0175 Geely Automobile Holdings Limited Annual Report 2011

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Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20116. Critical Accounting Judgements and Key Sources of Estimation Uncertainty(Continued)Key sources of estimation uncertainty (Continued)Impairment of long lived assetsIf circumstances indicate that the net book value of a long lived asset may not be recoverable, the asset maybe considered “impaired” and an impairment loss may be recognised in accordance with HKAS 36 “Impairmentof Assets”. The carrying amounts of long lived assets are reviewed periodically in order to assess whether therecoverable amounts have declined below the carrying amounts. These assets are tested for impairment wheneverevents or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. Whensuch a decline has occurred, the carrying amount is reduced to the recoverable amount. The recoverable amountis the greater of the net selling price and the value in use. It is difficult to precisely estimate selling prices becausequoted market prices for the Group’s assets are not readily available. In determining the value in use, expectedcash flows generated by the asset are discounted to their present value, which requires significant estimationrelating to the level of sales volume, selling prices and the amount of operating costs. The Group uses all readilyavailable information in determining an amount that is a reasonable approximation of recoverable amount, includingestimates based on reasonable and supportable assumptions and projections of sales volume, selling prices andthe amount of operating costs.Depreciation and amortisationProperty, plant and equipment and intangible assets with finite useful lives are depreciated or amortised on astraight-line basis over the estimated useful lives of the assets, after taking into account the estimated residualvalue, if any. The Group reviews the estimated useful lives of the assets regularly in order to determine the amountof depreciation and amortisation expense to be recorded during any reporting period. The useful lives are basedon the Group’s historical experience with similar assets and taking into account anticipated technological changes.The depreciation and amortisation expense for future periods is adjusted if there are significant changes fromprevious estimates.Impairment of investmentsThe Company assesses annually and at each interim reporting date if investments in associates have suffered anyimpairment in accordance with HKAS 36. Details of the approach are stated in the respective accounting policies.The assessment of value in use requires an estimation of future cash flows, including expected dividends, fromthe investments and the selection of appropriate discount rates. Future changes in financial performance andposition of these entities would affect the estimation of impairment loss and cause adjustments to their carryingamounts.Critical Accounting JudgementsAcquisitionsDuring the year, the Group acquired subsidiaries as set out in note 38. The Group determined whether the acquisitionsare to be accounted for as acquisition of businesses or as acquisition of assets by reference to a number of factorsincluding (i) whether the acquiree has relevant input, process or output; (ii) whether the acquiree has planned principalactivities or is pursuing a plan to produce output and will be able to obtain access to customers.7. Turnover/RevenueTurnover/revenue represents the consideration received and receivable from sales, net of discounts, returns andrelated sales taxes, of automobiles and automobile parts and components.The Group’s customer base is diversified and no customer with whom the transactions has exceeded 10% ofthe Group’s revenue.79
Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20118. Segment InformationThe Group manages its businesses by business lines. In a manner consistent with the way in which informationis reported internally to the Group’s most senior executive management for the purposes of resource allocationand performance assessment, the Group has presented the following two reportable segments. No operatingsegments have been aggregated to form the following reportable segments.Automobiles and related parts and components: Manufacture and sale of automobiles, automobile parts andrelated automobile components (excluding gearboxes).Gearboxes: Manufacture and sale of gearboxes.The accounting policies of the reportable segments are the same as the Group’s accounting policies describedin note 5 above. Segment profit represents the profit earned by each segment without allocation of corporateexpenses, directors’ emoluments, share of results of associates, interest income, interest expenses and taxation.Segment assets include all tangible, intangible assets and current assets with the exception of interests inassociates, deferred tax assets and other corporate assets. This is the measure reported to the Group’s chiefoperating decision maker for the purposes of resource allocation and assessment of segment performance. Intersegmentsales are priced with reference to prices charged to external parties for similar orders.Information regarding the Group’s reportable segments is set out below.Consolidated income statementFor the year ended 31 December 2011Automobilesand relatedparts andcomponents Gearboxes Unallocated Eliminations TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000Sales to external customers 20,170,835 794,096 – – 20,964,931Inter-segment 37,177 452,275 – (489,452) –Total segment revenue 20,208,012 1,246,371 – (489,452 ) 20,964,931Segment results 2,495,723 28,027 – – 2,523,750Interest income 40,596 3,173 634 (319) 44,084Finance costs (116,061) (408) (95,206) 319 (211,356)Corporate and other unallocated expenses – – (166,071) – (166,071)Share of results of associates (7,199) – – – (7,199)Profit before tax 2,183,208Taxation (467,359)Profit for the year 1,715,84980
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0175 Geely Automobile Holdings Limited Annual Report 2011

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