63
TEHO INTERNATIONAL INC LTD.
Annual Report 2016
NOTES
TO THE FINANCIAL STATEMENTS
Year ended 30 June 2016
5 INTANGIBLEASSETS (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, was measured by the
management. The key assumptions for the value in use calculations are as follows:
(i)
TEHO Engineering Pte. Ltd.
2016
2015
Estimated discount rates using post-tax rates
that reflect current market assessments at the
risks specific to the CGUs
12.2% 13.4%
Revenue growth rates estimated based on past
performance and expectations of market
0.0% to -18.8% to
developments
25.8% 10.5%
Gross margins estimated based on past performance
and expectations of market developments
32.0% 33.8%
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
5 INTANGIBLEASSETS (CONT’D)
Impairment test (cont’d)
(i)
TEHO Engineering Pte. Ltd. (cont’d)
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
business of the subsidiary. In 2016, as a result of the impact of fluctuations in crude
oil prices on the outlook of the offshore oil & gas industry, the carrying amount
of the subsidiary was determined to be higher than its recoverable amount of
$4,646,074 and an impairment loss on the goodwill of $1,400,000 (2015: Nil)
was recognised. The impairment loss was included in other operating expenses.
In 2015, the estimated recoverable amount of the subsidiary exceeded its carrying
amount by $1,004,065.
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.
(ii) TEHOWater & Envirotec Pte. Ltd.
2016
2015
Estimated discount rates using post-tax rates
that reflect current market assessments at the
risks specific to the CGUs
13.7% 15.1%
Revenue growth rates estimated based on past
performance and expectations of market
0.0% to 6.0% to
developments
5.0% 15.0%
Gross margins estimated based on past performance
31.9% to 30.9% to
and expectations of market developments
33.9%
33.9%
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
