DEFINING DESIGN
QUALITY
68
14.
Intangible assets (cont’d)
The goodwill and customer relationships were tested for impairment at the end of the reporting year. To assess the
impairment, the Group estimated the value in use (Level 3) of the respective subsidiaries, being the lowest cash
generating unit (“CGU”) to which the goodwill and customer relationships are allocated. Estimating the value in
use requires the Group to make an estimate of the expected future cash flows from each subsidiary, based on the
financial budgets approved by management covering a three-year period. The calculations of value in use for the
CGUs are most sensitive to the following assumptions:
-
Budgeted gross margins – gross margins are estimated based on values achieved in the past years. These are
generally adjusted over the budget period for anticipated changes in performance.
-
The pre-tax discount rates applied to the cash flow projections and the forecasted growth rates used to
extrapolate cash flows beyond the three-year period were between 16.2% to 18.6% (2013: 13.1% to 18.0%) and
1% to 2% (2013: 1% to 2%) per annum respectively. The discount rates reflect management’s estimate of the
risks specific to the subsidiaries and approximate the weighted average cost of capital for the subsidiaries.
The growth rates used are based on management’s best estimate of the long-term average growth rate
relevant to the business activities of the CGUs.
Management believes that any reasonably possible change in the key assumptions on which each subsidiary
recoverable amount is based on would not cause the carrying amount to exceed its recoverable amount. The
quantitative information about the value in use measurement using significant unobservable inputs for each CGU
are consistent with those used for the measurement last performed.
During the reporting year ended 31 December 2014, no impairment loss (2013: $Nil) was recognised to write down
the carrying amount of goodwill and customer relationships attributable to the subsidiaries as the values in use were
estimated to be higher than the respective carrying amounts.
15.
Investments in subsidiaries
Company
2014
2013
$’000
$’000
Unquoted equity shares
Balance at beginning of the year
20,409
20,552
Addition
–
210
Transfer from investments in associates
2,637
–
Disposal
–
(353)
Balance at end of the year
23,046
20,409
Impairment loss
(550)
(550)
Carrying amount of investments
22,496
19,859
No impairment loss (2013: $Nil) was recognised for the reporting year ended 31 December 2014 as the recoverable
amounts were in excess of the carrying amounts.
Notes to the Financial Statements
31 December 2014
