Page 66 - GB Auto Annual Report 2012

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GB Auto and its Subsidiaries (S.A.E)
Notes to the Consolidated Financial Statements
For the year ended 31 December 2012
(In the notes all amounts are shown in thousand Egyptian pounds unless otherwise stated)
66
GB Auto
2012 ANNUAL REPORT
Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date.
Quoted market prices or dealer quotes for similar instruments are used for long-term debt.
Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.
At the balance sheet date, the fair value of non-current liabilities do not significantly differ from their carrying amount.
4. Critical accounting estimates and judgments
(1) Critical accounting estimates and assumptions
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are outlined below.
a. Impairment of investment property
The evaluation of the fair value of investment property which consists of lands and buildings is based on an independent expert.
The independent expert uses technical elements for the evaluation such as the location, area and usage. The management do not
expect a negative effect on the operations results by the change in the fair value of investment property related to the Group lands
and buildings and there is no recognition for the increase in fair value in the income statement.
b. Impairment of accounts and notes receivables
The evaluation of the impairment value in accounts and notes receivables is made through monitoring aging of the receivable. The
Group management is studying the credit position and the customers’ ability to pay their debts falling due within the credit limits
granted to them. Impairment is recorded at values of the due amounts on the customers where the Group management determine
that their credit position does not allow them to settle their liabilities.
c. Warranty provision
The Group provides warranty for the manufacturing defaults concerning the local manufactured products.
The warranty provision is estimated based on the expected cost for providing the warranty service. These costs include the value of
spare parts, labour cost and a share of indirect costs. This estimation is based on management experience resulting from the actual
warranty costs for the 3 preceding years. Management does not take into consideration the present value of the expected warrant
cost when estimating the warranty provision, and also the inflation rate is not considered for this purpose.
d. Income tax
The Group companies are subject to corporate income tax. The Group estimates the income tax provision by using the advice of
an expert. In case there are differences between the final and preliminary results, these differences will affect the income tax and
deferred tax provision in these periods.
e. Impairment of goodwill
The management annually assesses the goodwill to determine the existence of impairment in the carrying amount. If the carrying
amount of the goodwill is higher than its recoverable amount, the carrying amount will be reduced and the impairment losses will be
charged to the statement of income and cannot be reversed.
(2) Critical Judgements in applying the Group accounting policies
In general, applying the Group accounting policies does not require judgments (apart from those involving estimates refer to in Note
4-1) that have significant effects on the amounts recognized in the financial statements.