Page 52 - Inegrated Annual Report 2020-Eng

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | 31 DECEMBER 2020

Allowance for slow moving and obsolete inventory

The Group reviews the underlying costs, ageing and movements of its inventories to assess losses due to any
deterioration in the market and obsolescence on a regular basis. In determining whether an allowance should be
recorded in profit or loss, the Group makes judgments as to whether there is any observable data indicating that
there is any future market for the product and the net realisable value for such product. Accordingly, management
has determined that allowance for slow-moving and obsolete inventories at 31 December 2020 is AED 43,723
thousand (2019: AED 35,671 thousand).

Change in estimate of revenue recognition

During the year, the management has re-assessed its estimate for recognition of revenue for one project with
effect from 1 April 2020 following a review of changes in circumstances over the period. Based on the review, the
management has updated its measure of progress from the “input method” to the “output method” basis. The
change in measure of progress has been accounted for as a change in accounting estimate in accordance with
the requirements of IAS 8. Accordingly, the effect of this change in accounting estimate has been recognized
prospectively in the consolidated statement of profit or loss from the current period. This change has not resulted
in a material impact to the reported profit.

Impairment of goodwill
• Determining whether goodwill is impaired requires an estimation of the higher of value-in-use or fair value
less cost to sale of the cash-generating unit to which the goodwill has been allocated. The value-in-use
calculation for goodwill requires the Group to calculate the net present value of the future cash flows for
which certain assumptions are required, including management’s expectations of:

• long term growth rates in cash flows;
• timing and quantum of future capital expenditure; and
• the selection of discount rates to reflect the risks involved.

The key assumptions used and sensitivities are detailed in note 6 to the consolidated financial statements. A
change in the key assumptions or forecasts might result in an impairment of goodwill.

The carrying amount of the Precast concrete division (CGU) is AED 111,257 (2019: AED 112,299 thousand)
which includes goodwill, right of use of asset, fair value adjustments on property, plant and equipment and net
assets amounting to AED 36,276 thousand, AED 11,897 thousand, AED 8,071 thousand and AED 55,013
thousand, respectively (2019: AED 36,276 thousand, AED 12,713 thousand, AED 9,401 thousand and AED
53,909 thousand). Based on the detailed impairment assessment performed by management, there were no
impairment losses recognized on goodwill as at 31 December 2020 and 2019.

Impairment of property, plant and equipment and other intangible assets

The Group assesses for indicators of impairment of property, plant and equipment and other intangible assets
at each reporting period. In determining whether impairment losses should be recorded, the Group makes
judgments as to whether there is any observable data indicating that there is a measurable decrease in the
estimated future cash flows. Accordingly, an allowance for impairment is made where there is an identified loss
event or condition which, based on previous experience, is evidence of a reduction in the recoverability of the
cash flows.

Uncertain tax positions

Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the
amount and timing of future taxable income. Given the wide range of international business relationships and the
long term nature and complexity of existing contractual agreements, differences may arise between the actual
results and adjustments to tax income and expense already recorded. Deferred tax assets are recognised for
all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses
can be utilised. Assessing the recoverability of deferred income tax assets requires the Group to make significant

52 2020 Integrated Annual Report