111
ANNUAL REPORT 2016
NOTES TOTHE FINANCIAL STATEMENTS
30 JUNE 2016
(Continued)
6.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
6.3 Key sources of estimation uncertainty
The following are key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:
(a)
Depreciation of property, plant and equipment
The cost of property, plant and equipment is depreciated on a straight line basis over the assets’ useful lives. Management
estimates that the useful lives of these property, plant and equipment as disclosed in Note 4.4 to the financial statements. These
are common life expectancies applied in the industry which the Group operates. Changes in the expected level of usage and
technological developments could impact the economic useful lives and the residual values of these assets, and therefore future
depreciation charges could be revised.
(b)
Impairment of goodwill on consolidation
The Group determines whether goodwill on consolidation is impaired at least on an annual basis. This requires an estimation
of the value-in-use of the subsidiaries to which goodwill is allocated. Estimating a value-in-use amount requires management
to make an estimate of the expected future cash flows from the subsidiaries and also to choose a suitable discount rate in order
to calculate the present value of those cash flows. Further details are disclosed in Note 9(a) to the financial statements.
(c)
Impairment of trademarks
The Group determines whether trademarks are impaired at least on an annual basis. This requires an estimation of the value-
in-use of the trademarks. Estimating a value-in-use amount requires management to make an estimate of the expected future
cash flows from royalty income and also to choose a suitable discount rate in order to calculate the present value of those cash
flows. Further details are disclosed in Note 9(b) to the financial statements.
(d)
Taxation
(i)
Deferred tax assets
Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that future
taxable profits would be available against which the deductible temporary differences could be utilised. Significant
management judgement is required to determine the amount of deferred tax assets that could be recognised, based on
the likely timing and extent of future taxable profits together with future tax planning strategies.
(ii)
Income taxes
Significant judgement is required in determining the capital allowances, deductibility of certain expenses and taxability
of certain income during the estimation of the provision for income taxes. There are many transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Company
recognise tax liabilities based on estimates of whether additional taxes would be due. Where the final tax outcome is
different from the amounts that were initially recorded, such differences would impact the income tax and deferred tax
provisions in the period in which such determination is made.
(e)
Write down for obsolete or slow moving inventories
The Group writes down its obsolete or slow moving inventories based on an assessment of their estimated net selling price.
Inventories are written down when events or changes in circumstances indicate that the carrying amounts could not be
recovered. Management specifically analyses fashion pattern, current economic trends and changes in customer preference
when making this judgement to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where
expectations differ from the original estimates, the differences would impact the carrying amount of inventories.
(f)
Impairment of receivables
The Group makes impairment of receivables based on an assessment of the recoverability of receivables. Impairment is applied to
receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Management
specifically analyses historical bad debt, customer concentration, customer creditworthiness, current economic trends and
changes in customer payment terms when making a judgement to evaluate the adequacy of impairment of receivables. Where
expectations differ from the original estimates, the differences would impact the carrying amount of receivables.
