Annual Report 2012 - IOI Group

NOTES TO THEFINANCIAL STATEMENTS5. SIGNIFICANT ACCOUNTING POLICIES (Continued)5.13 Impairment of Non-financial Assets (Continued)For goodwill, the recoverable amount is estimated at the end of each reporting period or more frequently when indicatorsof impairment are identified.For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unlessthe asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverableamount is determined for the Cash-generating Unit (“CGU”) to which the asset belongs. Goodwill acquired in a businesscombination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected tobenefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned tothose units or groups of units.Goodwill acquired in a business combination shall be tested for impairment as part of the impairment testing of the CGU towhich it relates. The CGU to which goodwill is allocated shall represent the lowest level within the Group at which thegoodwill is monitored for internal management purposes and not larger than an operating segment determined inaccordance with FRS 8.Recoverable amount is the higher of net selling price and value-in-use, which is measured by reference to discounted futurecash flows. In estimating the value-in-use, the estimated future cash inflows and outflows to be derived from continuing useof the asset and from its ultimate disposal are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset for which the future cash flowestimates have not been adjusted.An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairmentloss is charged to profit or loss unless it reverses a previous revaluation in which case it will be charged to equity.Impairment loss on goodwill is not reversed in subsequent periods. An impairment loss for an asset other than goodwill isreversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount sincethe last impairment loss was recognised.The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that thisamount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) hadno impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other thangoodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treatedas a revaluation increase.5.14 Financial InstrumentsA financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equityinstrument of another enterprise.A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive cash oranother financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities withanother enterprise under conditions that are potentially favourable to the Group.A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to anotherenterprise, or a contractual obligation to exchange financial assets or financial liabilities with another enterprise underconditions that are potentially unfavourable to the Group.142IOI CORPORATION BERHADAnnual Report 2012