Dagang NeXchange Berhad Annual Report 2018

1. BASIS OF PREPARATION (CONTINUED) (d) Use of estimates and judgements The preparation of the financial statements in conformity with MFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. There are no significant areas of estimation of uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements, other than as follows: (i) Revenue The Group’s contract for the implementation of National Single Window (“NSW”) will be ending in August 2019. Thus, there can be no assurance that the Group will be able to continue to enjoy similar level of revenue when the NSW contract expires. (ii) Impairment of goodwill The assessment of whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which the goodwill is allocated. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill as at the reporting date is disclosed in Note 4 to the financial statements. (iii) Impairment of property, plant and equipment, intangible assets and investments in associates The Group determines whether its property, plant and equipment, intangible assets and investments in associates are impaired by evaluating the extent to which the recoverable amount of the asset is less than its carrying amount. This evaluation is subject to changes such as market performance, economic and political situation of the country. A variety of methods is used to determine the recoverable amount such as discounted cash flows. For discounted cash flows, significant judgement is required in the estimation of the present value of future cash flows generated by the assets, which involve uncertainties and are significantly affected by assumptions used and judgements made regarding estimates of future cash flows and discount rates. The carrying amount of property, plant and equipment, intangible assets and investments in associates as at the reporting date are disclosed in Notes 3, 5 and 7 to the financial statements respectively. (iv) Impairment of contract assets and trade receivables The Group uses the simplified approach to estimate a lifetime expected credit loss allowance for all contract assets and trade receivables. The contract assets are grouped with trade receivables for impairment assessment because they have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Group develops the expected loss rates based on the payment profiles of past sales and the corresponding historical credit losses, and adjusts for qualitative and quantitative reasonable and supportable forward-looking information. If the expectation is different from the estimation, such difference will impact the carrying values of contract assets and trade receivables. The carrying amounts of contract assets and trade receivables as at the reporting date are disclosed in Notes 11 and 12 to the financial statements respectively. 107 Annual Report 2018 Notes to the Financial Statements (CONTINUED) FINANCIAL STATEMENTS