NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
Financial Statements
121
Annual Report 2014
24. Intangible assets
The Group
2014
2013
$’000
$’000
Goodwill arising on consolidation
9,564
9,539
Cost
Beginning of financial year
9,539
9,477
Currency translation differences
25
62
End of financial year
9,564
9,539
Net book value
9,564
9,539
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGU”), identified as the subsidiaries in the PRC
according to country of operation and business segments. The business segment refers to ship repair, ship
building and marine engineering.
The recoverable amount of a CGU is determined based on value-in-use calculations. Cash flow projections
used in the value-in-use calculations were based on financial forecasts approved by management covering
a three-year period. Cash flows beyond 2014 were 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:
2014
2013
Growth rate
1
3.50%
3.70%
Discount rate
2
4.36%
4.22%
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 2014
and 31 December 2013.
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.
