61
Annual Report 2015
TEHO INTERNATIONAL INC LTD.
5 INTANGIBLE ASSETS (CONT’D)
Impairment test
The goodwill arose from acquisitions of certain subsidiaries (see below). The value of the
goodwill is determined through purchase price allocation valuations carried out by the
management and independent professional valuers, as appropriate, for separate acquisitions
of subsidiaries.
An assessment is made annually whether goodwill has suffered any impairment loss. The
assessment process is complex and highly judgmental and is based on assumptions that
are affected by expected future market or economic conditions. Judgement is required in
identifying the cash generating units (“CGU”) and the use of estimates.
Goodwill is allocated to CGUs for the purpose of impairment testing. This CGU represents
the Group’s investment in the following subsidiaries. The goodwill is allocated to the
segments as follows:
2015
2014
Marine,
Marine,
Offshore
Property
Offshore
Property
Oil & Gas Development
Oil & Gas Development
Segment
Segment
Total
Segment
Segment
Total
$
$
$
$
$
$
Group
Name of subsidiaries:
TEHO Engineering
Pte. Ltd.
2,515,562
– 2,515,562 2,515,562
– 2,515,562
TEHO Water &
Envirotec Pte. Ltd.
844,364
–
844,364
844,364
–
844,364
TIEC Holdings
Pte. Ltd.
– 2,807,566 2,807,566
– 5,016,614 5,016,614
ECG Property
Services Pte. Ltd.
– 12,475,753 12,475,753
–
–
–
3,359,926 15,283,319 18,643,245 3,359,926 5,016,614 8,376,540
NOTES TO THE
FINANCIAL STATEMENTS
Year ended 30 June 2015
5 INTANGIBLE ASSETS (CONT’D)
Impairment test (cont’d)
The goodwill was tested for impairment at the end of the reporting period. An impairment
loss is the amount by which the carrying amount of an asset or a CGU exceeds its
recoverable amount. The recoverable amount of an asset or a CGU is the higher of its fair
value less costs of disposal or its value in use. The recoverable amounts of CGUs have
been measured based on the value in use method as appropriate for the separate CGUs.
The value in use, estimated using discounted cash flows, wasmeasured by themanagement.
The key assumptions for the value in use calculations are as follows:
(i) TEHO Engineering Pte. Ltd.
2015
2014
Estimated discount rates using post-tax rates that reflect
current market assessments at the risks specific to
the CGUs
13.4% 11.0%
Revenue growth rates estimated based on past
performance and expectations of market
developments
-18.8% to
10.5%
6.0% to
10.0%
Gross margins estimated based on past performance
and expectations of market developments
33.8%
36.6% to
41.5%
Terminal value growth rates based on industry growth
forecasts and not exceeding the average long-term
growth rate for the relevant markets
2.8% 2.8%
Cash flow forecasts derived from the most recent
financial budgets and plans approved by
management
5 years 3 years
The estimated recoverable amount of the subsidiary exceeded its carrying amount by
$1,004,065. Actual outcomes could vary from these estimates. A further decrease in
estimated gross margins by 1.6 percentage points or an increase in the discount rate
by 2.1 percentage points would result in the recoverable amount of this subsidiary
being equal to its carrying amount.
