1. BASIS OF PREPARATION (CONTINUED) (d) Use of estimates and judgements (continued) (vi) Asset retirement obligations The Group incurs retirement obligations for certain assets. The present values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. In the estimation of present value, the Group uses assumptions and judgements regarding such factors as the existence of a legal obligation for an asset retirement obligation, technical assessments of the assets, estimated amounts and timing of settlements, drilling rig rates, discount rates and inflation rates. Asset retirement obligations is disclosed in Note 22 to the financial statements. (vii)Write-down of inventories Reviews are made periodically by management on damaged, obsolete and slow-moving inventories. These reviews require judgement and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories. The carrying amount of inventories as at the reporting date is disclosed in Note 11 to the financial statements. (viii)Impairment of contract assets and trade receivables The Group uses the simplified approach to estimate a lifetime expected credit loss allowance for all contract assets and trade receivables. The contract assets are grouped with trade receivables for impairment assessment because they have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group develops the expected loss rates based on the payment profiles of past sales and the corresponding historical credit losses and adjusts for qualitative and quantitative reasonable and supportable forward-looking information. If the expectation is different from the estimation, such difference will impact the carrying values of contract assets and trade receivables. The carrying amounts of contract assets and trade receivables as at the reporting date are disclosed in Notes 12 and 13 to the financial statements respectively. (ix) Impairment of non-trade receivables The loss allowances for non-trade financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgements in making these assumptions and selecting appropriate inputs to the impairment calculation, based on the past payment trends, existing market conditions as well as forward-looking estimates at the end of each reporting period. The carrying amounts of other receivables and amount due from subsidiaries as at the reporting date are disclosed in Notes 13 and 14 to the financial statements respectively. (x) Deferred tax assets Deferred tax assets are recognised for all unabsorbed capital allowances to the extent that it is probable that future taxable profits would be available against which the unabsorbed capital allowances could be utilised. Management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the assessment of the probability of the future taxable profits. The carrying amount of deferred tax assets as at the reporting date is disclosed in Note 10 to the financial statements. 132 Financial Statements DAGANG NeXCHANGE BERHAD Integrated Report 2024 NOTES TO THE FINANCIAL STATEMENTS for the financial year ended 31 December 2024
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