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Baker Technology LimitedAnnual Report 2014
3.
Significant accounting judgments andestimates (cont’d)
3.2
Key sources of estimationuncertainty (cont’d)
(b)
Impairment of loans and receivables
TheGroup assesses at the end of each reporting periodwhether there is any objective evidence
that afinancial asset is impaired. Factors suchas theprobabilityof insolvencyor significant financial
difficulties of the debtor and default or significant delay in payments are objective evidence of
impairment.
In determining whether there is objective evidence of impairment, the Group considers whether
there isobservabledata indicating that therehavebeensignificantchanges in thedebtor’spayment
ability or whether there have been significant changes with adverse effect in the technological,
market, economicor legal environment inwhich thedebtor operates in.
Where there is objective evidence of impairment, the amount and timing of future cash flows are
estimatedbasedon historical loss experience for assets with similar credit risk characteristics. The
carryingamount of theGroup’s loans and receivableat theendof the reportingperiod isdisclosed
inNote19 to thefinancial statements.
(c)
Contract revenue
TheGroup recognisescontract revenueby reference to thestageof completionof thecontractactivity
at the endof each reportingperiod, when the outcome of a construction contract can be estimated
reliably. The stage of completion is measured by reference to the proportion that contract costs
incurred forworkperformed todatebear to theestimated total contract costs. Significantassumptions
are required toestimate the total contract costsand the recoverablevariationworks thatwill affect the
stageof completion. Theestimatesaremadebasedonpast experienceandknowledgeof theproject
engineers.Forproject inprogress, allowance for foreseeable losses ismadewhen thecontract revenue
has fallenbelow contract cost. The carryingamounts of assets and liabilities arising from construction
contractsat thebalancesheetdatearedisclosed inNote17 to thefinancial statements.
Iftheestimatedtotalcontractcostofthemajorongoingprojectshadbeen5%higherthanmanagement’s
estimates, the carrying amounts of the assets and liabilities arising from construction contractswould
havebeen$3,078,000 (2013: $793,000) lowerand$614,000 (2013: $Nil) higher, respectively.
(d)
Provision
Theprovisionforwarrantyisbasedonestimatesfromknownandexpectedwarrantyworkandcontractual
obligationafter project completion. Thewarrantyexpense incurred couldbehigher or lower than the
provisionmade. Theprovision forwarrantyamountsaredetailed inNote22.
NOTES TO THE
FINANCIAL STATEMENTS
For the financial year ended 31December 2014
