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Kumpulan Fima Berhad

(11817-V)

152

Notes to the

financial statements

31 march 2017

2.

Significant accounting policies (cont’d.)

2.4 Significant accounting estimate and judgement (cont’d.)

Key sources of estimation uncertainty (cont’d.)

(iv) Useful lives and depreciation of property, plant and equipment

Management uses key source of estimation and critical judgement 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 3 to 25 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 are disclosed

in Note 33.

(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 2017 was

RM12,710,000 (2016: RM12,710,000). Further details are disclosed in Note 18.

(vii) Provision for warranty

Provision for warranty is 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.

Total Group’s provisions for warranty as of 31 March 2017 is RM14,827,000 (2016: RM17,114,000), as disclosed in

Note 31.