Page 78 - Annual Report 2021

Overview Leadership Message Business Segment Moving Forward Our Resources Working for a Corporate Financial
Review Plan Better Tomorrow Governance statements

nOTES TO THE FInanCIaL STaTEmEnTS

5. signiFicant accOunting POliciEs
5.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Key Sources of Estimation Uncertainty
Management believes that there are no key assumptions made concerning the future, and other key sources of
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 year other than as disclosed below:-

(a) Depreciation of Plant and Equipment
The estimates for the residual values, useful lives and related depreciation charges for the plant and
equipment are based on commercial factors which could change significantly as a result of technical
innovations and competitors’ actions in response to the market conditions. The Group anticipates that the
residual values of its plant and equipment will be insignificant. As a result, residual values are not being
taken into consideration for the computation of the depreciable amount. Changes in the expected level of
usage and technological development could impact the economic useful lives and the residual values of
these assets, therefore future depreciation charges could be revised. The carrying amount of plant and
equipment as at the reporting date is disclosed in Note 8 to the financial statements.

(b) impairment of Plant and Equipment
The Group determines whether its plant and equipment is impaired by evaluating the extent to which the
recoverable amount of the asset is less than its carrying amount. This evaluation is subject to changes such as
market performance, economic and political situation of the country. A variety of methods is used to
determine the recoverable amount, such as valuation reports and discounted cash flows. For discounted cash
flows, significant judgement is required in the estimation of present value of future cash flows generated by
the assets, which involve uncertainties and are significantly affected by assumptions used and judgements
made regarding estimates of future cash flows and discount rates. The carrying amount of plant and
equipment as at the reporting date is disclosed in Note 8 to the financial statements.

(c) impairment 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 10 to
the financial statements.

(d) impairment of trade receivables
An impairment loss is recognised when there is objective evidence that a financial asset is impaired.
Management specifically reviews its trade receivables and analyses historical bad debts, customer
concentrations, customer creditworthiness, current economic trends and changes in the customer payment
terms when making a judgement to evaluate the adequacy of the allowance for impairment losses. 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. If the expectation is different
from the estimation, such difference will impact the carrying value of receivables. The carrying amount of
trade receivables as at the reporting date is disclosed in Note 11 to the financial statements.

78 UM Holdings Group