Directors' Report - Alibaba

NOTES TO THE FINANCIAL STATEMENTS
For the year ended December 31, 2010
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (Continued)
(c) Depreciation and amortization
The costs of property and equipment and intangible assets are charged ratably as depreciation and amortization expenses,
respectively, over the estimated useful lives of the respective assets using the straight-line method. The Group periodically
reviews changes in technology and industry conditions, asset retirement activity and residual values to determine
adjustments to estimated remaining useful lives and depreciation and amortization rates. Actual economic lives may differ
from estimated useful lives. Periodic reviews could result in a change in estimated useful lives and therefore depreciation
and amortization expenses in future periods.
(d) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated
in Note 2.7. The Group tested the recoverable amount of goodwill based on value-in-use calculations and determined
that there was no impairment as of December 31, 2010. The value-in-use calculations primarily use cash flow projections
based on financial forecasts prepared by management and an estimated terminal value. The expected growth in revenues
and gross margin, timing of future capital expenditures, selection of discount rates and terminal growth rate were based
on actual and prior year performance and market development expectations. The periods of the financial forecasts range
from 5 to 10 years. The Group considers that cashflow forecast that is beyond 5 years is justifiable given the industry
nature and the projection of growth rate beyond 5 years is based on the growth rate assumed in year 5. For the purpose
of the impairment test, the Group adopted a discount rate of 17% and a terminal growth rate of 2% to 5% to extrapolate
cash flows beyond the financial forecasts. Judgment is required to determine key assumptions adopted in the cash flow
projections and changes to key assumptions can significantly affect these cash flow projections and therefore the results of
the impairment tests.
4 SEGMENT INFORMATION
The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are
used to make strategic decisions, assess performance and allocate resources. In the respective periods presented, the Group had
one single operating segment, namely the provision of the B2B services. Although the B2B services consist of the operations of
the international marketplace and the China marketplace, the chief operating decision-maker considers that these underlying
marketplaces are subject to similar risks and returns. Therefore, it has only relied on the reported revenue associated from these
underlying marketplaces in making financial decisions and allocating resources. Significant costs incurred associated with the
revenue generated are not separately identified by marketplaces for the review of the chief operating decision-maker.
The Group mainly operates its businesses in the PRC. In 2010, the majority of the revenue from the external customers is
contributed from the PRC (2009: same).
As of December 31, 2010, the majority of the non-current assets other than financial instruments and deferred tax assets is
located in the PRC (2009: same).
For the year ended December 31, 2010, there is no revenue derived from a single external customer amounting to 10% or more
of the Group’s total revenue (2009: same).
Alibaba.com Limited Annual Report 2010
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