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Notes to the Consolidated Financial Statements

31st March 2015

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

(c) Impairment of non-financial assets (continued)

If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss
is recognised in the consolidated income statement whenever the carrying amount of an asset
exceeds its recoverable amounts. If an indication of impairment is identified, the Group is required
to estimate the recoverable value, representing the greater of the asset’s fair value less cost to sell
or its value in use. Changes in any of these estimates could result in a material change to the asset
carrying amount in the financial statements.

(d) Recognition of deferred income tax assets

According to the accounting policy as stated in Note 2.20, a deferred income tax asset is
recognised to the extent that it is probable that future taxable profit will be available against which
the deductible temporary differences and tax losses can be utilised, and it is measured at the tax
rates that are expected to apply when the related deferred income tax asset is realised.

In determining the deferred income tax asset to be recognised, management is required to
estimate the realisation of deferred tax assets. Any difference between these estimates and
the actual outcome will impact the Group’s result in the period in which the actual outcome is
determined.

(e) Provision for obsolete or slow moving inventories

The Group makes provision for obsolete or slow moving inventories based on consideration of
obsolescence of raw materials and work in progress and the net realisable value of finished goods.
The identification of inventory obsolescence and estimated selling price in the ordinary course
of business require the use of judgement and estimates. Where the expectation is different from
the original estimate, such difference will impact the carrying amount of inventory and impairment
provision in the year in which such estimate has been changed.

(f) Provision for other liabilities and charges

Provisions are recognised when the Group has a present legal or constructive obligation as a
result of past events. Significant judgement is required in determining the provision for liabilities
and charges. The Group’s management determines the provision for liabilities and charges by
estimating the present value of the expenditures expected to be required to settle the obligation.
This assessment requires the use of estimation.

58 ALCO HOLDINGS LIMITED ANNUAL REPORT 2015