ArcelorMittal South Africa 2007 Annual Report Page 100 Notes to the group and company annual financial statements continued for the year ended 31 December 2007 5. 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. The nature of these estimation assumptions is inherently long term and future experience may result in actual amounts differing from these estimates as applied in the reported financial results. 5.1 Useful lives and residual values of property, plant and equipment and intangible assets The estimates of remaining useful lives as translated into depreciation rates are detailed in the property, plant and equipment (note 3.11) and the intangible assets (note 3.15) accounting policies. These rates and the residual lives of the assets are reviewed annually taking cognisance of: •  forecasted commercial and economic realities; •  benchmarking within the greater ArcelorMittal Group; and •  guidance received from expert international valuers. 5.2 Valuation of share-based payments The critical estimates as used in the Binomial Matrix valuation models for the equity-settled share options plan and cash- settled share appreciation rights are detailed in note 36. 5.3 Valuation of financial instruments The carrying amount of over-the-counter stand-alone derivative financial instruments is based on their fair value at the balance sheet date. The values of these derivative instruments fluctuate on a daily basis and the actual amounts realised may differ materially from the value at which they are reflected at the balance sheet date. Correspondingly, the maturity profile for such derivatives, as presented in note 32.15, may be affected by such fluctuations. The significant application of estimates was made in the valuation of the bifurcated embedded derivative instruments, and in the determination of the disclosed valuation of unlisted equity accounted investments. These assumptions for both sets of valuations are detailed in note 32.11 and 32.18 respectively. 5.4 Asset retirement obligations and their related assets, and environmental remediation obligation estimates Estimating the future cash flows associated with obligations recognised in terms of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and the related asset components recognised in terms of IAS 16, Property, Plant and Equipment, is complex. Existing laws and guidelines are not always clear as to the required end-state situation. The provisions are also affected by changing technologies and political, environmental, safety, business and legal considerations. Management assesses long-term operational plans, technological and legislative developments, guidelines issued by the authorities, advice from external environmental experts, and computations provided by quantity surveyors in order to derive an estimated future cash flow profile to serve as basis for the computation of the obligations and related assets. For the majority of operational sites, with long-term operating horizons, it is not possible to reliably measure the associated costs of asset retirement and environmental remediation. 5.5 Deferred taxation assets Deferred tax assets are recognised to the extent that it is probable that the taxable income will be available in future against which they can be utilised. Future taxable profits are estimates based on business plans which include estimates and assumptions regarding economic growth, interest, inflation, taxation rates and competitive forces. 5.6 Commercial arrangements containing financial leases A number of commercial supply arrangements have been determined by management to contain embedded finance leases. For the purpose of applying the requirements of IAS 17, Leases, payments and other considerations required by the arrangement are separated at the inception of the arrangement into those for the lease and those for other elements on the basis of their relative fair values. The minimum lease payments include only payments for the lease (i.e. the right to use the asset) and exclude payments for other elements in the arrangement (e.g. for goods and services supplied).