Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8 Intangible assets
2005
Net book value at 1st January
MANDARIN ORIENTAL INTERNATIONAL LIMITED
Land use
Goodwill rights Total
US$m US$m US$m
– as previously reported 21.0 192.8 213.8
– prior period adjustments (refer note 22) 5.6 – 5.6
– as restated 26.6 192.8 219.4
Addition 1.9 – 1.9
Classified as non-current asset held for sale (refer note 23) (5.2) – (5.2)
Amortization – (0.6) (0.6)
Net book value at 31st December 23.3 192.2 215.5
2004
Net book value at 1st January
– as previously reported 20.7 193.4 214.1
– prior period adjustments (refer note 22) 5.6 – 5.6
– as restated 26.3 193.4 219.7
Addition 0.3 – 0.3
Amortization – (0.6) (0.6)
Net book value at 31st December 26.6 192.8 219.4
The Directors have performed an impairment review of the carrying amount of goodwill at 31st December 2005
and have concluded that there is no impairment. For the purpose of impairment testing, goodwill acquired has
been allocated to the respective hotels which is reviewed for impairment based on forecast individual hotel
operating performance and cash flows. Cash flow projections are based on individual hotel budgets prepared
on the basis of assumptions reflective of the prevailing market conditions, and are discounted appropriately. Key
assumptions used for value in use calculations include average growth rates of between 4% to 6% to extrapolate
cash flows which may vary across the Group’s geographical location, and are based on management expectations
of the market development; and pre-tax discounted rates of between 8% to 13% applied to the cash flow
projections.The discounted rates used reflect risks relating to the business cycle and geographical location.
The addition in 2005 represented goodwill arising on the acquisition of a further 22.76% interest in Mandarin
Oriental, Jakarta.
Land use rights represent the upfront payments to acquire long-term interests in property leased by the principal
subsidiaries listed on pages 70 and 71.