53
Notes to the Consolidated Financial Statements (continued)
For the year ended 31 December, 2012
(Expressed in Thousands of Trinidad and Tobago Dollars, except where otherwise stated)
2. Significant accounting policies
(continued)
(iv) Significant accounting judgments, estimates
and assumptions
(continued)
Going concern
TheGroup’smanagement hasmadeanassessment
of the Group’s ability to continue as a going concern
andhas concluded that theGrouphas the resources
to continue in business for the foreseeable future.
Therefore the financial statements are prepared
on the going concern basis. Note 2(ii) describes
the material uncertainties which may impact the
Group’s ability to continue as a going concern.
Impairment of non-financial assets
An impairment exists when the carrying value of
an asset or cash generating unit (CGU) exceeds
its recoverable amount, which is the higher of its
fair value less costs to sell and its value in use. The
fair value less costs to sell calculation is based on
available data from binding sales transactions,
conducted at arm’s length, for similar assets or
observablemarket prices less incremental costs for
disposing of the asset. The value in use calculation
is based on a discounted cash flow model. The
cash flows are derived from the budget for the
next five years and do not include restructuring
activities that the Group is not yet committed to
or significant future investments that will enhance
the asset’s performance of the CGU being tested.
The recoverable amount is most sensitive to
the discount rate used for the discounted cash
flow model as well as the expected future cash-
inflows and the growth rate used for extrapolation
purposes.
Taxes
Uncertaintiesexistwith respect to the interpretation
of complex tax regulations and the amount and
timing of future taxable income. Given the existence
of international business relationships and the long-
term nature and complexity of existing contractual
agreements, differences arising between the actual
results and the assumptions made, or future
changes to such assumptions, could necessitate
future adjustments to tax income and expense
already recorded.TheGroup establishes provisions,
based on reasonable estimates, for possible
consequences of audits by the tax authorities of
the respective countries in which it operates. The
amount of such provisions is based on various
factors, such as experience of previous tax audits
and differing interpretations of tax regulations by
the taxable entity and the responsible tax authority.
Such differences of interpretation may arise on a
wide variety of issues depending on the conditions
prevailing in the respective Group company’s
domicile.
Deferred tax assets are recognised for all unused
tax losses to the extent that it is probable that
taxable profit will be available against which the
losses can be utilised. Significant management
judgment is required to determine the amount of
deferred tax assets that can be recognised, based
upon the likely timing and the level of future taxable
profits together with future tax planning strategies.
Pension and post-retirement benefits
The cost of defined benefit pension plans and
other post retirement benefits is determined
using actuarial valuations. The actuarial valuation
involves making judgements and assumptions
in determining discount rates, expected rates of
return on assets, future salary increases and future
pension increases. Due to the long term nature
of these plans, such assumptions are subject
to significant uncertainty. All assumptions are
reviewed at each reporting date.
Property, plant and equipment
Management exercises judgment in determining
whether costs incurred can accrue significant
future economic benefits to the Group to enable
the value to be treated as a capital expense.
Further judgment is applied in the annual review of
the useful lives of all categories of property, plant
and equipment and the resulting depreciation
determined thereon.
Additionally, management exercises judgement in
the determination of the key assumptions utilised
in the impairment tests performed on the property,
plant and equipment. These assumptions include
the use of a suitable discount rate and applicable
cash flow forecasts to be used in the analysis.
These variables significantly impact the results
and conclusions derived from the impairment tests
performed.
