Notes to the Financial Statements - SingTel

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Notes to the Financial StatementsFor the financial year ended 31 March 201122. JOINT VENTURE COMPANIES (Cont’d)The Group’s share of certain items in the income statements and statements of financial position of the joint venture companieswere as follows -Group2011 2010S$ Mil S$ MilOperating revenue 10,112.9 8,061.8Operating expenses (5,794.4) (4,126.6)Net profit before tax 2,110.1 2,410.3Net profit after tax 1,576.5 1,874.8Non-current assets 17,405.0 10,873.6Current assets 2,349.9 2,680.6Current liabilities (5,164.6) (3,329.7)Non-current liabilities (7,145.7) (2,744.5)Net assets 7,444.6 7,480.023. IMPAIRMENT REVIEWS23.1 Goodwill arising on acquisition of subsidiariesThe carrying values of the Group’s goodwill on acquisition of subsidiaries as at 31 March 2011 were assessed for impairmentduring the financial year.Goodwill is allocated for impairment testing purposes to the individual entity which is also the cash generating unit (“CGU”).The fixed, mobile, cable and broadband networks of Optus Group are integrated operationally and accordingly, Optus as a groupis a CGU for the purpose of impairment tests for goodwill.Terminal growthPre-tax2011 2010 rate (1) discount rateGroup S$ Mil S$ Mil 2011 2010 2011 2010Carrying value of goodwill in -- Optus Group 9,575.0 9,572.4 4.0% 4.0% 12.2% 12.1%- SCS ComputerSystems Pte. Ltd. 82.2 82.2 2.0% 2.0% 9.9% 10.0%Note:(1) Weighted average growth rate used to extrapolate cash flows beyond the terminal year.156 SINGAPORE TELECOMMUNICATIONS LIMITED AND SUBSIDIARY COMPANIES
Notes to the Financial StatementsFor the financial year ended 31 March 201123.1 Goodwill arising on acquisition of subsidiaries (Cont’d)The recoverable values of cash generating units including goodwill are determined based on value-in-use calculations.The value-in-use calculations apply a discounted cash flow model using cash flow projections based on financial budgets andforecasts approved by management covering periods of five years. Cash flows beyond the terminal year are extrapolated usingthe estimated growth rates stated in the table above. Key assumptions used in the calculation of value-in-use are growth rates,operating margins, capital expenditure and discount rates.The terminal growth rates used do not exceed the long term average growth rates of the respective industry and country inwhich the entity operates and are consistent with forecasts included in industry reports.The discount rates applied to the cash flow projections are based on Weighted Average Cost of Capital (WACC) where the cost ofa company’s debt and equity capital are weighted to reflect its capital structure.As at 31 March 2011, no impairment charge was required for goodwill on acquisition of subsidiaries, with any reasonablypossible change to the key assumptions applied not likely to cause the recoverable values to be below their carrying values.23.2 Carrying values (including goodwill) of associated and joint venture companiesThe Group’s carrying values in Warid Telecom (Private) Limited (“Warid”) and Pacific Bangladesh Telecom Limited (“PBTL”) asat 31 March 2011 were assessed for impairment.Terminal growthPre-tax2011 2010 rate (1) discount rateGroup S$ Mil S$ Mil 2011 2010 2011 2010Carrying value (including goodwill) in -Warid and PBTL 650.1 796.5Less: Allowance forimpairment losses (590.0) (590.0)5.5% 5.5% 12.2% 12.4%60.1 206.5 to 7% to 8% to 18.7% to 17.4%Note:(1) Weighted average growth rate used to extrapolate cash flows beyond the terminal year.The impairment review of the Group’s investments in the associated and joint venture companies is based on the samemethodology described in Note 23.1. The cash flow projections were based on financial budgets and forecasts approved bymanagement covering periods of seven to nine years.ANNUAL REPORT 2010/2011 157
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Notes to the Financial Statements - SingTel

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