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CORDLIFE GROUP LIMITED
| ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
11.
INVESTMENT IN ASSOCIATE
(CONTINUED)
Impairment testing of investment in associate
The recoverable amount of the investment in associate is determined based on value in use calculations using
cash flow projections from financial budgets approved by management covering a five-year period. Cash
flows beyond the terminal year are extrapolated using estimated growth rates stated in the table below. Key
assumptions used in the calculation of value in use are growth rates and discount rates.
Growth rates – the terminal growth rate used do not exceed the long-term average growth rates of the
industry and country in which the associate operates in and is consistent with forecasts included in industry
reports.
Discount rate – the discount rates applied to the cash flow projections are based on Weighted Average Cost
of Capital (“WACC”) where the cost of a company’s debt and equity capital are weighted to reflect its capital
structure.
The discount rate applied to the cash flow projections and the cash flow projections and the forecasted growth
rates used to extrapolate cash flow projections beyond the five-year period are as follows:
2015
2014
Growth rate
2.0%
1.5%
Pre-tax discount
11.4%
11.4%
During the financial year, an impairment loss of $2,646,000 (2014: Nil) was recognised for the Group’s
investment in associate.
Transfer from associate to financial asset designated at fair value through profit or loss
During the financial year ended 30 June 2013, the Group acquired a 10.02% interest in China Cord Blood
Corporation (“CCBC”). CCBC is listed on the New York Stock Exchange (“NYSE”) and provides cord blood
collection, laboratory testing, hematopoietic stem cell processing and stem cell storage services in the Beijing
municipality and the provinces of Guangdong and Zhejiang. The Group had accounted for its 10.02% interest
in CCBC as an associate as the Group had determined that it had significant influence over CCBC in view of
Mr Jeremy Yee’s appointment to the CCBC board as a nominee director of the Group.
On 27 September 2013, Mr Jeremy Yee stepped down from the CCBC board and the Group irrevocably waived
its rights to appoint a nominee director to the CCBC board. As a result, the Group determined that it no longer
had significant influence over CCBC. The Group ceased accounting for CCBC using the equity method with
effect from 27 September 2013. Consequently, the investment in CCBC is designated as a financial asset at
fair value through profit or loss (Note 15). Consequently, a gain on transfer from associate to financial asset
designated at fair value through profit or loss of $6,297,000 was included in the Group’s profit or loss for the
year ended 30 June 2014.
