PSA International Pte Ltd Annual Report 2010
N otes to the Financial Statements
Year ended 31 December 2010
Computer software $’000
Cost At 1 January 2009/ 31 December 2009/ 31 December 2010
Accumulated amortisation At 1 January 2009 Amortisation charge for the year At 31 December 2009 Amortisation charge for the year At 31 December 2010
140 277 417 277 694
Carrying amount At 1 January 2009 At 31 December 2009 At 31 December 2010
692 415 138
Impairment testing for cash-generating units (CGUs) containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s port business in the country of operation, which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes. The carrying value of goodwill primarily relates to the Group’s port business CGUs in Europe of $469.5 million (2009: $477.8 million). The remaining goodwill relates to the Group’s port business CGUs in Asia.
The recoverable amounts of these port business CGUs were based on the “value-in-use” approach. They were determined by discounting the future cash flows generated from the continuing use of these units. The cash flow projections were done as part of the financial budgets approved by management. Key assumptions include the expected growth in revenues and gross margin, timing of future capital expenditures, growth rates and market development expectations in the port business based on both external sources and internal sources (historical data). The discount rates for the test were based on country specific risk adjusted discount rates and ranged from 6.00% to 15.50% (2009: 6.50% to 14.00%).
Judgement is required to determine key assumptions adopted in the cash flow projections and changes to the key assumptions can significantly affect these cash flow projections and therefore the results of the impairment tests.
At 31 December 2010, the recoverable amount of a CGU in Asia was determined to be lower than the carrying amount and an impairment loss of $47.5 million (2009: impairment loss of $12.1 million in a CGU in Europe) was recognised in other
operating expenses in the income statement.
Impairment loss on port use rights
At 31 December 2010, a shortfall in the carrying amount of port use rights of a foreign subsidiary was identified. The shortfall was determined when the value in use of the asset fell below the carrying value. Based on the assessment, an impairment loss of $13.5 million (2009: impairment loss of $49.0 million in the port use rights of a foreign jointly- controlled entity) was recognised in other operating expenses in the income statement.