NOTES TO THE FINANCIAL STATEMENTS 1. BASIS OF PREPARATION (CONTINUED) (d) Use of estimates and judgements (continued) (vii) Write-down of inventories Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. The carrying amount of inventories as at the reporting date is disclosed in Note 12 to the financial statements. (viii) Impairment of contract assets and trade receivables The Group uses the simplified approach to estimate a lifetime expected credit loss allowance for all contract assets and trade receivables. The contract assets are grouped with trade receivables for impairment assessment because they have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group develops the expected loss rates based on the payment profiles of past sales and the corresponding historical credit losses and adjusts for qualitative and quantitative reasonable and supportable forward-looking information. If the expectation is different from the estimation, such difference will impact the carrying values of contract assets and trade receivables. The carrying amounts of contract assets and trade receivables as at the reporting date are disclosed in Notes 13 and 14 to the financial statements respectively. (ix) Impairment of non-trade receivables The loss allowances for non-trade financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgements in making these assumptions and selecting appropriate inputs to the impairment calculation, based on the past payment trends, existing market conditions as well as forward-looking estimates at the end of each reporting period. The carrying amounts of other receivables and amount due from subsidiaries as at the reporting date are disclosed in Notes 14 and 15 to the financial statements respectively. (x) Deferred tax assets Deferred tax assets are recognised for all unabsorbed capital allowances to the extent that it is probable that future taxable profits would be available against which the unabsorbed capital allowances could be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the assessment of the probability of the future taxable profits. The carrying amount of deferred tax assets as at the reporting date is disclosed in Note 11 to the financial statements. 2. MATERIAL ACCOUNTING POLICY INFORMATION (a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved when the Company: • has power over the investee; • is exposed, or has rights, to variable returns from its involvement with the investee; and • has the ability to use its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. All intra-group assets and liabilities, equity income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 147 OPERATIONAL REVIEW SUSTAINABILITY STATEMENT GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDERS’ INFORMATION INTELLIGENCE POWERING
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