
Based on the above internal and external sources of information, management has carried
out a review of the recoverable amount of the group’s vessels and determined that carrying
amounts of the Group’s vessels did not exceed their recoverable amount.
The carrying amounts of the Group’s and Company’s vessels at the end of the reporting
period are disclosed in Note 10 of the financial statements.