99
ANNUAL REPORT 2016
NOTES TOTHE FINANCIAL STATEMENTS
30 JUNE 2016
(Continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.9 Impairment of non-financial assets
The carrying amounts of assets, except for financial assets (excluding investments in subsidiaries and interests in associates),
inventories, deferred tax assets and investment properties measured at fair value, are reviewed at the end of each reporting period to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment or more frequently if events or
changes in circumstances indicate that the goodwill or intangible asset might be impaired.
The recoverable amount of an asset is estimated for an individual asset. Where it is not possible to estimate the recoverable amount
of the individual asset, the impairment test is carried out on the cash generating unit (“CGU”) to which the asset belongs. Goodwill
acquired in a business combination is from the acquisition date, allocated to each of the CGU or groups of CGU of the Group that are
expected to benefit from the synergies of the combination giving rise to the goodwill irrespective of whether other assets or liabilities
of the acquiree are assigned to those units or groups of units.
Goodwill acquired in a business combination shall be tested for impairment as part of the impairment testing of CGU to which it relates.
The CGU to which goodwill is allocated shall represent the lowest level within the Group at which the goodwill is monitored for internal
management purposes and not larger than an operating segment determined in accordance with MFRS 8
Operating Segments.
The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its value in use.
In estimating the value in use, the estimated future cash inflows and outflows to be derived from continuing use of the asset and from
its ultimate disposal are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. An impairment
loss is recognised in profit or loss when the carrying amount of the asset or the CGU, including the goodwill or intangible asset,
exceeds the recoverable amount of the asset or the CGU. The total impairment loss is allocated, first, to reduce the carrying amount
of any goodwill allocated to the CGU and then to the other assets of the CGU on a pro-rata basis of the carrying amount of each asset
in the CGU. The impairment loss is recognised in profit or loss immediately.
An impairment loss on goodwill is not reversed in subsequent periods. An impairment loss for other assets is reversed if, and only if, there
has been a change in the estimates used to determine the assets’ recoverable amount since the last impairment loss was recognised.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Such reversals are recognised
as income immediately in profit or loss.
4.10 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the weighted average method. The cost of consumables and raw materials comprises all costs of purchase
plus other costs incurred in bringing the inventories to their present location and condition. The cost of work-in-progress and finished
goods includes the cost of raw materials, direct labour, other direct cost and a proportion of production overheads based on normal
operating capacity of the production facilities.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale.
4.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one enterprise and a financial liability or equity instrument
of another enterprise.
A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive cash or another
financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities with another enterprise
under conditions that are potentially favourable to the Group.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or a
contractual obligation to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially
unfavourable to the Group.
