194 NOTES TO THE FINANCIAL STATEMENTS ʹˢ˥ ˧˛˘ Ѓˡ˔ˡ˖˜˔˟ ˬ˘˔˥ ˘ˡ˗˘˗ ʦʤ ʷ˘˖˘ˠ˕˘˥ ʥʣʥʧ (cont’d) 2. BASIS OF PREPARATION (CONT’D) (c) Significant accounting judgements, estimates and assumptions (cont’d) Judgements (cont’d) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting period are set out below. Useful lives of property, plant and equipment, investment properties and right-of-use (“ROU”) assets The Group and the Company regularly review the estimated useful lives of property, plant and equipment, investment properties and ROU assets 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, investment properties and ROU assets would increase the recorded depreciation and decrease the value of property, plant and equipment, investment properties and ROU assets. The carrying amount at the reporting date for property, plant and equipment, investment properties and ROU assets are disclosed in Notes 3, 4 and 5 to financial statements respectively. Discount rate used in leases Where the interest rate implicit in the lease cannot be readily determined, the Group and the Company use the incremental borrowing rate to measure the lease liabilities. The incremental borrowing rate is the interest rate that the Group and the Company would have to pay to borrow over a similar term, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Therefore, the incremental borrowing rate required estimation, particularly when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group and the Company estimate the incremental borrowings rate using observable inputs when available and is required to make certain entity-specific estimates. Development costs The Group and the Company capitalise development costs for a project in accordance with the accounting policy. Initial capitalisation of development costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generations of the project, discount rates to be applied and the expected period of benefits. The carrying amount at the reporting date for development costs is disclosed in Note 6 to the financial statements. Recoverability of development costs During the financial year, the Directors considered the recoverability of the Group’s and of the Company’s development cost arising from its existing concession services and its newly introduced block-chain platform, namely Zetrix. The project continues to progress in a satisfactory manner, and customer reaction has reconfirmed the Directors’ previous estimates of anticipated revenues from the project. However, increased competitor activity has caused the Directors to reconsider their assumptions regarding future market share and anticipated margins of this product. Detailed sensitivity analysis has been carried out and the Directors are confident that the carrying amount of the asset will be recovered in full, even if returns are reduced. This situation will be closely monitored, and adjustments made in future periods, if market activity indicates that such adjustments are appropriate. The carrying amount at the reporting date for development costs is disclosed in Note 6 to the financial statements.
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