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AEMULUS HOLDINGS BERHAD
A N N U A L R E P O R T 2 0 1 6
2. BASIS OF PREPARATION (Cont’d)
2.5 Significant Accounting Estimates and Judgements (Cont’d)
2.5.2 Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of
the 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:
(i)
Useful lives of depreciable assets
Plant and equipment are depreciated on a straight line basis over their estimated useful lives.
Management estimates the useful lives of the plant and equipment to be 5 to 10 years. Changes in
the expected technological developments could impact the economic useful lives and residual values
of the property, plant and equipment. Therefore future depreciation charges could be revised.
(ii) Impairment of intangible assets
The Group determines whether goodwill is impaired at least on an annual basis. This requires
an estimation of the value-in-use of the cash-generating units to which the goodwill is allocated.
Estimating the value-in-use requires management to make an estimate of the expected future cash
flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate
the present value of those cash flows. Further details of the carrying value, the key assumptions
applied in the impairment assessment of goodwill and sensitivity analysis to changes in assumptions
are disclosed in Note 6 to the financial statements.
(iii) Inventories
The Group reviews for slow-moving and obsolete inventories. This review requires management to
estimate the potentially excess and obsolete inventories after considering forecasted demand for
the products as well as technical obsolescence. Possible changes in these estimates could result in
revision to the valuation of inventories.
(iv) 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 objective evidence of impairment, the amount and timing of future cash flows are
estimated based on historical loss experience of assets with similar credit risk characteristics.
(v) Provision for warranty
The Group provides warranty for manufacturing defects of its products sold. The Group’s normal
product warranty period is one year. The provision for product warranty is calculated at approximately
2.5% of the cost of products sold.
As the Group’s products are constantly upgraded for technology developments, the level of
manufacturing defects for the upgraded and/or new products may not necessary reflect past trends
and in such circumstances, the original basis used to calculate the amounts for product warranty claim
may need to be revised when it is appropriate.
NOTES TO THE FINANCIAL STATEMENTS
(Cont’d)
– 30 SEPTEMBER 2016