FY 2010 Annual Report - Part II - Orascom Development

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ODH Annual Report 2010 16 INVESTMENT PROPERTY ___________________________________________________________________________________ The Group has historically accounted for all its property as property, plant and equipment and measured them at cost less accumulated depreciation and / or accumulated impairment losses under IAS 16 (“property, plant and equipment”). The Group has restated its previously reported financial information including these financial statements to reflect the retrospective restatement of the Mauritius real-estate from property, plant and equipment to investment property measured at fair value as of 1 January 2009 (see notes 3.3, 3.19 and 4.2.9). The following table summarizes movements, which have occurred, during the current reporting period, on the carrying amount of investment property. CHF 31-Dec-10 31-Dec-09 1-Jan-09 Balance at the beginning of the year before restatement as of 71,786,344 65,834,078 - Transfer from property, plant and equipment 3,822,824 1,249,173 58,893,243 Revaluation gain resulting from accounting policy change - - 6,940,835 Revaluation gain 14,120,934 5,170,672 - Foreign currency translation adjustment (11,374,867) (467,579) - Restated balance as of 78,355,235 71,786,344 65,834,078 The Group’s investment properties are located in Mauritius and in Egypt. The transfer from property, plant and equipment to investment property during 2009 and 2010 relates to several premises located in El Gouna (Egypt) which have been leased to third parties for the first time. Their fair values at 31 December 2010, at 31 December 2009 and 1 January 2009 have been arrived at on the basis of valuations carried out at these dates by Messrs Alan Tinkler, Ramlackhan & Co and Fincorp & CPM, independent valuation specialists not related to the Group. They are both accredited valuators in Mauritius and Egypt and have appropriate qualifications and recent experience in the valuation of properties in the relevant locations. The valuation for the investment property in Egypt was arrived at by reference to market evidence of transaction prices for similar properties. Due to the lack of recent, comparable property trades, the valuation for the investment property in Mauritius was based on the summation approach. This approach considers the value of land using a comparative method and the value of buildings and other improvements based of their depreciated replacement cost defined as being the current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimization. Both valuation methods are in conformity with the International Valuation Standards. All of the Group’s investment property is held under freehold interests. The following table summarizes income and direct operating expenses from investment properties rented out to third parties. CHF 2010 2009 Rental income from investment properties (i) 7,161,744 5,062,180 Direct operating expenses (including repairs and maintenance) arising from investment properties that generated rental income during the period 68,228 117,421 (i) See note 7.1 for further information on the Group’s rental income. F-42
Orascom Development Holding (Consolidated Financial Statement) 17 GOODWILL ___________________________________________________________________________________ CHF 2010 2009 Cost Balance at beginning of year 30,432,009 33,368,405 Derecognized amount on disposal of former Garranah subsidiaries (see note 34) (17,731,566) - Derecognized amount of former Falcon subsidiary due to change of scope of consolidation (see note 47) - (2,025,920) Effect of foreign currency (4,491,636) (910,476) exchange differences 8,208,807 30,432,009 17.1 Allocation of goodwill to cashgenerating units Annual test for impairment An impairment test of goodwill was performed by the Group in order to assess the recoverable amount of its goodwill. No impairment was recorded as a result of this test. All cashgenerating units were tested for impairment using the Discounted Cash Flow (DCF) method in accordance with IFRS. The Group’s business segments have been identified as cash– generating units. The DCF model utilized to evaluate the recoverable amounts of these units was based on a five year projection period. The model estimated the effects of capital expenditures and assumed a positive development of the cashgenerating units in the future. The carrying amount of goodwill that has been allocated for impairment testing purposes is as follows: CHF Segment 2010 2009 Garranah Group of companies * Hotel companies * Tours operations - 20,866,473 Hotels 8,208,807 9,565,536 8,208,807 30,432,009 *Each subsidiary considered separately Hotels The recoverable amount of this cash-generating unit has been determined based on a value in use calculation which uses cash flow projections based on the financial budgets approved by the directors covering a five-year period and an average discount rate of 14% to 16% per annum (2009: 11% to 14% per annum). Cash flow projections during the budget period were based on a steady, annual growth rate. The cash flows beyond that five year period were extrapolated using no additional growth rate, as individual hotels have reached their peak. The directors believe that any reasonably possible change in the key assumptions (sensitivity analysis) on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cashgenerating unit. F-43
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FY 2010 Annual Report - Part II - Orascom Development

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