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61 60 Best World International Limited
Annual Report 2011
Best World International Limited
Annual Report 2011
2. Summary of Signifcant Accounting Policies (Cont’d)
Critical Judgements, Assumptions and Estimation Uncertainties (Cont’d)
Net realisable value of inventories:
A review is made periodically on inventory for excess inventory and declines in net realisable value below
cost and an allowance is recorded against the inventory balance for any such declines. The review requires
management to consider the future demand for the products. In any case the realisable value represents
the best estimate of the recoverable amount and is based on the acceptable evidence available at the end
of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual
considerations for determining the amount of allowance or write-down include ageing analysis, technical
assessment and subsequent events. In general, such an evaluation process requires signifcant judgement
and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes
in these estimates could result in revisions to the stated value of the inventories. The carrying amount of
inventories at the end of the reporting year was $5,103,000.
Useful lives of plant and equipment:
The estimates for the useful lives and related depreciation charges for plant and equipment is based on
commercial and other factors which could change signifcantly as a result of innovations and in response
to market conditions. The depreciation charge is increased where useful lives are less than previously
estimated lives, or the carrying amounts written off or written down for technically obsolete items or
assets that have been abandoned. It is impracticable to disclose the extent of the possible effects. It is
reasonably possible, based on existing knowledge, that outcomes within the next reporting year that are
different from assumptions could require a material adjustment to the carrying amount of the balances
affected. The carrying amount of the class of assets at the end of the reporting year affected by the
assumption is $2,809,000.
Estimated impairment of goodwill:
An assessment is made annually whether goodwill has suffered any impairment loss, based on the
recoverable amounts of the cash generating units (“CGU”) . The recoverable amounts of the CGUs was
determined based on value in use calculations and these calculations require the use of estimates in
relation to future cash fows and suitable discount rates as disclosed in Note 16A. Actual outcomes could
vary from these estimates.
Impairment of intangible assets:
An assessment is made of the carrying value of identifable intangible assets, annually, or more frequently
if events or changes in circumstances indicate that such carrying value may not be recoverable. Factors
that trigger an impairment review include underperformance relative to historical or projected future
results, signifcant changes in the manner of the use of the acquired assets or the strategy for the overall
business and signifcant negative industry or economic trends. The most signifcant variables in
determining cash fows are discount rates, terminal values, the number of years on which to base the
cash fow projections, as well as the assumptions and estimates used to determine the cash infows and
outfows. Amounts estimated could differ materially from what will actually occur in the future.
2. Summary of Signifcant Accounting Policies (Cont’d)
Critical Judgements, Assumptions and Estimation Uncertainties ( Cont’d)
Income taxes:
The group has exposure to income taxes in various jurisdictions. Signifcant judgement is involved in
determining the group-wide provision for income taxes. There are certain transactions and computations
for which the ultimate tax determination is uncertain during the ordinary course of business. The administration
and enforcement of tax laws and regulations may be subject to uncertainty and a certain degree of
discretion by the overseas tax authorities. Although the group believes the amounts recognised for income
tax is adequate, these amounts may be insuffcient based on the overseas tax authorities interpretation
and application of these laws and regulations and the group may be required to pay more as a result. It is
impracticable to determine the extent of the possible effects of the above, if any, on the consolidated
fnancial statements of the group.
Deferred tax estimation:
Management judgment is required in determining the amount of current and deferred tax recognised
as income or expense and the extent to which deferred tax assets can be recognised. A deferred tax asset
is recognised if it is more likely than not that suffcient taxable income will be available in the future
against which the temporary differences and unused tax losses can be utilised. Management also
considers future taxable income and tax planning strategies in assessing whether deferred tax assets
should be recognised in order to refect changed circumstances as well as tax regulations. As a result,
due to their inherent nature, it is likely that deferred tax calculation relates to complex fact patterns for
which assessments of likelihood are judgmental and not susceptible to precise determination. The carrying
amount of the group’s income tax payables, deferred tax liabilities and deferred tax assets at the reporting
year are disclosed in Note 11.
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2011