Significant Accounting Judgements and Estimations

Significant accounting judgements and estimations

The Directors and management of Maxtral Industry Berhad evaluate the estimates and judgements perpetually based on past experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The disclosure excludes uncertainty over future events and judgments in respect of measuring financial instruments. Below are the items in the financial statements of Maxtral Industry Berhad that require significant accounting judgements and estimations;

1. Depreciation of property, plant and equipment

The residual values, useful lives and related depreciation charges for the property, plant and equipment are estimated based on commercial values which could change significantly as a result of technical innovations and competitors’ actions in response to the market conditions.

The Group expects that the residual values of its property, plant and equipment will be insignificant. As a result, residual values are not being taken into consideration for the computation of the depreciable amount. The management estimates the useful lives of the plant and machinery to be within 5 to 20 years which are common life expectancies applied in timber operation.

The economic useful lives and residual values of these assets could be affected by the changes in the expected level of usage and technological development, therefore future depreciation charges could be revised.

1. Allowance for inventories

Significant judgments and estimations are used in order to review damaged, obsolete and slow moving inventories. The reviews are done on a continual basis. Possible changes in the estimates could result in revision to the valuation of inventories.

1. Income taxes

The Group and the Company recognize tax liabilities based on its understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final outcome of these matters is different from the amounts that were initially recognised, such difference will impact the income and deferred tax provision in the year in which such determination is made.

1. Deferred tax assets and liabilities

The management estimates the realisation and settlement of temporary differences based on the available information at the reporting date, changes in business strategy, future operating performance and other factors could potentially impact on the actual timing and amount of temporary differences realised and settled. Any difference between the actual amount and the estimated amount would be recognised in the Statements of Comprehensive Income in the period in which actual realisation and settlement occurs.