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THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2011
41 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
(a) Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of
the reporting period, 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:
(i) Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. The recoverable amount
of the cash-generating unit is determined based on the higher of fair value less cost to sell and value
in use. Management also reviews other economic factors and market conditions to assess whether the
recoverable amount as determined using this method is sustainable. Changes in the market value of
the cash-generating unit could affect the recoverable amount. The carrying amount of goodwill at 31
December 2011 was $21,863,000 (2010: $22,425,000). More details are given in note 15.
(ii) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated using the appropriate basis as outlined in note 2.12
over the estimated useful lives of these assets. The carrying amount of the Group’s property, plant and
equipment at 31 December 2011 was $389,802,000 (2010: $340,923,000). Changes in the estimated
economically recoverable ore reserves and resources and 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.
(iii) Impairment and amortisation for deferred mine exploration and evaluation expenditure, deferred mine
development expenditure and mining rights
These require estimates and assumptions on the quantity of economically recoverable ore reserves and
resources, expected future costs and expenses to produce the metal or minerals, effective interest rates,
expected future prices used in the impairment test for deferred mine development, mine exploration
expenditures, mining rights and mining assets. The estimate of the quantity of economically recoverable
ore reserves and resources are also used for the amortisation of deferred development and exploration
expenditures, mining rights and mining assets. Actual outcomes could differ from these estimates and
assumptions.
The carrying amounts are as follows:
Group
2011 2010
$’000 $’000
Deferred exploration and evaluation expenditure 6,211 5,209
Deferred mine development expenditure 32,140 28,052
Mining rights 414 480