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Notes to the Consolidated Financial Statements

31st March 2016

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)

(b) Estimate of useful lives of property, plant and equipment and intangible assets (Continued)

The useful lives are estimated at the time of purchase of these assets after considering future
technology changes, business developments and the Group’s strategies. The Group performs
annual reviews to assess the appropriateness of the estimated useful lives. Such review takes
into account any unexpected adverse changes in circumstances or events, including declines
in projected operating results, negative industry or economic trends and rapid advancement in
technology. The Group extends or shortens the useful lives and/or makes impairment provisions
according to the results of the review.

(c) Impairment of non-financial assets

At each balance sheet date, the Group reviews internal and external sources of information to
identify indications that the following assets may be impaired or an impairment loss previously
recognised no longer exists or may have decreased:

– property, plant and equipment
– leasehold land and land use rights
– intangible assets
– investments in subsidiaries

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 2.19, 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.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2016 55