SCC Holdings Berhad Annual Report 2019

notes to the financial statement 31 december 2019 (cont’d) 50 SCC Holdings Berhad | Annual Report 2019 2. Basis of Preparation (CONT’D) (c) Significant accounting judgements, estimates and assumptions Key sources of estimation uncertainty (cont’d) Income taxes Judgement is involved in determining the provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for tax based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. As at 31 December 2019, the Group has approximate tax payable and recoverable of RM686,000 (2018: RM901,000) and RM67,000 (2018: RM126,000). Customer loyalty programme The Group operates a customer loyalty programme that provide points awards to customers based on accumulated purchase made which entitled to redeem gift. A portion of the revenue attributable to the awards of point for is deferred until they are utilised or expired. The deferment of the revenue is estimated based on historical trends of breakage upon redemption, which is then used to project the expected utilisation of these benefits. As at 31 December 2019, no deferral revenue had been recognised as the customer loyalty programme was ended during the financial year. Discount rate used in leases Where the interest rate implicit in the lease cannot be readily determined, the Group uses the incremental borrowing rate to measure the lease liabilities. The incremental borrowing rate is the interest rate that the Group would have to pay to borrow over a similar term, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Therefore, the incremental borrowing rate requires estimation, particularly when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the incremental borrowing rate using observable inputs when available and is required to make certain entity-specific estimates. 3. Significant Accounting Policies The Group and the Company apply the significant accounting policies set out below, consistently throughout all periods presented in the financial statements unless otherwise stated. (a) Basis of consolidation (i) Subsidiary companies Subsidiary companies are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiary companies are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.