2013 Apr 15 Annual Report 2012 - Phosphagenics

Notes to the consolidated fi nancial statements
10. INTANGIBLE ASSETS (CONTINUED)
Intangible assets with an indefi nite life or not available for use are tested for impairment at least annually
at 31 December, or earlier where an indicator of impairment arises. The recoverable amount has been
determined by calculation of the value in use being the present value of future cash fl ows expected
to be derived from intangible assets, excluding expansionary activities, fi nance costs and income tax.
Asset recoverable amounts (value in use) are calculated using discounted cash fl ow methodology,
and applying sensitivity analysis to various input assumptions.
Key assumptions of these valuations include:
• management opinion on future cash fl ows on a product by product basis
• different residual lifetime of acquired patents
• allocation of products’ value to underlying patents
• probability adjustments (ranging from 0.4275 to 1.00) to individual cash fl ows, refl ecting various types
of risks
• no terminal value
The pre-tax discount rate used was 20%, based on:
• the required rates of return on listed companies in a similar business
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• the indicative rates of return required by suppliers of venture capital
• the Groups current level of fi nancial gearing
Recoverable amounts were assessed from an individual patent asset perspective. Based on the
recoverable amounts, no impairment exists for intangible assets with an indefi nite useful life for the year
ended 31 December 2012 (2011: NIL).
Development costs
Development expenditure on an internal project is recognised as an intangible asset only when
Phosphagenics can demonstrate the technical feasibility of completing the intangible asset so that it will
be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset
will generate future economic benefi ts, the availability of resources to complete the development and the
ability to measure reliably the expenditure attributable to the intangible asset during its development.
Capitalised development costs relating to patents are amortised from the date signifi cant revenues are
carried over the remaining patent life.
Development expenditure is tested for impairment annually, when the asset is not yet available
for use, or more frequently when an indication of impairment arises during the reporting period.
At 31 December 2012 zero development costs were impaired and recognised as an expense (2011: Nil).
11. CURRENT TRADE AND OTHER PAYABLES
2012
$’000
2011
$’000
Trade payables 512 1,997
Accrued expenses 569 1,123
Goods and services tax (GST) payable 20 29
Other - 209
Total 1,101 3,358
Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.
Trade payables are non-interest bearing and are generally settled on 30 day terms.
Other payables are non-trade payables and non-interest bearing.
PHOSPHAGENICS ANNUAL REPORT 2012