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Notes to the Consolidated Financial Statements

31st March 2018

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)

(e) Impairment of non-financial assets

At each balance sheet date, the Group and Company review 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.

(f) 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.

(g) 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. Nature and extent of significant provisions
estimated and related changes on contingencies arising from the Group’s production and other
business activities are disclosed in the consolidated financial statements, except to the extent
that such disclosures might seriously prejudice the Group’s position in pending disputes with or
possible claims from vendors or other counter parties.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2018 85