Annual Report 2012, PDF - Axiata Group Berhad - Investor Relations

NOTES TO THEFINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 (CONTINUED)4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)(b) Critical accounting estimates and assumptions (continued)To enhance the information content of the estimates, certain key variables that are anticipated to havematerial impact to the Group’s results and financial position are tested for sensitivity to changes in theunderlying parameters. The estimates and assumptions that have a significant risk of causing a materialadjustment to the carrying amounts of assets and liabilities within the next year are mentioned below.(i)Impairment assessment of goodwillThe Group tests goodwill for impairment annually in accordance with its accounting policy andwhenever events or change in circumstances indicate that this is necessary within the financial year.Recoverable amount is measured at the higher of the FVLCS for that asset and its VIU.The recoverable amounts of certain CGUs have been determined based on VIU calculations. Thesecalculations require the use of estimates. The calculations are inherently judgemental and susceptibleto change from period to period because they require the Group to make assumptions about revenuegrowth, exchange rates, an appropriate discount rate and terminal growth rate.The assumptions used, results and sensitivity of the impairment assessment of goodwill are disclosedin Note 24(a) to the financial statements.(ii) Impairment assessment of PPE and investmentsThe Group and the Company assess impairment of the assets or CGUs mentioned above whenever theevents or changes in circumstances indicate that the carrying amount of an asset or CGU may not berecoverable i.e. the carrying amount of the asset is more than the recoverable amount. Recoverableamount is measured at the higher of the FVLCS for that asset or CGU and its VIU.Projected future cash flows used in impairment testing of the assets or CGUs mentioned above arebased on Group’s and Company’s estimates calculated based on historical, sector and industry trends,general market and economic conditions, changes in technology and other available information.The recoverable amounts of the asset or CGUs have been determined based on VIU calculations. Thesecalculations require the use of estimates. The calculations are inherently judgemental and susceptibleto change from period to period because they require the Group and the Company to makeassumptions about revenue growth, exchange rates, an appropriate discount rate and terminal growthrate.The assumptions used, results and sensitivity of the impairment assessments of investments in associateare disclosed in Note 29 to the financial statements.(iii) Estimated useful lives of PPEThe Group reviews the estimated useful lives of PPE based on factors such as business plan andstrategies, expected level of usage and future technological developments at the end of each reportingperiod. Future results of operations could be materially affected by changes in these estimates broughtabout by changes in the factors mentioned. A reduction in the estimated useful lives of PPE wouldincrease the recorded depreciation charge and decrease the PPE balance.The impact of the review of the useful lives of PPE is disclosed in Note 25 to the financial statements.202