Ecowise Annual Report 2007 - ecoWise Holdings Limited

Notes to FinancialStatements31 October 200714. INTANGIBLE ASSETS (Cont’d)The value in use was determined by management. The key assumptions for the value in use calculations are thoseregarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period.Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value ofmoney and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in sellingprices and direct costs are based on past practices and expectations of future changes in the market.For the CGU, the group prepares cash flow forecasts derived from the most recent financial budgets approved bymanagement for the next five years and extrapolates cash flows for the following five years based on an estimatedgrowth rate of 3% and an estimated discount rate using pre-tax rate that reflects the current market assessmentsat the risks specific to the CGU of 6%. This rate does not exceed the average long-term growth rate for the relevantmarkets.For goodwill arising from subsidiary acquired in 2006, an impairment loss of $174,754 is made. This is based onthe realizable value of $600,000, which is the proposed cash consideration agreed by the purchaser for the latter’sacquisition of this subsidiary after the group’s financial year end 31 October 2006.15. INVESTMENTS IN SUBSIDIARIESCompany2007 2006$’000 $’000Unquoted shares at cost to company 6,056 6,575Less provision for impairment (635) (235)Total at cost 5,421 6,340Net book value of subsidiaries 9,760 7,982Movements in provision for impairment:Balance at beginning of year 235 1,870Provided/(reversed) to income statement included in other credits/(charges) 400 (1,635)Balance at end of year 635 235The reversal of the provision in year 2006 is because of the excess of the recoverable amount over the carrying amountof the investments.71