notes to the financial statements - Investor Relations

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2011
5 INTANGIBLE ASSETS (CONT’D)
The amortisation charge is recognised in the following line items in profit or loss:
Annual Report 2011
Group Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Administration expenses 329 282 173 185
Cost of sales 20 16 8 –
Other operating expenses 4,959 1,301 – –
5,308 1,599 181 185
Impairment test for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the following cash-generating units, which represent the lowest
level within the Group at which the goodwill is monitored for internal management purposes:
Group
2011 2010
$’000 $’000
LME licence 3,276 13,055
General warehousing 11,844 –
Collateral management (“CMA”) 6,117 6,117
Freight forwarding 3,240 3,148
Defence logistics 5,482 5,482
Commodity marketing and supply chain management (“SCM”) 38,978 –
Others 33 132
68,970 27,934
Due to the restructuring in Europe during the year, the Group reorganised its reporting structure in a manner that changes
the composition of cash-generating units to which goodwill has been allocated. As a result, certain entities previously falling
under LME licence are now reallocated to general warehousing.
The recoverable amount of the cash-generating units is based on value-in-use calculations which were determined by
discounting future cash flows generated from continuing use of the units. The key assumptions used for projecting future
cash flows are as follows:
LME
licence
General
warehousing CMA
Freight
forwarding
Defence
logistics SCM
Revenue annual growth rate 3% - 12% 3% - 18% 3% - 14% 5% - 7% 0% - 50% 3% - 29%
Discount rate 8% 8% 8% 13% 8% 8%
The budgeted gross margins used in the forecasts are based on past performance trends and expectations of market
developments. The average growth rate used is consistent with past performance trends and forecasts included in industry
reports. The discount rates used are pre-tax and reflect the weighted average cost of capital adjusted for the risks specific
to the respective cash-generating units.
Cash flows are projected based on financial budgets approved by management covering 2012 and are extrapolated using
the growth rates and gross margins as described above for the next four years. The terminal value is estimated by using the
fifth year cash flow through perpetuity at zero growth rate and discounting it.
The Group believes that any reasonably possible changes in the above key assumptions are not likely to cause any of the
recoverable amounts to be materially lower than the related carrying amounts.
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