Annual Report 2012 - e-KONG Group Limited

e-KONG GROUP LIMITEDNotes to the Consolidated Financial Statements (continued)For the year ended 31 December 20122. PRINCIPAL ACCOUNTING POLICIES (continued)Critical accounting estimates and judgements (continued)Impairment of goodwill and intangible assets with indefinite useful livesThe Group determines whether goodwill and intangible assets with indefinite useful lives are impaired at least onan annual basis. This requires an estimation of the fair value of the cash-generating units to which the goodwill andintangible assets with infinitive useful lives are allocated. Estimating the fair value requires the Group to make anestimate of the expected cash flows from the cash-generating unit and also to choose a suitable discount rate inorder to calculate the present value of those cash flows, suitable multiples regarding the public companies selectedfor guideline transaction method and guideline company method. Details of the estimates used to calculate therecoverable amount are given in note 16 to the consolidated financial statements.Impairment of property, plant and equipment and intangible assets with finite useful livesIn determining the recoverable amounts of these assets, expected cash flows to be generated by the assets arediscounted to their present value, which involves significant level of estimates relating to sales volume, sellingprices and other operating costs. When a decline in an asset’s recoverable amount has occurred, the carryingamount is reduced to its estimated recoverable amount.Useful lives of intangible assetsThe Group assesses whether the intangible assets are of finite useful lives at the end of each reporting period. Indetermining useful lives of intangible assets, the Group has considered various factors, such as expected usage ofthe asset, forecasted customer attrition pattern, expected period of future economic benefit and legal or similarlimits on the use of the asset. The estimation of the useful lives of the intangible assets is based on the experienceof the Group with similar intangible assets that generate similar future economic benefits.50Annual Report 2012