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TEHO INTERNATIONAL INC LTD.
Annual Report 2015
5 INTANGIBLE ASSETS (CONT’D)
Impairment test (cont’d)
(ii) TEHO Water & Envirotec Pte. Ltd.
2015
2014
Estimated discount rates using post-tax rates that
reflect current market assessments at the risks specific
to the CGUs
15.1% 15.0%
Revenue growth rates estimated based on past
performance and expectations of market
developments
6.0% to
15.0%
6.0% to
30.0%
Gross margins estimated based on past performance
and expectations of market developments
30.9% to
33.9%
35.3%
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 5 years
The estimated recoverable amount of the subsidiary exceeded its carrying amount by
$886,822. Actual outcomes could vary from these estimates. A further decrease in
estimated gross margins by 0.6 percentage points or an increase in the discount rate
by 0.7 percentage points would result in the recoverable amount of this subsidiary
being equal to its carrying amount.
5 INTANGIBLE ASSETS (CONT’D)
Impairment test (cont’d)
(iii) TIEC Holdings Pte. Ltd.
The recoverable amount for this subsidiary was based on its value in use,
determined by discounting the future cash flows to be generated from the
development projects of the subsidiary. In 2015, as a result of the cooling measures
implemented by the Singapore government, the property market in Singapore
continued to soften. Consequently, the carrying amount of the subsidiary was
determined to be higher than its recoverable amount of $7,994,561 and an
impairment loss on the goodwill of $2,209,048 (2014: Nil) was recognised.
The impairment loss was included in other operating expenses.
2015
2014
Estimated discount rates using post-tax rates that reflect
current market assessments at the risks specific to the
CGUs
9.5% 11.6%
Estimated selling price
$1,126
psf
$1,251
psf
Cash flow forecasts derived from the most recent
financial budgets and plans approved by management
2 years 3 years
The cash flow forecasts were based on the subsidiary’s remaining property
development projects which were expected to be completed within the following
two years. Revenue was based on the gross development value estimated by an
independent professional valuer, adjusted to account for a foreseeable decline in
property prices in Singapore’s luxury property market.
Following the recognition of the impairment loss, the recoverable amount was equal
to the carrying amount. Therefore, any adverse movement in a key assumption would
lead to further impairment.
NOTES TO THE
FINANCIAL STATEMENTS
Year ended 30 June 2015
