CAHYA MATA SARAWAK ANNUAL REPORT 2016

www.cmsb .com.my Cahya Mata Sarawak Berhad 126 Section 07 Financial StatementS NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 31 December 2016 3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONT'D.) 3.2 Key sources of estimation uncertainty (cont'd.) (c) Construction contracts The Group recognises contract revenue based on percentage of completion method. The stage of completion is measured by reference to either the costs incurred to-date to the estimated total cost or the completion of a physical proportion of work to-date. Significant judgement is required in determining the stage of completion, the extent of the costs incurred and the estimated total revenue (for contracts other than fixed contracts) and costs. Total contract revenue also includes an estimation of the variation works that are recoverable from the customers. In making the judgement, the Group relies on past experience and work of specialists. The carrying amount of the Group’s construction contracts is shown in Note 26. (d) Deferred tax assets Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits together with future tax planning strategies. Assumptions about generation of future taxable profits depend on management’s estimates of future cash flows. These depend on estimates of future production and sales volume, operating costs, capital expenditure, dividends and other capital management transactions. Judgement is also required about application of income tax legislation. These judgements and assumptions are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised in the statements of financial position and the amount of unrecognised tax losses and unrecognised temporary differences. The carrying amount of the Group’s and the Company’s deferred tax assets is disclosed in Note 22. (e) Classification of development properties for sale The Group recognises revenue on property development projects based on the completion method, when the risks and ownership of the properties have been transferred to the customers and the Group does not have a substantial continuing involvement with the properties. These usually coincide upon the receipt of the certificate of practical completion. In determining this, management makes judgements to the expected date of completion of the project and when the risks and ownership and ownership for the Group’s development properties will be transferred to third parties. (f) Impairment of investments in subsidiaries and interests in associates The Group assesses whether there is any indication that investments in subsidiaries and interests in associates may be impaired at each reporting date. If indicators are present, these assets are subject to impairment review. The impairment review comprises a comparison of the carrying amount of the investment and the investment’s estimated recoverable amount. Impairment exists if the former value is greater than the latter.