DESTINI AR 2017

2. Basis of Preparation (Cont’d) (c) Significant accounting judgments, estimates and assumptions (Cont’d) Key sources of estimation uncertainty (Cont’d) Impairment of goodwill on consolidation The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value- in-use of the cash-generating units to which the goodwill is allocated. Estimating the value-in-use amount requires the Group to make an estimate of the expected future cash flows from the cashgenerating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The key assumptions used to determine the value- in-use is disclosed in Note 9. 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 inventories are disclosed in Note 13. Impairment of loans and receivables The Group and the Company assesses at 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 and the Company 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 11, 15, 16 and 17. Construction contracts The Group recognises construction contracts revenue and expenses in the profit or loss by using the stage of completion method. The stage of completion is determined by reference to the proportion of physical completion based on technical milestone defined under the contract and take into account the nature of activities and its associated risks. Significant judgment is required in determining the stage of completion, the extent of the construction costs incurred, the estimated total construction revenue and costs, as well as the recoverability of the construction projects. The details of construction contracts are disclosed in Note 14. Deferred tax assets Deferred tax assets are recognised for all unused tax losses, unabsorbed capital allowances and other deductible temporary differences to the extent that it is probable that taxable profit will be available against which the unused tax losses, unabsorbed capital allowances and other deductible temporary differences can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies of the carrying value of recognised and unrecognised deferred tax assets are disclosed in Note 26. 99 DESTINI BERHAD Annual Report 2017