Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
CP
Impairment test for cash-generating units containing development costs 179
In the second half of 2023, the electronics market in Malaysia intensified with the entry of a global
industry leader, and as a result the group's operating profits in Malaysia were significantly lower than
originally budgeted. The group assessed the recoverable amounts of the assets comprising the CGU in
relation to its Malaysia electronics operations, which included the capitalised development costs.
The recoverable amount of the CGU that included the development costs is determined based on
value-in-use calculation. The group engaged an independent professional valuer to assist with the
calculation. The calculation uses cash flow projections based on financial budgets approved by
management covering a five-year period. The key assumptions used in estimating the recoverable
amount are as follows:
HKAS 1.125, 129
179
CP
Annual revenue growth rate during the forecast period
Gross profit margin
Growth rate beyond the forecast period (note (i))
2023
2022
[•]%
[•]%
[•]%
[•]%
[•]%
[•]%
[•] %
[•]%
Pre-tax discount rate
(i)
Cash flows beyond the five-year period have been extrapolated using an estimated weighted
average growth rate which is consistent with the forecasts included in industry reports and
generally in line with 2022.
As at 31 December 2023, the recoverable amount of the CGU was $[•] (2022: $[•]), which was higher
than its carrying amount by $[•] (2022: $[•]). The group considers that reasonably possible change in
the key assumptions above would not cause the CGU's carrying amount at 31 December 2023 to
exceed its recoverable amount.
Impairment assessment typically involves estimation uncertainties and entities should consider paragraphs 125 and 129 of HKAS
1 in addition to the requirements in HKAS 36 to determine the extent of disclosures needed, including whether a sensitivity
analysis is needed. Paragraph 125 of HKAS 1 requires disclosure of information about the assumptions an entity makes about
the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Sensitivity
analysis is one of the example type of disclosures provided in paragraph 129 of HKAS 1.
In any event, if impairment assessments have been performed for material intangible assets, regardless of whether an
impairment loss has been recognised, the SEHK recommends listed issuers to provide, in addition to the disclosures required by
HKFRSS, the following additional information in the MD&A and financial statements (where appropriate) to help investors
understand better those impairment assessments:
(a) additional quantitative data of key assumptions (other than discount rate and terminal growth rate, e.g. gross and net
margins), comparative information in the previous year and the explanation of significant changes of assumptions;
(b) a negative statement indicating that reasonably possible change in the key assumptions on which the management had
based its determination of the CGU's recoverable amount would not cause an impairment loss;
(c) the recoverable amount of the CGU and the headroom available;
(d) highlight whether the impairment assessment is based on a valuation by an independent professional valuer; and
(e) details of further development of the CGU or segment, such as business plan and contracts with new customers in the
coming year and their impact on the revenue and margins.
SEHK's recommendations can be found in its Review of Issuers' Annual Reports 2022.
115
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