EXCEL FORCE MSC BERHAD Annual Report 2017

60 2. Basis of Preparation (cont’d) (c) Significant accounting judgments, estimates and assumptions (cont’d) Key sources of estimation uncertainty (cont’d) Useful lives of property, plant and equipment The Group regularly reviews the estimated useful lives of property, plant and equipment based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment. The carrying amount at the reporting date for property, plant and equipment is disclosed in Note 4. Impairment of product development costs The Group reviews the carrying amounts of product development costs as at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amount or value in use is estimated. Determining the value in use of product development costs requires the determination of future cash flows expected to be generated from the continued use, and ultimate disposition of such assets. Any resulting impairment loss could have a material adverse impact on the Group’s financial position and results of operations. Significant judgement is made in the estimation of the present value of future cash flows generated by product development costs, which involves uncertainties and is significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s assessment for impairment of product development costs. Further details on the assessment for impairment of product development costs are disclosed in Note 5. Inventories valuation Inventories are measured at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories based on an assessment of expected sales prices. Demand levels and pricing competition could change from time to time. If such factors result in an adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories. Details of the inventories are disclosed in Note 9. Impairment of loans and receivables The Group assesses at the end of each reporting period whether there is any objective evidence that a receivable is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivable and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amounts at the reporting date for loans and receivables are disclosed in Notes 8, 10 and 11 respectively. Notes To The Financial Statements 31 December 2017 (cont’d)