Mandarin Oriental International Limited - Mandarin Oriental Hotel ...

8 Intangible assets
Land use Computer Development
Goodwill rights software costs Total
US$m US$m US$m US$m US$m
2008
Cost 23.3 194.3 2.6 7.2 227.4
Amortization – (3.5 ) (0.5 ) – (4.0 )
Net book value at 1st January 23.3 190.8 2.1 7.2 223.4
Exchange differences – 1.2 – (0.6 ) 0.6
Additions 0.6 – 1.4 8.1 10.1
Amortization charge – (0.6 ) (0.9 ) – (1.5 )
Write-off – – – (0.3 ) (0.3 )
Net book value at 31st December 23.9 191.4 2.6 14.4 232.3
Cost 23.9 195.5 4.0 14.4 237.8
Accumulated amortization – (4.1 ) (1.4 ) – (5.5 )
23.9 191.4 2.6 14.4 232.3
2007
Cost (restated) 23.3 195.0 0.8 3.7 222.8
Amortization – (3.0 ) (0.1 ) – (3.1 )
Net book value at 1st January (restated) 23.3 192.0 0.7 3.7 219.7
Exchange differences – (0.7 ) 0.1 0.1 (0.5 )
Additions – – 1.7 3.4 5.1
Amortization charge – (0.5 ) (0.4 ) – (0.9 )
Net book value at 31st December 23.3 190.8 2.1 7.2 223.4
Cost 23.3 194.3 2.6 7.2 227.4
Accumulated amortization – (3.5 ) (0.5 ) – (4.0 )
23.3 190.8 2.1 7.2 223.4
Management has performed an impairment review of the carrying amount of goodwill at 31st December 2008 and
has concluded that no impairment is required. For the purpose of impairment testing, goodwill acquired has been
allocated to the respective hotels and is reviewed for impairment based on individual hotel forecast operating
performance and cash flows. Cash flow projections for impairment reviews 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 2% to 17% to extrapolate
cash flows, which may vary across the Group’s geographical locations, and are based on management expectations of
the market development; and pre-tax discount rates of between 10% to 13% applied to the cash flow projections. The
discount rates used reflect business specific risks relating to the business life-cycle and geographical location.
The amortization charges are included in cost of sales in the consolidated profit and loss account.
Land use rights represent the upfront payments to acquire long-term interests in property leased by the principal
subsidiaries listed on pages 74 and 75.
Annual Report 2008 51