KINGSMEN CREATIVES LTD
ANNUAL REPORT
2014
51
2.
Summary of significant accounting policies (cont’d)
Intangible assets
An identifiable non-monetary asset without physical substance is recognised as an intangible asset at acquisition
cost if it is probable that the expected future economic benefits that are attributable to the asset will flow to the
Group and the cost of the asset can be measured reliably. After initial recognition, an intangible asset with finite
useful life is carried at cost less any accumulated amortisation and accumulated impairment losses. Intangible assets
with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there
is an indication that the intangible assets may be impaired. Intangible assets with indefinite useful lives or not yet
available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that
the carrying amounts may be impaired individually or at the cash-generating unit level. An intangible asset with an
indefinite useful life is not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed
annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life
from indefinite to finite is made on a prospective basis. An intangible asset is regarded as having an indefinite useful
life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the
asset is expected to generate net cash inflows for the Group.
The amortisable amount of an intangible asset with finite useful life is allocated on a systematic basis over the best
estimate of its useful life from the point at which the asset is ready for use. The amortisation period and amortisation
method are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the
amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The estimated
useful lives are as follows:
Customer relationships
-
5 - 6 years
Identifiable intangible assets acquired as part of a business combination are initially recognised separately from
goodwill if the asset’s fair value can be measured reliably, irrespective of whether the asset had been recognised by
the acquiree before the business combination. An intangible asset is considered identifiable only if it is separable or
if it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from
the acquiree or from other rights and obligations.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is
derecognised.
Impairment of non-financial assets
Irrespective of whether there is any indication of impairment, an annual impairment test is performed on an intangible
asset with an indefinite useful life or an intangible asset not yet available for use. The carrying amount of other non-
financial assets is reviewed at the end of each reporting period for indications of impairment and where an asset is
impaired, it is written down through profit or loss to its estimated recoverable amount.
The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in profit
or loss. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of
disposal and its value in use. When the fair value less costs of disposal method is used, any available recent market
transactions are taken into consideration. If no such transactions can be identified, an appropriate valuation model
is used. These calculations are corroborated by valuation multiples or other available fair value indicators. When
the value in use method is adopted, in assessing the value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). The Group bases its impairment
calculations on detailed budgets and forecast calculations which are prepared separately for each of the Group’s
cash generating units to which the individual assets are allocated. These budgets and forecast calculations generally
cover a period of three years. For longer periods, a long-term growth rate is calculated and applied to project future
cash flows after the third year.
At the end of each reporting period, non-financial assets, other than goodwill, with impairment loss recognised in
prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised. Such reversal is recognised in profit or loss.
Inventories
Inventories are measured at the lower of cost (weighted average method) and net realisable value. Cost includes all
costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location
and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale. A write down on cost is made where the
cost is not recoverable or if the selling prices have declined.
Notes to the Financial Statements
31 December 2014
