2012 Annual Report - ZTE

ANNUAL REPORT 2012Notes to Financial Statements (continued)(Prepared in accordance with PRC ASBEs)(All amounts in RMB’000 unless otherwise stated)(English translation for reference only)II.PRINCIPAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (continued)25. Impairment (continued)In connection with impairment tests for goodwill, the carrying value of goodwill arising from businesscombination is allocated to relevant cash generating units (“CGU”) from the date of acquisition on areasonable basis. If it is difficult to allocate such goodwill to a relevant CGU, it should be allocatedto a relevant CGU group. A relevant CGU or CGU group is defined as one which can benefit fromthe synergies of the business combination and is not larger than the reporting segments determinedby the Group.In connection with impairment tests for CGUs or CGU groups that comprise goodwill, where indicationsof impairment exists in a CGU or CGU group related to goodwill, impairment tests should be performedfirst on CGUs or CGU groups that do not comprise goodwill and recognize impairment loss afterestimating the recoverable amount. Then impairment tests on CGUs or CGU groups that comprisegoodwill should be performed and the carrying value and recoverable amount should be compared.Where the recoverable amount is lower than the carrying value, the impairment loss should first beoffset against the carrying value of the goodwill allocated to CGUs or CGU groups and then againstassets in the CGUs or CGU groups other than goodwill in proportion to the weighting of these assets.Previously recognised impairment losses are not reversed in subsequent periods.26. Employee benefitsEmployee benefits represent all kinds of benefits (other than share-based payments) and other relevantexpenditures incurred by the Group in exchange for service rendered by employees. During theaccounting period when employees provide services, employee benefits payable is recognized as aliability. Items which expire longer than one year after the balance sheet date are measured at presentvalue if the discounting impact is significant.Defined contribution pension schemeEmployees of the Group participated in contribution pension scheme managed by the local government,including pension scheme, medical insurance, unemployment insurance and housing fund. Thecontribution costs are charged as asset cost or to current profit or loss when incurred.Defined benefits pension schemeThe Group provides certain employees, who joined the Group before 1 January 2002, with postretirementmonthly pension payments. The cost of providing these benefits under the Group’s defined benefitspension scheme is actuarially determined and recognized over the employees’ service period by usingthe projected unit credit method. The Group makes monthly pension payments to eligible retirees. TheGroup has not held any plan assets since the commencement of the defined benefits pension scheme,therefore it is not required to make any forecast on asset return.187