2006 - TCL Communication Technology Holdings Limited

TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED
Notes to Financial Statements
31 December 2006
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill (continued)
Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation
within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in
this circumstance is measured based on the relative values of the operation disposed of and the portion of the cashgenerating
unit retained.
An impairment loss recognised for goodwill is not reversed in a subsequent period.
Excess over the cost of business combinations
Any excess of the Group’s interest in the net fair value of the acquirees’ identifiable assets, liabilities and contingent
liabilities over the cost of the acquisition of subsidiaries (previously referred to as negative goodwill), after reassessment,
is recognised immediately in the income statement.
Impairment of non-financial assets other than goodwill
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than
inventories, deferred tax assets and financial assets), the asset’s recoverable amount is estimated. An asset’s recoverable
amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to
sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets, in which case, the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In
assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. An
impairment loss is charged to the income statement in the period in which it arises in those expense categories
consistent with the function of the impaired asset, unless the asset is carried at a revalued amount, in which case the
impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has
been a change in the estimates used to determine the recoverable amount of that asset, however not to an amount
higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no
impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to the
income statement in the period in which it arises.
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Annual Report 2006