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FIMA CORPORATION BERHAD
(21185-P) |
Annual Report
2016
NOTES TO THE FINANCIAL
STATEMENTS 31 MARCH 2016
(contd.)
2.
SIGNIFICANT ACCOUNTING POLICIES (CONTD.)
2.4 Significant Accounting Estimates and Judgements
(iv) Useful lives and depreciation of property, plant and equipment
Management uses key source of estimation and critical judgment in the process of applying the
Group’s accounting policies for depreciation in respect of plant and machinery.
The cost of plant and machinery is depreciated on a straight-line basis over the assets’ useful
lives. Management estimates that the useful lives of the plant and machinery to be within 4 to 10
years. These are common life expectancies applied in the industry.
Changes in the expected level of usage and technological developments could impact the economic
useful lives and the residual values of these assets, therefore future depreciation charges could be
revised.
(v) Employee Share Scheme (“ESS”)
The Group measures the cost of equity-settled transactions with employees by reference to
the fair value of the equity instruments at the date at which they are granted. Estimating fair
value for share-based payment transactions requires determining the most appropriate valuation
model, which is dependent on the terms and conditions of the grant. This estimate also requires
determining the most appropriate inputs to the valuation model including the expected life of the
share option, volatility and dividend yield and making assumptions about them. The assumptions
and models used for estimating fair value for share-based payment transactions and the carrying
amounts are disclosed in Note 25.
(vi) Impairment of goodwill
Goodwill is tested for impairment annually and at other times when such indicators exist. This
requires an estimation of the value-in-use of the CGU to which goodwill is allocated. Estimating
a value-in-use requires management to make an estimate of the expected future cash flows from
the CGU and also to choose a suitable discount rate in order to calculate the present value of
those cash flows. The carrying amount of goodwill as at 31 March 2016 was RM510,000 (2015:
RM510,000). Further details are disclosed in Note 15.
(vii) Provision for goods defect
Provisions for goods defect are based on current volumes of products sold still under warranty and
on historic quality rates as well as estimates and assumptions regarding future quality rates for
new products and estimates of costs to remedy the various qualitative issues that might occur.
Total Group’s provisions for goods defect as of 31 March 2016 is RM17,114,000 (2015:
RM16,492,000), as disclosed in Note 30(c).