Annual Report 2016
119
Financial Section
3 Principal Accounting Policies
(continued)
(b) Intangible assets
(i)
Goodwill
Goodwill arising on acquisitions of subsidiaries is included in intangible assets. Goodwill arising on acquisitions
of joint ventures and associated companies is included in interests in joint ventures and associated companies
respectively and is tested for impairment as part of overall balance. Separately recognised goodwill is tested
annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill
are not reversed. Gains or losses on the disposal of all or part of an entity include the carrying amount of
goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of testing for impairment. The allocation is made
to those cash-generating units or groups of cash-generating units that are expected to benefit from the
business combination in which the goodwill arose.
(ii) Trademarks
Separately acquired trademarks are recognised at initial cost. Trademarks acquired in a business combination
are recognised at fair value at the date of acquisition. Trademarks with indefinite life are carried at cost less
impairment and are not amortised.
(iii) Hotel management contracts
Separately acquired hotel management contracts are shown at historical cost. Hotel management contracts
acquired in a business combination are recognised at fair value at the date of acquisition. Hotel management
contracts have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method to allocate the cost of hotel management contracts over their
estimated useful lives of 20 years.
(iv) Customer relationships
Customer relationships acquired in a business combination are recognised at fair value at the date of
acquisition. Customer relationships have a finite useful life and are carried at cost less accumulated
amortisation. Amortisation is calculated using the straight-line method to allocate the cost of customer
relationships over their estimated useful lives of 20 years.
(v) Process, technology and know-how
Process, technology and know-how acquired in a business combination are recognised at fair value at the date
of acquisition. Process, technology and know-how have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of
process, technology and know-how over their estimated useful lives of 10 years.
(vi) Operating right
Operating right primarily resulted from the acquisition of right to operate facilities rental and other businesses.
Separately acquired operating rights are initially recognised at cost. Operating rights acquired in a business
combination are initially recognised at fair value at the acquisition date. Operating right is carried at cost less
accumulated amortisation and impairment. Amortisation is calculated using the straight-line method to allocate
the cost over the period of the operating right.
(vii) Intangible concession rights
The Group has entered into various service arrangements (“Service Concessions”) with local government
authorities for its participation in the development, financing, operation and maintenance of various
infrastructures for public services, such as toll roads and bridges, power plants and water treatment plants (the
“Infrastructures”). The Group carries out the construction or upgrade work of Infrastructures from the granting
authorities in exchange for the right to operate the Infrastructures concerned and the right to change users of
the respective Infrastructures. The fees collected during the operating periods are attributable to the Group.
The relevant Infrastructures are required to be returned to the local government authorities upon the expiry of
the operating rights without significant compensation to the Group.
The Group applies the intangible asset model to account for the Infrastructures where they are paid by the
users of the Infrastructures and the concession grantors (the respective local governments) have not provided
any contractual guarantees in respect of the amounts of construction costs incurred to be recoverable.
