My EG Services Berhad Annual Report 2020

ANNUAL REPORT 2020 145 FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS For The Financial Year Ended 31 December 2020 (CONT’D) 4. SIGNIFICANT ACCOUNTING POLICIES (CONT’D) 4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d) Key Sources of Estimation Uncertainty (cont’d) (f) 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. It also requires the Group to assess whether there is a significant increase in credit risk of the non-trade financial asset at the reporting date. The Group uses judgement 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, amounts owing by subsidiaries, amounts owing by associates and amounts owing by joint ventures as at the reporting date are disclosed in Notes 17, 18, 19 and 20 to the financial statements. (g) Fair Value Estimates for Unquoted Financial Assets The Group carries certain financial assets that are not traded in an active market at fair value. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The amount of fair value changes would differ if the Group uses different valuation methodologies and assumptions, and eventually affect profit and/or other comprehensive income. The carrying amounts of these financial assets as at the reporting date are disclosed in Note 11 to the financial statements. (h) Impairment of Development Costs The assessment of whether development costs and other intangible assets are impaired requires an estimation of the value in use of the cash-generating unit to which these assets are allocated. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of development costs and other intangible assets as at the reporting date are disclosed in Note 12 to the financial statements. Critical Judgements Made in Applying Accounting Policies Management believes that there are no instances of application of critical judgement in applying the Group’s accounting policies which will have a significant effect on the amounts recognised in the financial statements other than as disclosed below:- (a) Lease Terms Some leases contain extension options exercisable by the Group before the end of the non- cancellable contract period. In determining the lease term, management considers all facts and circumstances including the past practice and any cost that will be incurred to change the asset if an option to extend is not taken. An extension option is only included in the lease term if the lease is reasonably certain to be extended (or not terminated). (b) Classification between Investment Properties and Owner-occupied Properties Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.