NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
76
CITIC ENVIROTECH LTD.
Annual Report
2015
3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY (cont’d)
(ii)
Key sources of estimation uncertainty (cont’d)
Useful lives of patent and customer contracts
As described in Note 2 to the financial statements, the Group reviews the estimated useful
lives of patent and customer contracts at the end of each annual reporting period. The
carrying amounts of patent and customer contracts at end of the reporting period are
disclosed in Note 17 to the financial statements.
Impairment of property, plant and equipment and intangible assets
The Group assesses annually whether property, plant and equipment and intangible assets
exhibit any indication of impairment. In instances where there are indications of impairment,
the recoverable amounts of property, plant and equipment and intangible assets have been
determined based on value-in-use calculations. The value-in-use calculations require the
exercise of judgement and use of estimates. The carrying amounts of property, plant and
equipment and intangible assets at the end of the reporting period are disclosed in Note 15
and Note 17 respectively to the financial statements.
Impairment of investments in subsidiaries and associates
The Group assesses at each reporting date whether there is an indication that the investments
in subsidiaries and associates may be impaired. Where there are indication of impairment, the
Group estimates the recoverable amount based on the higher of fair value less cost to sell and
value in use. Management has evaluated the recoverability of these investments based on such
estimates. The carrying value of the investments in subsidiaries and associates are set out in
Notes 13 and 14 to the financial statements.
Purchase price allocation
Business combinations are accounted for by applying the acquisition method. Identifiable
assets acquired and liabilities (including contingent liabilities) assumed in a business
combination are measured initially at their fair values at the acquisition date. Any excess of the
sum of the fair value of the consideration transferred in the business combination, the amount
of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously
held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable
assets and liabilities (including contingent liabilities) is recorded as goodwill.
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period, or additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have affected the amounts recognised as of that date.
The determination of the identifiable assets and liabilities (including contingent liabilities) fair
value is most sensitive to the discount rate used for the discounted cash flow model as well as
the expected future cash inflows.
The fair value of the identifiable assets and liabilities at the acquisition date is disclosed in
Note 40 to the financial statements.
