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156 TRANS FORMATION
NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2011
41 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (cont’d)
(a) Estimation Uncertainty (cont’d)
(iv) Fair value of properties
Properties are stated at fair value, which has been determined based on valuations as at 31 December
2011. The properties are at valuations performed by registered independent professionally qualified
valuers, based on the comparison/comparable sales method, depreciated replacement cost method,
discounted cash flow method, profit/capitalisation/investment method for existing use. The fair value of
the Group’s investment properties at 31 December 2011 was $932,907,000 (2010: $853,505,000), and
land and buildings was $328,464,000 (2010: $292,726,000). The basis and assumptions and methods
used are outlined in notes 13 and 14.
(v) Impairment loss on investments in associates and joint ventures
MSC has associates and a joint venture which are principally involve in exploration and mining of various
minerals and metals. The impairment assessments were based on projected value of the estimated
quantity of economically recoverable reserves and resources. These require estimates and assumptions
on the quantity of economically recoverable reserves and resources, expected future costs and expenses
to produce the minerals and metals, effective interest rates, weighted average cost of capital, expected
commencement date for commercial production and future prices used. Actual outcomes could differ
from these estimates and assumptions. The carrying amount of the Group’s investments in associates
and joint ventures at 31 December 2011 was $76,439,000 (2010: $67,143,000).
(vi) Inventories
Inventories are stated at the lower of cost and net realisable value. Significant management judgement
and in certain circumstances estimate on the physical stock quantity are required to determine their
cost and net realisable value.
The write down of obsolete or slow moving inventories is based on assessment of its ageing. Inventories
are written down when events or changes in circumstances indicate that the carrying amounts may not
be recoverable. The management specifically analyses sales trend and current economic trends when
making a judgement to evaluate the adequacy of the write down for obsolete or slowmoving inventories.
Where expectations differ from the original estimates, the differences will impact the carrying amount
of inventories.
(vii) Provision for mine rehabilitation and restoration costs
Provision for mine rehabilitation and restoration costs are provided based on the present value of
the estimated future expenditure to be incurred. Significant management judgement and estimation
is required in determining the discount rate and the expenditure to be incurred subsequent to the
cessation of production of each mine property. Where expectations differ from the original estimates,
the differences will impact the carrying amount of provision for mine rehabilitation and restoration costs.