ANNUAL%20REPORT%202015%20eng

Notes to Consolidated Financial Statements
6 LOSS BEFORE TAXATION (Continued)
(c)
Other items: (Continued)
Note:
(i)
Selling and distribution costs
Selling and distribution costs represent fees and charges incurred for importing coal into the People’s
Republic of China (“PRC”), logistics and transportation costs, governmental fees and charges and fixed agent
fees associated with the new market penetration strategy to diversify and expand sales channels in inland
PRC.
(ii)
Impairment of non-financial assets
Given the fact that coking coal market experienced continuing price decline and the operating losses
sustained by the Group during the year ended 31 December 2015, according to IAS 36, Impairment of assets,
management has performed impairment assessment on the carrying amount of the Group’s property, plant
and equipment, construction in progress, intangible assets and long-term prepayments related to the UHG
Mine and BN Mine operations (collectively referred to as “UHG and BN Assets”). For the purpose of this, the
UHG and BN Assets are treated as a cash generating unit (“CGU”).
The recoverable amount of the CGU was based on value in use, determined by discounting the future cash
flows to be generated from the continuing use of the UHG and BN Assets. The key assumptions used in the
estimation of value in use were as follows:
– Recoverable reserves and resources
Economically recoverable reserves and resources represent management’s expectations at the time of
completing the impairment testing, based on reserves and resource statements and exploration and
evaluation work undertaken by appropriately qualified persons.
Compared with the one used at the year end of 2014, economically recoverable reserves and resources
applied in the estimation made for the year end of 2015 had incorporated the latest JORC (2012) Coal
Reserve estimate for UHG issued at a post balance sheet date.
– Growth rate
Instead of using a steady growth rate over the estimation period longer than five years, the cash flow
projection made at the year end of 2015 and the year end of 2014 followed the same mechanism as
coal product price multiplied by sales quantity, which was consistent throughout the whole life-of-mine
(“LOM”) time.
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Annual Report 2015