Annual Report 2010-2011 - Colombo Stock Exchange

(a) Goodwill
Goodwill represents the excess of an acquisition over the Group interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities at the date of acquisition, and is carried at cost less accumulated impairment losses. The group Goodwill has
been allocated to four cash-generating units for impairment testing, as follows:
1. Kegalle Plantations PLC
2. Namunukula Plantations PLC
3. Maskeliya Plantations PLC
4. Arpico Super Centre in Kandy (which is under the purview of Richard Pieris Distributors Ltd)
Goodwill is not amortised, but is reviewed for impairment annually and for the purpose of testing goodwill for impairment, goodwill
is allocated to the operating entity level, which is the lowest level at which the goodwill is monitored for internal management
purpose.
During the year Richard Pieris Distributors Ltd ,a fully owned subsidiary of the group took over the identified assets and liabilities of
five mini stores located in the central province. The goodwill resulting on such acquisition amounted to Rs. 34.4mn and was written
off during the year.
The recoverable amount of the goodwill is determined based on a value in use calculation using cash flow projections based on
financial budgets approved by senior management for one year, and forecast for the four years thereafter, covering a five year
period.
(b) Licenses
Licenses include separately acquired four operating licenses stated at cost less accumulated amortizations and impairment losses.
Licences acquired have been amortized evenly over a period of five years.
During the year Richard Pieris Securities (Pvt) Ltd, a fully owned subsidiary of the group acquired a licence to operate stock
broking activities at Colombo Stock Exchange at a cost of Rs. 28.9 mn.
(c) Other intangible assets
Other intangible assets represents the value of services provided by the foreign collaborator on engineering assembly know-how
training, technological assistance and works management to Arpitalian Compact Soles (Private) Limited. This is amortized over a
period of fifteen years and commencing from the financial year 2000/2001.
The recoverable amount of the know how is determined based on a value in use calculation using cash flow projections based
on financial budgets approved by senior management for one year, and forecast for the four years thereafter, covering a five year
period.
Key assumptions used in Value in Use calculations
Volume growth - Volume growth is based on past performance, the approved budget and expected performance of such Cash
Generation Unit (CGU) based on the actual performance and to evaluate future investment proposals.
Discount rates - Discount rates reflect management’s estimate of the risk specific to the unit. This is the benchmark used by
management to assess operating performance and to evaluate future investment proposals.
Cost increase due to inflation - Expected inflationary levels over the next five years based on management judgment were used to
estimate the increase in costs over similar periods.
81
Annual Report 2010/2011 | Richard Pieris and Company PLC