Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

C Foreign currencies (continued)
Net exchange differences arising from the translation of the financial statements of subsidiaries, associates and
joint ventures expressed in foreign currencies are taken directly to exchange reserves. On the disposal of these
investments, such exchange differences are recognized in the consolidated profit and loss account as part of the
profit or loss on disposal. Exchange differences on other non-current investments are dealt with in reserves as
part of the gains and losses arising from changes in their fair value.All other exchange differences are dealt with
in the consolidated profit and loss account.
Goodwill and fair value adjustments arising on acquisition of a foreign entity after 1st January 2003 are treated
as assets and liabilities of the foreign entity and translated into United States Dollars at the rate of exchange
ruling at the year end.
D Impairment
Assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment.
Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.An impairment loss is recognized for the amount by
which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s fair value
less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level
for which there are separately identifiable cash flows.
E Intangible assets
i) Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary, associate or joint venture at the effective date of acquisition, and,
in respect of an increase in holding in a subsidiary undertaking, the excess of the cost of acquisition over the
carrying amount of the proportion of the minority interests acquired. If the cost of acquisition is less than
the fair value of the net assets acquired or the carrying amount of the proportion of the minority interest
acquired, the difference is recognized directly in the consolidated profit and loss account. Goodwill on
acquisitions of subsidiary undertakings is included in intangible assets. Goodwill on acquisitions of associates
and joint ventures is included in investment in associates and joint ventures.
Goodwill is tested annually for impairment and carried at cost, after netting off accumulated amortization
at 31st December 2003, less accumulated impairment losses.
The profit or loss on disposal of subsidiaries, associates and joint ventures includes the carrying amount of
goodwill relating to the entity sold.
ii) Land use rights are payments to acquire long-term interests in owner-occupied property.These payments are
stated at cost and are amortized over the useful life of the lease which includes the renewal period if the lease
can be renewed without significant cost.
ANNUAL REPORT 2005 33