86
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2014
19.
Intangible assets
(continued)
Impairment tests for goodwill
(continued)
The recoverable amount of a CGU was determined based on value-in-use. Cash flow projections
used in the value-in-use calculations were based on financial budgets approved by management
covering a three-year period. There was no impairment of goodwill allocated to Recon, Top Great/
Offshore, Subsea, MEPL, Vac-Tech and Chinyee as at the balance sheet date.
Key assumptions used for value-in-use calculations:
2014
2013
Gross
margin
1
Growth
rate
2
Discount
rate
3
Gross
margin
1
Growth
rate
2
Discount
rate
3
Recon
43%
3% 11%
49%
3% 11%
Top Great/Offshore
22%
3% 13%
23%
3% 13%
Subsea
38%
3% 11%
30%
3% 11%
MEPL
23%
3% 13%
35%
3% 13%
Vac-Tech
39%
3% 11%
37%
3% 11%
Chinyee
23%
3% 13%
22%
3% 13%
1 Budgeted gross margin
2 Weighted average growth rate used to extrapolate cash flows beyond the budget period
3 Pre-tax discount rate applied to the pre-tax cash flow projections
These assumptions were used for the analysis of each CGU within the business segment.
Management determined budgeted gross margin based on past performance and its expectations
of market developments. The weighted average growth rates used were consistent with forecasts
included in industry reports. The discount rates used were pre-tax and reflected specific risks
relating to the relevant segments.
