NewWorld Development Company Limited
FINANCIAL SECTION
168
20 INTANGIBLE ASSETS
(continued)
Impairment test for goodwill
(continued)
2014
Hong Kong Mainland China
Others
Total
HK$m
HK$m
HK$m
HK$m
Property development
–
14.2
–
14.2
Property investment
–
285.1
–
285.1
Service and infrastructure
849.3
–
–
849.3
Hotel operations
–
9.2
245.1
254.3
Department stores
–
1,168.2
–
1,168.2
Others
60.7
–
–
60.7
910.0
1,476.7
245.1
2,631.8
Goodwill is allocated to the Group’s cash generating units identified according to country of operation and business
segment.
For the purpose of impairment test, the recoverable amount of the business unit is determined based on either fair
value less costs to sell or value-in-use calculations whichever is higher. The key assumptions adopted on growth
rates and discount rates used in the value-in-use calculations are based on management best estimates and past
experience.
For the segment of property investment, growth rates are determined by considering both internal and external
factors relating to the relevant segments. Discount rates used also reflect specific risks relating to the relevant
segment, which was 13.6% (2014: 15.6%).
For the segment of service and infrastructure, growth rates being 0% (2014: 0% to 2%) are determined by
considering both internal and external factors relating to the relevant segment. Discount rates used also reflect
specific risks relating to the relevant segment, which were 6.3% (2014: 6.2%).
The segment of hotel operations includes hotel operations and hotel management services. The growth rates of
hotel operation of 3.5% (2014: 3.5%) are determined by considering both internal and external factors relating to
the relevant segment. Discount rates used also reflect specific risks relating to the relevant segment, which ranged
from 3.4% to 7.5% (2014: 5.1% to 7.5%).
For hotel management services in 2014, the key assumptions adopted on growth rates and discount rates used
in the value-in-use calculations were based on management best estimates. A financial budget of five-year with
growth rates ranging from 23% to 83% were determined by considering both internal and external factors relating
to the relevant segment and the hotel management contracts in the pipeline. Cash flows beyond the five-year
period were extrapolated using the estimated growth rates of 3%. Discount rate used also reflect specific risks
relating to the relevant segment, which was 18.2%.
For the segment of department stores, estimated long-term growth rates of 5% (2014: 5%) are determined by
considering both internal and external factors relating to the relevant segment. Discount rates used are post-tax and
reflect specific risks relating to the relevant segment, which were 13.6% (2014: 15.6%).
