NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
66
CITIC ENVIROTECH LTD.
Annual Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.13 Intangible assets
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are recognised separately from goodwill and are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less
accumulated amortisation and any accumulated impairment loss. Amortisation for intangible
assets with finite useful lives is provided on a straight-line basis over their estimated useful lives.
Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent
accumulated impairment loss (see the accounting policy in respect of “Impairment of non-financial
assets” below).
Operating concessions represent (i) the rights to charge users of the public service for the water
supply contracts, which fall within the scope of INT FRS 112
Service Concession Arrangements
;
(ii) the rights under the service concession arrangements for the wastewater treatment allows the
Group to receive and treat wastewater above the minimum amount of guaranteed volume, at a
predetermined tariff rate during the concessionary period acquired in a business combination; and
(iii) rights to operate and manage wastewater treatment plants acquired in a business combination.
The operating concessions are stated at cost less accumulated amortisation and any accumulated
impairment loss. The operating concessions acquired in a business combination are initially
recognised at their fair value at the acquisition date (which is regarded as their cost). Amortisation is
provided on straight-line basis over the respective periods of the operating concessions granted to
the Group of 30 years.
Customer contracts represent the manufacture and supply agreement with a customer for membrane
products acquired from a business combination. Customer contracts are amortised on a straight-line
basis over the period of 9 years.
Patents represent the in-house Research and Development (“R&D”) capabilities and technical
expertise in membrane which relate to the Polyvinylidene Fluoride (“PDVF”) hollow fibre membrane.
Patents are amortised on a straight-line basis over the period of 5 years.
Club memberships are stated at cost, less any impairment in value. Where an indication of
impairment exists, the carrying amount of the intangible asset is assessed and written down
immediately to its recoverable amount.
2.14 Associates
An associate is an entity over which the Group has significant influence and that is neither a
subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not control or joint control over those
policies.
The results and assets and liabilities of associates are incorporated in these financial statements
using the equity method of accounting, except when the investment is classified as held for sale,
in which case it is accounted for under FRS 105
Non-current Assets Held for Sale and Discontinued
Operations
. Under the equity method, investments in associates are carried in the statement of
financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net
assets of the associate, less any impairment in the value of individual investments. Losses of an
associate in excess of the Group’s interest in that associate (which includes any long-term interests
that, in substance, form part of the Group’s net investment in the associate) are not recognised,
unless the Group has incurred legal or constructive obligations or made payments on behalf of the
associate.
