2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Critical Judgements, Assumptions and Estimation Uncertainties (continued)
Fair Values of Investment Properties:
Certain judgements and assumptions are made in the valuation of the investment properties based on certain
calculations and these calculations require the use of estimates in relation to future cash flows and suitable discount
rates as disclosed in Note 12.
Income Tax Amounts:
The entity recognises tax liabilities and tax assets based on an estimation of the likely taxes due, which requires
significant judgement as to the ultimate tax determination of certain items. Where the actual amount arising from these
issues differs from these estimates, such differences will have an impact on income tax and deferred tax amounts in
the period when such determination is made. In addition management judgement is required in determining the amount
of current and deferred tax recognised and the extent to which amounts should or can be recognised. A deferred tax
asset is recognised if it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a
reduction in tax payments. This involves the management making assumptions within its overall tax planning activities
and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Moreover, the
measurement of a deferred tax asset or liability reflects the manner in which the entity expects to recover the asset’s
carrying value or settle the liability. As a result, due to their inherent nature assessments of likelihood are judgemental
and not susceptible to precise determination. The income tax amounts are disclosed in Note 9 on income tax.
Allowance for Doubtful Trade and Other Receivables:
An allowance is made for doubtful trade and other receivables for estimated losses resulting from the subsequent
inability of the customers and debtors to make required payments. If the financial conditions of the customers and
debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required in future periods. To the extent that it is feasible impairment and uncollectibility is determined individually for
each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end
of the reporting year, the trade and other receivables carrying amount approximates the fair value and the carrying
amounts might change materially within the next reporting year but these changes may not arise from assumptions or
other sources of estimation uncertainty at the end of the reporting year. The carrying amount is disclosed in the Note
on trade and other receivables.
Deferred Tax: Recovery of Underlying Assets:
The deferred tax relating to an asset is dependent on whether the entity expects to recover the carrying amount of the
asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through
sale when the asset is measured using the fair value model or revaluation model for investment property or when fair
value is required or permitted by a FRS for a non-financial asset. Management has taken the view that as there is clear
evidence that it will consume the relevant asset’s economic benefits throughout its economic life. The amount is stated
in Note 9.
Estimated Impairment of Subsidiary:
Where an investee is in net equity deficit and or has suffered losses a test is made whether the investment in the
investee has suffered any impairment. This determination requires significant judgement. An estimate is made of the
future profitability of the investee, and the financial health of and near-term business outlook for the investee, including
factors such as industry and sector performance, and operational and financing cash flow.
NOTES TO THE
FINANCIAL STATEMENTS
31 DECEMBER 2014
61
FIRST REIT
ANNUAL REPORT 2014
