CFSL - Annual report 2018

85 CIM FINANCIAL SERVICES LTD ANNUAL REPORT 2018 EXPLANATORY NOTES 30 SEPTEMBER 2018 3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) Deferred tax assets Deferred tax assets are recognised in respect of deductible temporary differences to the extent that it is probable that future taxable profit will be available where these temporary differences can be utilised. Judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and level of future taxable profits, together with future tax-planning strategies. The investment properties consisting of land and buildings are held within a business model where the objective is to consume substantially all of the economic benefits embodied in the building over time through rental, rather than through sale. The presumption that the Group will recover the carrying amount of the investment properties entirely through sale is rebutted for the buildings which are depreciable. Accordingly deferred tax has been provided for on the fair value gain arising on the building. However, since the land is not depreciable, the recovery through sale would not be rebutted for the land. No deferred tax has been recognised on the land as there is no capital gains tax imposed on sale of land. Asset lives and residual values Property, plant and equipment are depreciated over their useful lives taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets. Disposal group held for distribution and discontinued operation A disposal group is classified as held for distribution to shareholders when the company is committed to distribute the disposal group to the shareholders. A number of conditions are required including the fact that the assets must be available for immediate distribution in their present condition and the distribution must be highly probable. The directors made an assessment on whether the decision to spin off the property segment constitutes a disposal group held for distribution at the reporting date taking into consideration the relevant factors and circumstances. In order for the distribution to proceed, the Group needs to restructure the property segment under a single holding company which requires the approval of the authorities. The directors evaluated that the approval from the authorities is critical and could alter their plan or delay the transaction. In addition, the approval was not yet obtained at 30 September 2018 and therefore the distribution is not available in its present condition. Based on the above, the directors concluded that the property segment did not meet the requirement to be classified as a disposal group held for distribution and discontinued operation.