NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
Financial Statements
102
COSCO Corporation (Singapore) Limited
3.
Critical accounting estimates, assumptions and judgements
(continued)
(b)
Useful life of property, plant and equipment
The management of the Group determines the estimated useful lives and related depreciation
expense for the property, plant and equipment. The management of the Group estimates useful
lives of the property, plant and equipment by reference to expected usage of the property, plant and
equipment, expected repair and maintenance, and technical or commercial obsolescence arising
from the changes or improvements in the market. The useful lives and related depreciation expense
could change significantly as a result of the changes in these factors.
Please refer to Note 2.4(b) “Property, plant and equipment – Depreciation” for the change in
accounting estimate for useful lives of certain assets within leasehold land and buildings, plant and
machinery and docks and quays adopted by the Group on 1 January 2014.
(c)
Impairment of trade receivables (including amount due from customer on construction contracts)
Management reviews its trade receivables (including amount due from customer on construction
contracts) for objective evidence of impairment regularly. Significant financial difficulties of the
debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in
payments are considered objective evidence that a receivable is impaired. In determining this,
management has made judgement as to whether there is observable data indicating that there has
been a significant change in the payment ability of the debtor, or whether there have been significant
changes with adverse effect in the technological, market, economic or legal environment in which
the debtor operates in.
Where there is objective evidence of impairment, management has made judgements as to whether
an impairment loss should be recorded in profit or loss. In determining this, management has used
estimates based on historical loss experience for assets with similar credit risk characteristics.
The methodology and assumptions used for estimating both the amount and timing of future cash
flows are reviewed regularly to reduce any differences between the estimated loss and actual loss
experience.
The net present values of estimated cash flows from management’s estimates for all past due
receivables, will not result in any significant impact to the Group’s allowance for impairment.
(d)
Warranty claims
The provision for warranty is based on estimates from known and expected warranty work and
contractual obligation for further work to be performed after completion. The warranty provision
could differ from future claims. Movements in provision for warranty are detailed in Note 28(b).
4.
Revenue
The Group
2014
2013
$’000
$’000
Rendering of services
- Ship repair, ship building and marine engineering
4,208,197
3,452,505
- Charter hire
51,611
54,731
Others
897
898
Total sales
4,260,705
3,508,134
