3. Significant accounting judgements and estimates (cont’d)
3.2 Key sources of estimation uncertainty (cont’d)
(a) Useful lives of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over
their estimated economic useful lives. Management estimates the useful lives of
these property, plant and equipment to be within 3 to 30 years. These are common
life expectancies applied in the shipping industry. Changes in the expected level
of usage and technological developments could impact the economic useful lives
and the residual values of these assets, therefore future depreciation charges could
be revised. The carrying amount of the Group’s property, plant and equipment is
disclosed in Note 4.
Based on management’s estimates, a 5% difference in the expected useful lives
of these assets would result in less than $2,363,000 (2014: less than $2,021,000)
variance in the Group’s profit before tax for the financial year.
(b) Impairment of property, plant and equipment
The Group determines the recoverable amount of an asset or cash-generating unit
based on the higher of its fair value less costs to sell and its value in use. When
value in use calculation is undertaken, management estimates the expected future
cash flows from the asset or cash-generating unit by applying a suitable discount
rate to calculate the present value of those cash flows. When fair value less costs to
sell is used, management engages the services of professional valuers to determine
the fair values using valuation techniques which involve the use of estimates and
assumptions which are reflective of current market conditions. The carrying amount
of the Group’s property, plant and equipment is disclosed in Note 4.
(c) Useful lives of intangible assets
Intangible assets with definite useful lives are amortised on a straight-line basis over
their estimated economic useful lives. Management estimates the useful lives of
those intangible assets to be within 1 to 25 years. Changes in the expected returns
of the intangible assets and technological development could impact the economic
useful lives and the residual values of these intangible assets, therefore future
amortisation charges could be revised.
Based on management’s estimates, a 5% difference in the expected useful lives of
these assets would result in less than $41,000 (2014: less than $60,000) variance in
the Group’s profit before tax for the financial year.
(d) Impairment of goodwill and intangible assets
Goodwill and intangible assets which are allocated to the same cash generating
unit (“CGU”) are tested for impairment annually. The Group estimates the value in
use if the CGU to where the goodwill and intangible assets is allocated. Estimating
the value regulates the Group to make an estimate of the expected future cash flow
from the call and also to choose a suitable discount rate in order to calculate the
present value of those cash flows.
NOTES TO THE FINANCIAL
STATEMENTS
For the financial year ended 30 June 2015
ASL Marine Holdings Ltd. /Annual Report 2015
103
