| |
Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements.
They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and
expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant
factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
Information on other significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amount recognised in the financial statements are described in
the following notes: |
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| a. |
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the
value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires
the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to
choose a suitable discount rate in order to calculate the present value of those cash flows. Information about the
assumptions and their risk factors relating to goodwill impairment are disclosed in Note 16. |
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|
| b. |
Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is involved in determining
the group-wide provision for income taxes. There are certain transactions and computation for which the ultimate
tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected
tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income taxes
and deferred tax provisions in the period in which such determination is made. |
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|
| c. |
Pension assumptions
The Group has decided on certain principal actuarial assumptions, as detailed in Note 28, in estimating its pension
liability as at the balance sheet date. If there were adverse changes to these actuarial assumptions, then the
Group’s unrecognised actuarial losses would increase with the risk that they would fall outside the corridor and
would need to be recognised in the income statement. |
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|
| d. |
Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives.
Management estimates the useful lives of these property, plant and equipment to be within 1 to 60 years. The
carrying amount of the Group’s property, plant and equipment are set out in Note 6. Changes in the expected level
of usage and technological developments could impact the economic useful lives and the residual values of these
assets, therefore future depreciation charges could be revised. |
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|
| e. |
Provisions and contingent liabilities
Estimates of the Group’s obligations arising from contracts exist as at balance sheet date may be affected by
future events, which cannot be predicted with any certainty. The assumptions and estimates are made based on
the management’s knowledge and experience and may vary from actual experience so that the actual liability may
vary considerably from the best estimates.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated
reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits
is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of
one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic
benefits is remote. |
|
| |
Critical accounting judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, management has made certain judgements, apart from those involving estimations, which have significant effect on the amounts recognised in the financial statements. |
| |
| a. |
Revenue recognition
The Group has recognised revenue on construction contract, ship and rig repair, building and conversion based on the percentage of completion method in proportion to the stage of completion. The percentage of completion is assessed by reference to surveys of work performed. Significant judgement is required in determining the appropriate stage of completion and estimating a reasonable contribution margin for revenue and costs recognition. |
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|
| b. |
Impairment of investments and financial assets
The Group follows the guidance of FRS 39 Financial Instruments: Recognition and Measurement on determining when an investment or financial asset is other than temporarily impaired. This determination requires significant judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of an investment and financial asset is less than its cost; and the financial health of and near-term business outlook for the investment of financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. |
|
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| A subsidiary of the Company, Jurong Shipyard Pte Ltd (“JSPL”) through Estaleiro Jurong Aracruz Ltda, a Brazilian
incorporated subsidiary of JSPL, acquired a freehold land in the State of Espirito Santo in Brazil to develop into a
shipyard. Jurong do Brasil Prestacao de Services Ltda, another Brazilian incorporated subsidiary of JSPL will undertake
marine and offshore services in Brazil. |
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| Certain comparatives in the financial statements have been changed from the previous year to be consistent with the current year’s presentation. |
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| The Group has not applied the following accounting standards (including their consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective: |
| |
| FRS 27 (revised) |
Consolidated and Separate Financial Statements |
| FRS 103 (revised) |
Business Combinations |
| INT FRS 117 |
Distributions of Non-cash Assets to Owners |
| Improvements to FRSs 2009 |
| Amendment to FRS 32 Financial Instruments: Presentation
– Classification of Rights Issue |
| Amendment to FRS 39 Financial Instruments: Recognition and Measurement – Eligible hedged items |
| Amendment to FRS 102 Share-based Payment – Group Cash-settled Share-based Payment Transactions |
|
| |
FRS 103 (revised) and FRS 27 (revised) will become effective for the Group’s financial statements for the year ending
December 31, 2010. FRS 103 (revised) introduces significant changes to the accounting for business combinations both
at the acquisition date and post acquisition, and requires greater use of fair values. The revised FRS 103 will be applied
prospectively and therefore there will be no impact on prior periods in the Group’s financial statements for the year
ending December 31, 2010. FRS 27 (revised) requires accounting for changes in ownership interests by the Group in
a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a
subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised
in the income statement. The Group is in the process of assessing the impact of these amendments.
INT FRS 117 will become effective for the Group’s financial statements for the year ending December 31, 2010.
INT FRS 117 provides guidance when an entity distributes assets other than cash as dividends to its owners acting in their
capacity as owners, or when the distributions give owners a choice of receiving either non-cash assets or cash alternative.
The interpretation requires that an entity should recognise such distributions as dividend payable when it is appropriately
authorised and is no longer at the discretion of the entity. The dividend payable should be measured at the fair value of
the non-cash assets to be distributed. The Group is in the process of assessing the impact of these amendments.
Improvements to FRSs 2009 will become effective for the Group’s financial statements for the year ending December
31, 2010 for amendments relating to: |
| |
| • |
FRS 102 Share-based payment |
| • |
FRS 38 Intangible assets |
| • |
INT FRS 109 Reassessment of embedded derivatives |
| • |
INT FRS 116 Hedges of a net investment in a foreign operation |
|
| |
| Improvements to FRSs 2009 will become effective for the Group’s financial statements for the year ending December 31, 2011 for amendments relating to: |
| |
| • |
FRS 1 Presentation of financial statements |
| • |
FRS 7 Statement of cash flows |
| • |
FRS 17 Leases |
| • |
FRS 36 Impairment of assets |
| • |
FRS 39 Financial Instruments: Recognition and measurement |
| • |
FRS 105 Non-current assets held for sale and discontinued operations |
| • |
FRS 108 Operating segments |
|
| |
Improvements to FRSs 2009 contain amendments to numerous accounting standards that result in accounting changes
for presentation, recognition or measurement and disclosure purposes. The Group is in the process of assessing the
impact of these amendments.
The amendment to FRS 32 on classification of rights issues will become effective for the Group’s financial statements
for the year ending December 31, 2010. This amendment addresses the accounting for rights issues (rights, options and
warrants) that are denominated in a currency other than the functional currency of the issuer. Previously, such rights
issues were accounted for as derivative liabilities. The amendment requires that rights issues to acquire a fixed number
of the entity’s own equity instruments for a fixed amount of any currency are equity instruments if the entity offers
the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity
instruments. This is regardless of the currency in which the exercise price is denominated. The Group is in the process
of assessing the impact of this amendment.
The amendments to FRS 39 on eligible hedged items will become effective for the Group’s financial statements for the
year ending December 31, 2010. The amendments clarify how the principles that determine whether a hedged risk or
portion of cash flows is eligible for designation should be applied in two particular situations: (i) the designation of a
one-sided risk in a hedged item; and (ii) the designation of inflation in particular situations. The Group is in the process
of assessing the impact of these amendments.
The amendments to FRS 102 on group cash-settled share-based payment transactions will become effective for the
Group’s financial statements for the year ending December 31, 2010. The amendments require an entity receiving
goods or services in either an equity-settled or a cash-settled share-based payment transaction to account for the
transaction in its separate or individual financial statements. The Group is in the process of assessing the impact of
these amendments.
The initial application of these standards (including their consequential amendments) and interpretations is not
expected to have any material impact on the Group’s financial statements. The Group has not considered the impact
of accounting standards issued after the balance sheet date. |
