57
GRAND BANKS YACHTS LIMITED
ANNUAL REPORT
2016
NOTES TO THE FINANCIAL STATEMENTS
Year ended 30 June 2016
2 BASIS OF PREPARATION
(CONTINUED)
2.4 Use of estimates and judgements (Continued)
Key sources of estimation uncertainty
a.
Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful
lives. Management estimates the useful lives of these property, plant and equipment to be within 3 to
30 years (see Note 3.3). The carrying amount of the Group’s property, plant and equipment are set out
in Note 4. Changes in the 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.
b.
Estimation of value-in-use for cash generating unit containing goodwill
When value-in-use calculations are undertaken, the Group must estimate the expected future cash flows
from the cash generating unit and choose a suitable discount rate in order to calculate the present value
of these cash flows. Further details of the key assumptions applied in the impairment assessment of
goodwill are disclosed in Note 6.
c.
Measurement for provision for warranty claims
The provision recognised represents management’s best estimate of the present value of the future
cost required in the event that warranty claims arise. Management assessed the provision based on
historical warranty data. Significant estimates and assumptions are made in determining the amount
of warranty provision. The provisions recognised are periodically reviewed and updated based on the
facts and circumstances available at the time. Movements in the provision for warranty claims are
disclosed in Note 16.
d.
Recognition of revenue using percentage of completion method
The Group recognised revenue on construction contract based on the percentage of completion method
in proportion to the stage of completion. The percentage of completion is assessed by reference to the
hours incurred to date and the estimated total hours for each contract. Significant judgement is required
in determining the appropriate stage of completion by estimating the budgeted total hours and total
cost to complete and, in estimating a reasonable profit margin for each contract for revenue and costs
recognition. Revenue from construction contract is disclosed in Note 21.
e.
Measurement of allowance for inventories obsolescence
The net realisable value of stock boats is estimated by reference to recent selling prices for comparable
boats in the market. However, where a reasonably possible range exists, such net realisable value
estimated may not be the actual realisable value. Such uncertainties may significantly affect the net
realisable value of inventories and there is a significant risk of resulting in a material adjustment to the
carrying amounts of inventories in future periods. The allowance made for inventories obsolescence is
disclosed in Note 9.
