INDOFOOD AGRI RESOURCES LTD
ANNUAL REPORT 2015
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For the financial year ended 31 December 2015
3.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D)
3.2
Key sources of estimation uncertainty (cont’d)
(c)
Depreciation of property, plant and equipment
The cost of property, plant and equipment are depreciated on a straight-line basis over their estimated useful
lives. Management estimates the useful lives of these property, plant and equipment to be within 4 to 25 years.
These are common life expectancies applied in the industries where the Group conducts its businesses. Changes
in the expected level of usage and technological development could impact the economic useful lives and the
residual values of these assets, and therefore future depreciation charges could be revised. The net carrying
amount of the Group’s property, plant and equipment as at 31 December 2015 is disclosed in Note 14.
(d)
Biological assets
The Group carries its oil palm, rubber and sugar cane plantations and other smaller plantations at fair value less
costs of disposal, which requires extensive use of accounting estimates. Significant components of fair value
measurement were determined using assumptions including forecast market prices of agricultural produces,
average lives of plantations, period to reach maturity production, yield per hectare, maintenance and harvesting
costs and discount rates utilised in the computation of future cash flows. The amount of changes in fair values
would differ if there are changes to the assumptions used. Any changes in fair values of these plantations
would affect the Group’s profit or loss and equity. The carrying amount of the Group’s biological assets as at
31 December 2015 is Rp15,878.9 billion (2014: Rp15,060.6 billion). The key assumptions applied in the
determination of fair value of biological assets including a sensitivity analysis, are disclosed and further
explained in Note 13.
(e)
Income tax
Significant judgement is involved in determining provision for income tax. Uncertainties exist with respect to the
interpretation of tax regulations, changes in tax laws, and the amount and timing of future taxable income which
requires future adjustments to tax income and expense already recorded. There are certain transactions and
computation for which the ultimate tax determination is uncertain during the ordinary course of business. The
Group recognises liabilities for expected income tax issues based on estimates of whether additional income
taxes will be due. Where the final income tax outcome of these matters is different from the amounts that
were initially recognised, such differences will impact the income tax and deferred income tax in the year in
which such decision is made by the taxation authority. The carrying amount of the Group’s tax payables as at
31 December 2015 is Rp34.9 billion (2014: Rp144.2 billion).
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. Significant management estimates are required to
determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the
level of future taxable profits together with future tax planning strategies. The carrying amount of the Group’s
deferred tax assets as at 31 December 2015 is Rp1,390.3 billion (2014: Rp1,153.0 billion). Further details are
disclosed in Note 17.
(f)
Allowance for decline in market value of inventories and obsolescence of inventories
Allowance for decline in market value of inventories and obsolescence of inventories is estimated based on the
best available facts and circumstances, including but not limited to, the inventories’ own physical conditions,
their market selling prices, estimated costs of completion and estimated costs to be incurred for their sales. The
provisions are re-evaluated and adjusted as additional information received affects the amount estimated. The
carrying amount of the Group’s inventories as at 31 December 2015 is Rp1,936.7 billion (2014: Rp1,773.3 billion).
Further details are disclosed in Note 22.
