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Notes To The Consolidated Financial Statements
(Expressed in Renminbi)
1
/ China Communications Services Corporation Limited
44 Significant accounting estimates and judgements
(continued)
(b) Impairment for trade and other receivables
The Group estimates impairment losses for trade and other receivables resulting from the inability
of the customers to make the required payments. The Group bases the estimates on the aging of
the accounts receivable balance, customer credit-worthiness, and historical write-off experience. If
the financial condition of the customers were to deteriorate, actual write-offs would be higher than
estimated.
(c) Impairment of long-lived assets
If circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the
asset may be considered “impaired”, and an impairment loss may be recognised in accordance with
accounting policy for impairment of long-lived assets as described in note 2(l). The carrying amounts of
long-lived assets are reviewed periodically in order to assess whether the recoverable amounts have
declined below the carrying amounts. These assets are tested for impairment whenever events or
changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When
such a decline has occurred, the carrying amount is reduced to recoverable amount. The recoverable
amount is the greater of the net selling price and the value in use. In determining the value in use,
expected future cash flows generated by the asset are discounted to their present value, which
requires significant judgement relating to level of revenue and amount of operating costs. The Group
uses all readily available information in determining an amount that is a reasonable approximation
of recoverable amount, including estimates based on reasonable and supportable assumptions and
projections of revenue and amount of operating costs. Changes in these estimates could have a
significant impact on the carrying value of the assets and could result in additional impairment charge
or reversal of impairment in future periods.
(d) Depreciation and amortisation
Property, plant and equipment and intangible assets are depreciated on a straight-line basis over the
estimated useful lives of the assets, after taking into account their estimated residual value. The Group
reviews the estimated useful lives and residual values of the assets annually in order to determine
the amount of depreciation expense to be recorded during any reporting period. The useful lives and
residual values are based on the Group’s historical experience with similar assets and taking into
account anticipated technological changes. The depreciation and amortisation expense for future
periods is adjusted if there are significant changes from previous estimates.
(e) Deferred tax assets
The recognition of deferred tax assets requires assessment of the temporary differences which arise
as a consequence of different accounting and tax treatments. These temporary differences result in
deferred tax assets are included within the balance sheet. Deferred tax assets are measured using
substantially enacted tax rates expected to apply when the temporary differences reverse. Deferred
tax assets are not recognised where it is more likely than not that the asset will not be realised in
the future. This evaluation requires judgements to be made including the forecast of future taxable
income. Recognition therefore, involves management’s judgement regarding the future financial
performance of the particular legal entity in which the deferred tax asset has been recognised and
interpretation of country specific tax law and the likelihood of settlement. However the actual tax assets
could differ from the provision and in such event the group would be required to make an adjustment
in a subsequent period which could have a material impact on the group’s profit and loss.