Annual Report 2011 - Food Junction

Notes to the Financial Statements (cont’d)
31 December 2011
5. Intangible assets (cont’d)
Amortisation expense
The amortisation of management service agreement and order backlog is included in the “Other
expenses” line item in profit or loss.
Impairment testing of goodwill and trademark
Goodwill acquired through business combination and trademark has been allocated to two cashgenerating
units (“CGU”), under the food and beverages (“F&B”) segment for impairment testing.
The carrying amounts of goodwill and trademark allocated to each CGU are as follows:
Organic growth Pre-tax discount
Goodwill Trademark rates per annum rate per annum
2011 2010 2011 2010 2011 2010 2011 2010
$’000 $’000 $’000 $’000 % % % %
Malones Holdings Pte. Ltd. 1,487 1,487 3,977 3,977 4.0 4.0 11.5 11.9
All Around Limited 3,487 3,487 – – 3.0 – 8.2 –
The recoverable amount of the CGU has been determined based on value in use calculations using cash
flow projections from financial budget approved by management covering a five-year period.
The calculations of value in use for the CGU are most sensitive to the following assumptions:
Budgeted gross margins – Gross margins are based on average values achieved in the three years
preceding the start of the budget period. These are increased over the budget period for anticipated
efficiency improvements.
Growth rates – The forecasted growth rate is based on published industry research, taking into
consideration China economy to expand around 8% and the long-term consumer price inflation of
China of 4%.
Pre-tax discount rates – The discount rate reflects the current market assessment of the risks. In
determining the appropriate discount rate for the CGU, regard has been given to the yield on a tenyear
China government bond at the valuation date.
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