68
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
3.
Critical accounting estimates, assumptions and judgements
(continued)
(b)
Construction contracts
The Group uses the percentage-of-completion method to account for its contract revenue.
The stage of completion is measured by reference to the contract costs incurred to date
compared to the estimated total costs for the contract.
Significant assumptions are required to estimate the total contract costs and the recoverable
variation works that affect the stage of completion and the contract revenue respectively.
In making these estimates, management has relied on past experience and the work of
specialists. Details of construction contracts are disclosed in Note 14.
If the revenue on uncompleted contracts at the balance sheet date had been higher/lower
by 10% from management’s estimates, the Group’s profit would have been higher/lower by
$3,051,000 and $3,358,000 respectively.
If the contract costs of uncompleted contracts to be incurred had been higher/lower by
10% from management’s estimates, the Group’s profit would have been lower/higher by
$2,976,000 and $3,350,000 respectively.
(c)
Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over their estimated
useful lives. Management estimates the useful lives of these assets to be within 1 to 60
years. The carrying amount of the Group’s property, plant and equipment as at 31 December
2014 was $181,936,000 (2013: $156,793,000). Changes in the expected level of usage could
impact the economic useful lives and the residual values of these assets, therefore future
depreciation charges could be revised.
(d)
Impairment of loans and receivables
Management reviews its loans and receivables for objective evidence of impairment on
a monthly basis. Significant financial difficulties of the debtor, the probability that the
debtor will enter bankruptcy, and default or significant delay in payments are considered
objective evidence that a receivable is impaired. In determining this, management has
made judgements as to whether there is observable data indicating that there has been a
significant change in the payment ability of the debtor, or whether there have been significant
changes with adverse effect in the technological, market, economic or legal environment in
which the debtor operates in.
Where there is objective evidence of impairment, management has made judgements
as to whether an impairment loss should be recorded as an expense. In determining this,
management has used estimates based on historical loss experience for assets with similar
credit risk characteristics. The methodology and assumptions used for estimating both the
amount and timing of future cash flows are reviewed regularly to reduce any differences
between the estimated loss and actual loss experience. Details of trade and other receivables
and allowance for impairment are disclosed in Note 12.
