DESTINI Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS 2. Basis of Preparation (Cont’d) (c) Significant accounting judgements, estimates and assumptions (Cont’d) Key sources of estimation uncertainty (Cont’d) Revenue from construction contracts (Cont’d) The progress towards complete satisfaction of performance obligation is measured based on the physical proportion of contract work-to-date certified by professional consultants. Significant judgement is required in determining the progress based on technical milestone defined under the contract and take into account the nature of activities and its associated risks. The details of construction contracts are disclosed in Note 15. 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 judgement 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 28. 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 and the Company recognize liabilities for expected tax issues 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 tax recoverable of RM1,942,878 (2018: RM1,140,729) and tax payable of RM21,353,470 (2018: RM24,373,469) respectively. The Company has tax payable of RM540,012 (2018: RM3,432,468). Fair values of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the Note 42(c) regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm’s length transaction at the end of the reporting period. Impairment of investment in subsidiaries Investment in subsidiaries is stated at cost less accumulated impairment losses in the Company’s statement of financial position. The investment is reviewed for impairment whenever there is any indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to sell and value in use) of the asset is estimated to determine the amount of impairment loss. The Company has carried out review on impairment of investment in subsidiaries and the Directors are of the opinion that no additional allowance for impairment loss is necessary. As such, the investment is stated at cost less any impairment losses. The carrying amount of investment in subsidiaries is disclosed in Note 6. 06 FINANCIAL STATEMENTS DESTINI BERHAD 112