57

Notes To The Financial Statements

VITROX CORPORATION BERHAD

[649966-K]

For The Financial Year Ended 31 December 2008

2.

SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

2.19 Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, deposits pledged with financial

institutions, bank overdrafts and short-term, highly liquid investments that are readily convertible to known amounts

of cash and which are subject to an insignificant risk of changes in value.

3.

CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY

Critical Judgements

In the process of applying the accounting policies of the Group and the Company, the management makes the following

judgements that can significantly affect the amounts recognised in the financial statements:-

(i)

Allowance for Inventories

Reviews are made periodically by the management on inventories for excess inventories, obsolescence and decline in

net realisable value below cost. These reviews require the use of judgements and estimates. Possible changes in these

estimates could result in revisions to the valuation of inventories.

(ii)

Allowance for Doubtful Debts

The Group and the Company make allowance for doubtful debts based on an assessment of the recoverability of

receivables. Allowance is applied to receivables where events or changes in circumstances indicate that the balances

may not be recoverable. The management specifically analyses historical bad debts, customer concentration, customer

creditworthiness, current economic trends and changes in customer payment terms when making a judgement to

evaluate the adequacy of the allowance for doubtful debts. Where expectations are different from previous estimates,

the difference will impact the carrying amounts of receivables.

Key Sources of Estimation Uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that

have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial

year are discussed below:-

(i)

Amortisation and Depreciation

Property, plant and equipment and development expenditure are depreciated/amortised on a straight-line basis over

the estimated useful lives of the assets. The management estimates the useful lives to be within 4 to 50 years. Changes

in the expected level of usage and technological development will impact the economic useful lives and residual values

of the assets and therefore, future depreciation/amortisation charges may be revised.

(ii)

Impairment of Assets

When the recoverable amount of an asset is determined based on its value in use, estimates on future cash flows and

appropriate discount rate are required to determine the present value of those cash flows.