NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2015
140
THE STRAITS TRADING COMPANY LIMITED
42.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
(a)
Estimation Uncertainty (cont’d)
(iii)
Amortisation and impairment of mining rights, deferred mine exploration and evaluation expenditures and
mine properties
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 mining rights, deferred mine exploration and evaluation
expenditures and mine properties. The estimate of the quantity of economically recoverable ore reserves
and resources are also used for the amortisation of mining rights and mine properties. Actual outcomes
could differ from these estimates and assumptions.
Group
2015
2014
$’000
$’000
Deferred mine exploration and evaluation expenditure
1,935
1,500
Mine properties
2,138
2,835
Mining rights
2,367
3,058
(iv)
Revaluation of properties
The Group carries its properties at fair value. Changes in fair values of investment properties are recognised
in profit or loss and changes in fair values of the other properties are recognised in other comprehensive
income respectively.
The fair values of properties are determined by independent real estate valuation experts using recognised
valuation techniques. These techniques comprise comparison method, income capitalisation method/
discounted cash flow method and depreciated replacement cost method.
The determination of the fair values of the properties require the use of estimates such as:
–
sales of similar properties that have been transacted in the open market with adjustment made for
differences in factors that affect value,
–
an estimate of the current market value of the land, plus the current gross replacement of
improvements, less allowances for physical deterioration, obsolescence and optimisation,
–
capitalisation of net rental income taking into consideration such as vacancy rates and rental growth
rates; and
–
estimation of net income stream over a period and discounting the net income stream; taking into
consideration a range of assumptions such as terminal yield rate, discount rate and rental growth.
(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. (“Guilin”), a joint venture, KM Resources. Inc. and its unquoted
investment in TMR Ltd. (“TMR”) 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 values of
Guilin and TMR had been fully impaired.
