FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
69
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(w) Borrowing costs
Borrowing costs are recognised in the income statement using the effective interest method except for those
costs that are directly attributable to the construction or the production of the qualifying assets.
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the
acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the
activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing
costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended
use or sale.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group and the Company make estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
(i) Estimation of impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting
policy stated in Note 2(e)(i). The recoverable amounts of CGUs have been determined based on value-in-use
calculations. These calculations require the use of estimates (Note 17).
An impairment loss of $179,000 was recognised in the last financial year. As disclosed in Note 17, the
carrying amount of goodwill as at 31 December 2015 was $11,402,000 (2014 : $11,578,000).
(ii) Estimation of impairment of deferred development costs
During the year, management performed a review of the development costs capitalised as part of intangible
assets for indicators of impairment. Based on the review, an impairment loss of $2,288,000 (2014 : $Nil)
is recognised during the year. As disclosed in Note 17, the carrying amount of the Group’s deferred
development costs as at 31 December 2015 was $10,891,000 (2014 : $10,915,000).
(iii) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in
determining the capital allowances and deductibility of certain expenses 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 recognises liabilities for anticipated tax due.
Where the final tax outcome of these matters is different from the amounts that were initially recorded,
such differences will impact the income tax and deferred income tax provisions in the period in which such
determination is made.
The estimate is reviewed on an ongoing basis. The carrying amounts of the Group’s and Company’s current
income tax payable as at 31 December 2015 was $2,510,000 (2014 : $1,234,000) and $3,000 (2014 :
$2,000) respectively. The carrying amount of the Group’s current tax recoverable as at 31 December 2015
was $126,000 (2014 : $1,862,000).
