NOTES TO THE FINANCIAL STATEMENTS
For the Financial Year Ended 31 December 2014
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.21 IMPAIRMENT OF ASSETS
(a)
NON-FINANCIAL ASSETS
An assessment is made at each reporting date to determine whether there is an indication that an asset may
be impaired. If any indication exists, or when annual impairment testing for an asset is required, the estimated
recoverable amount of that asset is determined.
Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations
are recognised in the profit or loss except for assets that are previously revalued where the revaluation was taken
to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income
up to the amount of any previous revaluation.
Calculation of recoverable amount
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal
and its value in use and is determined for an individual asset. If the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets, the recoverable amount is determined for
the cash-generating unit to which the asset belongs to. In assessing value in use, the estimated future cash flows
expected to be generated by the asset 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. In determining fair
value less costs of disposal, recent market transactions are taken into account, if available. If no such transactions
can be identified, an appropriate valuation model is used.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared
separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets
and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in profit or loss, except for assets that are previously
revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also
recognised in other comprehensive income up to the amount of any previous revaluation.
Reversal of impairment
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication
that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists,
the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment
loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to
its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss
unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.
72
THE STRAITS TRADING COMPANY LIMITED ANNUAL REPORT 2014
