3. Significant accounting judgements and estimates (cont’d)
3.2 Key sources of estimation uncertainty (cont’d)
(d) Impairment of goodwill and intangible assets (cont’d)
The impairment tests are sensitive to growth rate. Changes in these assumptions
may result in changes in recoverable amounts. If management’s estimate of the
forecasted growth rate to extrapolate cash flow projections beyond the five-year
period decreased by a compound annual growth rate of 0.5% (2014: 1.5%), the
recoverable amount would be reduced by $689,000 (2014: $195,000).
(e) 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 for assets with similar
credit risk characteristics. The carrying amount of the Group’s loans and receivables
as at 30 June 2015 was $303,703,000 (2014: $349,363,000).
(f)
Construction contracts
The Group 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 to the estimated total contract costs. Significant assumptions are required to
estimate the total contract costs that will affect the stage of completion. In making
these estimates, management has relied on its past experience and knowledge.
The carrying amounts of assets and liabilities arising from construction contracts at
the end of each reporting period are disclosed in Note 10 to the financial statements.
If the estimated total contract cost had been 5% higher than management estimate,
the carrying amount of the assets and liabilities arising from construction contracts
would have been $1,217,000 (2014: $18,475,000) lower and $436,000 (2014:
$126,000) higher respectively. If the estimated total contract cost had been 5%
lower than management estimate, the carrying amount of the assets and liabilities
arising from construction contracts would have been $476,000 (2014: $21,441,000)
higher and $1,422,000 (2014: $594,000) lower respectively.
Total contract revenue includes an estimation of the value of variation works
amounting to $Nil (2014: $2,503,000) was taken into consideration in arriving at
the estimated revenue of construction contracts. Any shortfall in recovery of this
estimate will impact the results of the Group by the same quantum.
NOTES TO THE FINANCIAL
STATEMENTS
For the financial year ended 30 June 2015
ASL Marine Holdings Ltd. /Annual Report 2015
104
