Page 121 - ar2013.pdf

NOTES TO THE FINANCIAL STATEMENTS
For the Ànancial year ended 31 December 2013
119
Annual Report 2013
F i nanc i a l Statement s
24. Intangible assets
The Group
2013 2012
$’000 $’000
Goodwill arising on consolidation 9,539 9,477
Cost
Beginning of financial year 9,477 9,526
Currency translation differences 62 (49)
End of financial year 9,539 9,477
Net book value 9,539 9,477
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGU”), identified as the subsidiaries in the People’s
Republic of China (“PRC”) according to country of operation and business segments. The business segment refers
to ship repair, ship building and marine engineering activities.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash
flow projections based on the existing capacity of the CGU. Cash flows beyond 2013 are extrapolated using the
estimated growth rate stated below. The growth rate does not exceed the long-term average growth rate for ship
repair, ship building and marine engineering business in the PRC in which the CGU operates.
Key assumptions used for value-in-use calculations:
2013 2012
Growth rate1 3.70% 3.50%
Discount rate2 4.22% 4.59%
1 Weighted average growth rate used to extrapolate cash flows beyond the budget period
2 Pre-tax discount rate applied to the pre-tax cash flow projections
These assumptions were used for the analysis of the CGU within the business segment. Management determined
budgeted gross margin based on past performance and its expectations of the market development. The weighted
average growth rate used was consistent with the forecasts included in industry reports. The discount rate used was
pre-tax and reflected specific risks relating to the relevant segments.
The impairment test has revealed that the recoverable amount of the CGU is higher than its carrying amount.
Hence, there is no impairment charge recognised for the financial years ended 31 December 2013 and 31
December 2012.
In addition, a decrease in the growth rate or an increase in the discount rate by 1% per annum would not result in
any impairment charge for both financial years.
25. Deferred expenditure
Deferred expenditure relates to prepaid rental for leasehold land on operating leases and is amortised on the
straight-line basis over the lease period.