Grande AR (E). - the grande holdings limited

notes to financial statements
31 December 2005
2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS
(continued)
(c) Business combinations: (continued)
In the current year, the Group has also applied HKAS 21 “The effects of
changes in foreign exchange rates” which requires goodwill to be treated as
assets and liabilities of the foreign operation and translated at closing rate at
each balance sheet date. Previously, goodwill arising on acquisitions of foreign
operations was reported at the historical rate at each balance sheet date. In
accordance with the relevant transitional provisions in HKAS 21, goodwill arising
on acquisitions prior to 1 January 2005 is treated as a non-monetary foreign
currency item. Therefore, no prior period adjustment has been made.
Excess of the Group’s interest in the net fair value of acquiree’s identifiable
assets, liabilities and contingent liabilities over cost (previously known as
“negative goodwill”):
In accordance with HKFRS 3, any excess of the Group’s interest in the net fair
value of acquiree’s identifiable assets, liabilities and contingent liabilities over
the cost of acquisition (“discount on acquisition”) is recognised immediately in
the income statement in the period in which the acquisition takes place. In
previous periods, negative goodwill arising on acquisitions prior to 1 January
2001 was held in reserves, and negative goodwill arising on acquisitions after
1 January 2001 was presented as a deduction from assets and released to
income based on an analysis of the circumstances from which the balance
resulted. In accordance with the relevant transitional provisions in HKFRS 3,
the Group derecognised all negative goodwill on 1 January 2005, of which
negative goodwill of HK$237 million was previously recorded in reserves and
of HK$4 million was previously presented as a deduction from assets. A
corresponding adjustment to the Group’s retained earnings of HK$241 million
has been made. As a result of this change in accounting policy, no negative
goodwill has been released to the income statement in the current year, the
profit for the year has been reduced by HK$1 million and increased by HK$1
million in respect of the recognition of discount on the increased investment in
subsidiaries.
Intangible assets:
In previous years, brands and trademarks were amortised over their estimated
useful lives of 20 years. HKAS 38 requires intangible assets to be assessed at
the individual asset level as having either finite or indefinite life. A finite-life
intangible asset is amortised over its estimated useful life whereas an intangible
asset with an indefinite useful life is carried at cost less accumulated impairment
losses (if any). Intangible assets with indefinite lives are not subject to
amortisation but are tested for impairment annually or more frequently when
there are indications of impairment. In accordance with the transitional
provisions in HKAS 38, the Group reassessed the useful lives of the brands
and trademarks on 1 January 2005 and concluded that all brands and
trademarks with a total carrying amount of HK$1,315 million recognised under
the predecessor Standard have indefinite useful lives. The Group has applied
the revised useful lives prospectively and discontinued amortising the brands
and trademarks with indefinite useful lives from 1 January 2005 onwards. No
amortisation has been charged in relation to the brands and trademarks with
indefinite useful lives for the year ended 31 December 2005. As a result, the
profit for the year has been increased by HK$78 million.
Because the revised accounting policies have been applied prospectively, the
change has had no impact on amounts reported for 2004 or prior periods.
The Grande Holdings Limited Annual Report 2005 41