3.  Significant accounting judgments, estimates and assumptions (cont’d) 3.2  Estimates and assumptions (cont’d) Useful lives of plant and machinery Deferred tax assets Derecognition of bills receivable Provision for product warranty NOTES TO THE CONSOLIDATED FINANCIAL  STATEMENTS  (RMB AND US$ AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE DATA)  The costs of plant and machinery of the Group are depreciated on a straight-line basis over the useful lives of the  plant and machinery. Management estimates the useful lives of the plant and machinery to be within 3 to 20 years.  These are common life expectancies applied in the industry. Changes in the expected level of usage and technological  developments could impact the economic useful lives and the residual values of the plant and machinery, therefore  future depreciation charges could be revised. The carrying amount of the Group’s plant and machinery as of  December 31, 2013 is disclosed in Note 11. A 5% decrease in the expected useful life of the plant and machinery from  management’s estimate would decrease the Group’s profit before tax approximately Rmb 15,564 (US$2,543) (2012:  Rmb 13,629). Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be  available against which the losses can be utilized. Significant management judgment is required to determine the  amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable  profits together with future tax planning strategies. The carrying amounts of deferred tax assets as of December 31,  2012 and 2013 are Rmb 353,382 and Rmb 389,077 (US$63,574) respectively. The Group has unrecognized tax loss carried forward amounting to Rmb 400,326 and Rmb 354,606 (US$57,941) as  of December 31, 2012 and 2013 respectively. These losses relate to subsidiaries that have a history of losses, do not  expire and may not be used to offset taxable income elsewhere in the Group. The subsidiary has no temporary taxable  differences or any tax planning opportunities available that could partly support the recognition of these losses as  deferred tax assets. If the Group was able to recognize all unrecognized deferred tax assets, profit would increase by  Rmb 60,690 (US$9,917) for year ended December 31, 2013 (2012: Rmb 68,238). The Group sells bills receivable to banks on an ongoing basis. The buyer is responsible for servicing the receivables  upon maturity of the bills receivable. This involves management assumptions relating to the transfer of risks and  rewards of the bills receivable when discounted. At the time of sale of the bills receivable to the banks, the risks and  rewards relating to the bills receivable are substantially transferred to the banks. Accordingly, bills receivable are  derecognized, and a discount equal to the difference between the carrying value of the bills receivable and cash  received is recorded. Please refer to Note 19. The Group recognizes a provision for product warranty in accordance with the accounting policy stated on Note  2.3(r). The Group has made assumptions in relation to historical warranty cost per unit of engines sold. The carrying  amounts of the provision of product warranty as at December 31, 2012 and 2013 were Rmb 268,006 and Rmb 305,938  (US$49,989) respectively. China Yuchai International Limited | Annual Report 2013 66