DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 46 47 DONACO INTERNATIONAL LIMITED 2018 ANNUAL REPORT 47 46 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2018 NOTE 3. OPERATING SEGMENTS IDENTIFICATION OF REPORTABLE OPERATING SEGMENTS The consolidated entity is organised into three operating segments: casino operations in Vietnam, casino operations in Cambodia and corporate operations. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The consolidated entity is domiciled in Australia and operates predominantly in six countries: Australia, Cambodia, Vietnam, Singapore, Malaysia and Hong Kong. Casino operations are segmented geographically between casino operations in Vietnam and Cambodia. The CODM reviews EBITDA. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. NOTE 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS CONTINUED The fair value of options is determined by using an amended Black-Scholes Merton model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity- settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. The value of shares issued to employees is based on the market value of shares traded on the ASX at the time of issue. ESTIMATION OF USEFUL LIVES OF ASSETS The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. The casino licence is stated at cost less impairment losses, if any. The licence issued by the Royal Government of Cambodia is renewable annually and deemed to be with indefinite useful life, and therefore should not be amortised. Its useful life is reviewed at each reporting period to determine whether events and circumstances continue to exist to support indefinite useful life assessment. Impairment testing by comparing its recoverable amount with its carrying amount is performed annually. In the event that the expected future economic benefits are no longer probable of being recovered, the licences are written down to their recoverable amount. GOODWILL AND OTHER INDEFINITE LIFE INTANGIBLE ASSETS The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash generating units have been determined based on the higher of value-in-use calculations and fair value less costs of disposal. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. INCOME TAX The consolidated entity is subject to income taxes in the jurisdictions in which it operates, including Cambodia, Vietnam and Hong Kong. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. WARRANTS The consolidated entity measures the cost of warrants issued by the reference to the fair value of the equity instruments at the date at which they are granted. The fair value of warrants is determined by using an amended Black-Scholes Merton model taking into account the terms and conditions upon which the instruments were granted. EMPLOYEE SHARE TRUST AND OPTION TRUST The consolidated entity has engaged an external unrelated third party to form trusts to administer the group’s employee share schemes. The consolidated entity has no ownership interest in the trusts and the trusts are not consolidated as they are not controlled by the consolidated entity. In determining whether or not the consolidated entity had control over the trusts, management considered the trust’s status as an independent trust with an independent trustee, which holds the assets for the benefit of the employees rather than the consolidated entity. IMPAIRMENT OF TRADE AND OTHER RECEIVABLES The consolidated entity reviews the collectability of trade receivables on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant judgement is required to determine if a receivable amount is impaired, based on indicators such as significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue). The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows. TYPES OF PRODUCTS AND SERVICES The principal products and services of each of these operating segments are as follows: Casino Operations – Vietnam Comprises the Aristo International Hotel operating in Vietnam. These operations include hotel accommodation and gaming and leisure facilities. Casino Operations – Cambodia Comprises the Star Vegas Resort and Club, operating in Cambodia. These operations include hotel accommodation and gaming and leisure facilities. Corporate Operations Comprises of the development and implementation of corporate strategy, commercial negotiations, corporate finance, treasury, management accounting, corporate governance and investor relations functions. INTERSEGMENT TRANSACTIONS Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.