NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2014
42 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
(a)
Estimation Uncertainty (cont’d)
(v)
Impairment loss on investments in associates and joint ventures and unquoted investment
MSC has associates and joint ventures and unquoted investment which are principally involved in exploration,
mining and processing of various minerals and metals. The impairment assessment of the Group’s investment
in an associate, Guilin Hinwei Tin Co Ltd., a joint venture, KM Resources. Inc. and its unquoted investment in
TMR Ltd. are based on estimated fair value less costs to sell. These require estimates and assumptions on the
net assets, future prospect or expected commencement date for commercial production. Actual outcomes
could differ from these estimates and assumptions. The carrying amount of the Group’s investments in
associates and joint ventures and unquoted investment are disclosed in note 18 and 21.
(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. Management specifically analyses sales trend and current economic trends when making
a judgement to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where
expectations differ from the original estimates, the differences will impact the carrying amount of inventories.
(vii)
Provision for mine restoration costs
Provision for mine restoration costs are provided based on the present value of the estimated future
expenditure to be incurred subsequent to the cessation of production. Significant management judgement
and estimation are required in determining the future expenditure, the cessation date of production and the
discount rate. The carrying amount of provision for mine restoration disclosed in note 31 is based on the
mine restoration plan submitted by a subsidiary to the relevant authorities during the financial year ended
31 December 2013. As the mine rehabilitation plan is still being reviewed by the relevant authorities, the
final amount cannot be determined at this juncture. Where expectations from the relevant authorities differ
from the original plan submitted or actual amount differs from the original estimates, the differences may
significantly impact the carrying amount of provision for mine restoration costs.
(viii) Economically recoverable ore reserves and resources
Economically recoverable ore reserves and resources are estimates of the amount of ore that can be
economically and legally recoverable from the mining properties. The Group estimates its ore reserves and
resources based on information compiled by appropriately qualified persons relating to the geological data
on the size, depth and shape of the ore body, and requires complex geological judgements to interpret the
data. The estimation of recoverable reserves and resources is based upon factors such as estimates of foreign
exchange rates, commodity prices, future capital requirements, and production costs along with geological
assumptions and judgements made in estimating the size and grade of the ore body. Changes in the reserve
or resource estimates may impact upon the carrying value of investments in associates and joint ventures,
unquoted investment, mining rights, mining assets, deferred mine development expenditure, deferred mine
exploration and evaluation expenditure, mine properties, property, plant and equipment, goodwill, provision
for rehabilitation and mine restoration costs, recognition of deferred tax assets and deferred tax liabilities,
tax recoverable and depreciation and amortisation charges.
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THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
