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118 | S P SETIA BERHAD GROUP | Annual Report 2014

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 October 2014

V. FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(d) Significant accounting judgements and estimates (cont’d)

(i) Critical judgement made in applying accounting policies (cont’d)

Classification between investment properties and owner-occupied properties (cont’d)

If the portions could not be sold separately, the property is accounted for as an investment property only if an insignificant

portion is held for use in the production and supply of goods and services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property

does not qualify as an investment property.

(ii) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources associated with estimation uncertainty at the reporting date

that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next

financial period are discussed below:

Depreciation and useful life of property, plant and equipment and investment properties

Property, plant and equipment and investment properties are depreciated on a straight-line basis to write off their costs to their

residual values over their estimated useful lives. Management estimates the useful lives of these assets to be within 2½ to 100

years for property, plant and equipment and 50 to 96 years for investment properties.

The carrying amounts of the Group’s and the Company’s property, plant and equipment and investment properties as at 31

October 2014 are disclosed in notes 2 and 3 to the financial statements.

Changes in the expected level of usage, physical wear and tear and technological development could impact the economic

useful lives and the residual values of these assets, and therefore future depreciation charges could be revised.

Allowance for stock obsolescence and inventories write down

Inventories are stated at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories

based on an assessment of expected sales prices.

Inventories are reviewed on a regular basis and the Group will make an allowance for excess or obsolete inventories based

primarily on historical trends and management estimates of expected and future product demand and related pricing.

The carrying amounts of the Group’s inventories as at 31 October 2014 are disclosed in note 16 to the financial statements.

Demand levels, technological advances and pricing competition could change from time to time. If such factors result in an

adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories and additional

allowances for slow moving inventories may be required.

Impairment of loans and receivables

The Group assesses at each reporting date 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 debtors 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 amounts of the Group’s and Company’s trade and other receivables as at 31 October 2014 are disclosed in notes

18 and 19 to the financial statements.