Cordlife Group Limited
Annual Report 2016
89
Notes to
The Financial Statements
for the financial year ended 30 June 2016
14. Intangible assets (cont’d)
Amortisation expense
The amortisation of the intangible assets has been recognised in the “Administrative expenses” line item in the
consolidated statement of comprehensive income.
Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated to one cash-generating unit (“CGU”),
which is its business operations in Malaysia, being Stemlife Berhad. The carrying amount of goodwill is
$7,924,000, which resulted from the Group’s additional acquisition of Stemlife Berhad.
The recoverable amount of the cash-generating unit has been determined based on value in use calculations
using cash flow projections from financial budgets approved by management covering a five-year period. The
pre-tax discount rate applied to the cash flow projections was 12.5% and the forecasted growth rates used to
extrapolate the cash flow projections beyond the five-year period was 2.0%.
The calculations of value in use for the CGU are most sensitive to the following assumptions:
Budgeted gross margin – Gross margin is based on average values achieved in the two years preceding the
start of the budget period. This is increased over the budget period for anticipated efficiency improvements.
Growth rate – The forecasted growth rate is based on market research data and does not exceed the long-term
average growth rate for the industry relevant to the CGU.
Pre-tax discount rate – The discount rate represents the current market assessment of the risks specific to
the CGU, regarding the time value of money and individual risks of the underlying assets which have not been
incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances
of the Group and the CGU and derived from its weighted average cost of capital (WACC). The WACC takes
into account both debt and equity. The cost of equity is derived from the expected return on investment by the
Group’s investors. The cost of debt is based on the interest bearing borrowings the Group is obliged to service.
The CGU’s specific risk is incorporated by applying individual beta factors. The beta factors are evaluated
annually based on publicly available market data.
Market share assumptions – These assumptions are important because, as well as using market data for the
growth rate (as noted above), management assesses how the CGU’s position, relative to its competitors, might
change over the budget period. Management expects the Group’s share of the market to grow over the budget
period.
Impairment loss recognised
During the financial year, no impairment loss was recognised (2015: $Nil).
