Annual Report - QuamIR

Notes to the Consolidated Financial Statements (Continued)
4 Critical accounting estimates and judgements (Continued)
(b) Toll Road – Estimated impairment of
concession right
The Group tests annually whether intangible assets have suffered
any impairment in accordance with the accounting policy. The
calculations use pre-tax cash flow projections based on financial
budgets approved by management.
4
(b)
The unit prices used for the analysis are determined by
management making reference to the agreements approved by
the government authorities. The weighted average growth rates
used are consistent with the forecasts expected in the industry.
The discount rates used are pre-tax and reflect specific risks
relating to the relevant segments.
If the discount rate used in the value-in-use calculation had
been 10% higher or lower than management’s estimates at 31
December 2011, the profit for the year arising from the Group’s
concession right (toll road) would have been decreased by
HK$101.1 million or increased by HK$224.8 million (2010: loss
for the year arising from the Group’s concession right (toll road)
would have been increased by HK$50.7 million or decreased by
HK$294.8 million).
10%
101,100,000224,800,000
50,700,000 294,800,000
The Group has performed impairment assessment by using the
discounted cash flow model with the assumptions that traffic
flow would increase by 11% every year on average, the tariff
rate would increase by 7.5% every five years and the discount
rate is 10.48%. According to the impairment assessment, the
recoverable amount of Guilin Tollroad is RMB1,012.8 million,
which is barely higher than the carrying value as at 31 December
2011. Considering the recoverable amount is approximate to
the carrying value, the Group has performed sensitivity test on
the discounted cash flow model. If all other assumptions remain
unchanged, each of the changes of the following assumptions
on a stand-alone basis would cause the recoverable amount of
Guilin Tollroad to reduce to its carrying amount:
11%7.5%
10.48%
1,012,800,000
– Average traffic flow decreases by 2.7%,
– 2.7%
– Tariff growth rate decreases to 6.09% every five years,
–
6.09%
– Discount rate increases to 10.8%.
– 10.8%
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