for the year ended 31 December 2016
NOTES TO THE
FINANCIAL STATEMENTS
Baker Technology Limited
-
103
-
3.
Significantaccounting judgementsandestimates (cont’d)
3.2
Key sources of estimationuncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of
each reporting period are discussed below. The Group based its assumptions and estimates on parameters
availablewhen the financial statementswere prepared. Existing circumstances and assumptions about future
developments, however, may change due tomarket changes or circumstances arising beyond the control of
theGroup. Such changes are reflected in the assumptionswhen they occur.
(a)
Impairment of non-financial assets
Impairment of goodwill
During the current financial year, theGroup recognisedS$7.6million full impairment of its goodwill
related to the Sea Deep Shipyard Pte. Ltd, the cash generating unit (CGU). In accordance with the
requirement ofFRS36
Impairment ofAssets
, goodwill acquired frombusinesscombination is required
to be tested for impairment annually.
TheGroup determined the recoverable value of theCGU based on the value in use calculations. The
Group considered the status of the ongoing projects, the projected order book and the implications of
the negative outlook in the oil and gas industry in their cash flow projections. After comparing the
carrying amount of the CGU and its recoverable amount, full impairment of goodwill was provided
during the current financial year.More details are disclosed inNote 11.
(b)
Determination of net realisable value for liftboat
Asdisclosed inNote11, inpreviousyears, theGroupacquiredavesseldesignand theGroupcommenced
the construction of a liftboat with the intention to sell to customers in the oil and gas industry. The
carrying amount of the vessel design is disclosed in Note 11 and the cost of the construction of the
liftboat is included inwork in progress inNote 16.
In accordancewith FRS 2
Inventories
, theGroup recognised the liftboat at the lower of cost and net
realiasable value.Net realisable value is the estimated sellingprice in the ordinary course of business,
less estimated costs for completion and the estimated costs necessary to make the sale. Further, the
net realisable value of the liftboat has an impact on management’s assessment of the vessel design
capitalised as an intangible asset as they are related.
Due to the uncertainty in oil prices, the industry has been affected with delays in rigs and vessel
deliveries, resulting in significant pressures on the contract rates,whichmayhave abearingon thenet
realisable value. Based on theGroup’s assessment, the cost of the liftboat is lower than its estimated
net realisable value.More details are disclosed inNote 16.
