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PSA International Pte Ltd Annual Report 2010

N otes to the Financial Statements

Year ended 31 December 2010

2.6

Goodwill

Goodwill arising on the acquisition of subsidiaries and jointly-controlled entities is presented in intangible assets. Goodwill arising on the acquisition of associates is presented together with investments in associates.

Goodwill represents the excess of:

  • the fair value of the consideration transferred; plus

  • the recognised amount of any non-controlling interests in the acquiree; plus

  • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree,

over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in income statement.

Goodwill is measured at cost less accumulated impairment losses and is subject to testing for impairment, as described in note 2.6.

Software development costs

Development expenditure attributable to projects where the technical feasibility and commercial viability of which are reasonably assured, is capitalised and amortised over the time period for which the tangible benefits of the projects are expected to be realised. Software development costs are not amortised until the completion date and when the software is ready for use. Amortisation is charged to the income statement on a straight-line basis over its estimated useful life of 3 years.

Computer software

Computer software, which is acquired by the Group, where it is not an integral part of the related hardware, is treated as an intangible asset. Computer software is amortised in the income statement on a straight-line basis over its estimated useful life of 3 years, from the date on which it is ready for use.

Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets with finite useful lives, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. Non-financial assets with infinite useful lives or not available for use are tested for impairment on an annual basis.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups.

Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination.

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