| |
Impairment Testing for Goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.
The aggregate carrying amounts of goodwill allocated to each unit are as follows:
|
|
Group |
|
|
2008 |
2007 |
|
Note |
S$’000 |
S$’000 |
Cash-Generating Unit (“CGU”) |
|
|
|
SUT Division |
(a) |
18,946 |
18,946 |
Sembcorp Cogen Pte Ltd |
(b) |
26,378 |
26,378 |
Sembcorp Gas Pte Ltd |
(c) |
41,986 |
41,986 |
SembRamky Environmental Management Private Limited |
(d) |
4,394 |
4,394 |
Multiple units of insignificant goodwill |
|
18,246 |
13,626 |
|
|
109,950 |
105,330 |
The recoverable amounts are determined based on calculations of the value-in-use. These calculations use cash flow projections from years 2009 to 2017, of which the projections for the first five years are based on financial budgets / forecasts approved by management and that for the remaining years are based on the same cash flow since 2013. Management has applied past experience in operating the business to forecast the performance and believes that this cash flow projection period was justified in consideration of the long-term nature of CGUs’ businesses. Zero terminal value is assumed and discount rates ranging from 5.74% to 6.00% have been used. At the balance sheet date, based on the following key assumptions, management believes that the recoverable amounts exceed their carrying amounts.
| a. |
SUT Division
| i. |
Market demand and supply for industrial utilities and services are updated for changes during the year; |
| ii. |
Cash flows beyond the budget period are estimated based on the long-term offtake contracts with its existing customers in the captive market in which it operates. |
|
| b. |
Sembcorp Cogen Pte Ltd
| i. |
Demand and supply for electricity and electricity spark spread are updated for changes in market conditions; |
| ii. |
Required plant maintenance and associated maintenance cost have been accounted for in the forecast of the plant’s gross profit; |
| iii. |
Expected capital expenditure for replenishment of parts has been included in the forecast in accordance with the plant maintenance programme; and |
| iv. |
Cash flows beyond the budget period are estimated based on plant availability and load factors as well as changes in operating costs due to normal wear and tear, maintenance cycles and inflation. |
|
| c. |
Sembcorp Gas Pte Ltd
| i. |
Depreciating USD / SGD exchange rate and High Sulphur Fuel Oil (“HSFO”) prices compared to prior year; |
| ii. |
Gross profit margin is expected to remain stable as the pricing of both customer and supplier contracts are pegged to the HSFO prices; |
| iii. |
Expected capital expenditure for plant refurbishment has been included in the forecast in accordance with the plant maintenance programme; and |
| iv. |
Cash flows beyond the budget period are estimated based on the contracted sales and purchase quantities of gas over the remaining period of the existing contracts with the major customers and the gas supplier. |
|
| d. |
SembRamky Environmental Management Private Limited
These calculations use cash flow projections based on management’s 5-year financial forecast of the company. The forecasted revenue and operating expenses are based on past performance and its expectation of market development. |
Movements in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows:
|
At Jan 1, 2008 |
Recognised in income statement (Note 33) |
Recognised in equity |
Translation adjustments |
At Dec 31, 2008 |
|
S$’000 |
S$’000 |
S$’000 |
S$’000 |
S$’000 |
|
|
|
|
|
|
Group |
|
|
|
|
|
2008 |
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
Property, plant and equipment |
260,322 |
48,094 |
— |
(32,458) |
275,958 |
Interest in associates |
5,091 |
963 |
— |
— |
6,054 |
Other financial assets |
116,439 |
625 |
(62,843) |
(1,922) |
52,299 |
Trade and other receivables |
277 |
60 |
— |
— |
337 |
Other items |
7,723 |
1,304 |
— |
(2,106) |
6,921 |
Total |
389,852 |
51,046 |
(62,843) |
(36,486) |
341,569 |
|
|
|
|
|
|
Deferred tax assets |
|
|
|
|
|
Property, plant and equipment |
(3,508) |
157 |
— |
3,030 |
(321) |
Inventories |
(22) |
— |
— |
— |
(22) |
Trade receivables |
(282) |
(1,317) |
— |
— |
(1,599) |
Trade and other payables |
(528) |
(125) |
— |
— |
(653) |
Tax losses |
(1,162) |
555 |
— |
(40) |
(647) |
Provisions |
(15,318) |
(2,860) |
— |
5,095 |
(13,083) |
Other items |
(21,288) |
1,345 |
(68,343) |
(215) |
(88,501) |
Total |
(42,108) |
(2,245) |
(68,343) |
7,870 |
(104,826) |
|
At Jan 1, 2007 |
Recognised in income statement (Note 33) |
Recognised in equity |
Acquisition / (disposal) of subsidiary |
Translation adjustments |
At Dec 31, 2007 |
|
S$’000 |
S$’000 |
S$’000 |
S$’000 |
S$’000 |
S$’000 |
|
|
|
|
|
|
|
Group |
|
|
|
|
|
|
2007 |
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
Property, plant and equipment |
241,546 |
21,649 |
— |
812 |
(3,685) |
260,322 |
Interest in associates |
1,948 |
3,143 |
— |
— |
— |
5,091 |
Other financial assets |
48,699 |
— |
67,766 |
— |
(26) |
116,439 |
Trade and other receivables |
1,852 |
(1,575) |
— |
— |
— |
277 |
Other items |
5,290 |
4,316 |
(1,702) |
— |
(181) |
7,723 |
Total |
299,335 |
27,533 |
66,064 |
812 |
(3,892) |
389,852 |
|
|
|
|
|
|
|
Deferred tax assets |
|
|
|
|
|
|
Property, plant and equipment |
(3,884) |
376 |
— |
— |
— |
(3,508) |
Inventories |
(10) |
(12) |
— |
— |
— |
(22) |
Trade receivables |
(917) |
635 |
— |
— |
— |
(282) |
Trade and other payables |
— |
(528) |
— |
— |
— |
(528) |
Tax losses |
(2,619) |
1,460 |
— |
— |
(3) |
(1,162) |
Provisions |
(14,268) |
(1,466) |
— |
— |
416 |
(15,318) |
Other items |
(20,019) |
1,279 |
(2,660) |
— |
112 |
(21,288) |
Total |
(41,717) |
1,744 |
(2,660) |
— |
525 |
(42,108) |
|
At Jan 1, 2007 |
Recognised in income statement |
At Dec 31, 2007 |
Recognised in income statement |
Acquisition (Note 37) |
At Dec 31, 2008 |
|
S$’000 |
S$’000 |
S$’000 |
S$’000 |
S$’000 |
S$’000 |
|
|
|
|
|
|
|
Company |
|
|
|
|
|
|
2007 & 2008 |
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
Property, plant and equipment |
195 |
— |
195 |
5,809 |
44,667 |
50,671 |
Total |
195 |
— |
195 |
5,809 |
44,667 |
50,671 |
Deferred tax liabilities and assets are set off when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The amounts determined after appropriate offsetting included in the balance sheet are as follows:
|
Group |
Company |
|
2008 |
2007 |
2008 |
2007 |
|
S$’000 |
S$’000 |
S$’000 |
S$’000 |
|
|
|
|
|
Deferred tax liabilities |
271,960 |
385,567 |
50,671 |
195 |
Deferred tax assets |
(35,217) |
(37,823) |
— |
— |
|
236,743 |
347,744 |
50,671 |
195 |
Deferred tax assets have not been recognised in respect of the following items:
|
Group |
|
2008 |
2007 |
|
S$’000 |
S$’000 |
|
|
|
Deductible temporary differences |
33,715 |
18,644 |
Tax losses |
35,874 |
41,319 |
Capital allowances |
27,368 |
24,413 |
|
96,957 |
84,376 |
Of the above tax losses, tax losses of the Group amounting to S$4,312,000 (2007: S$20,518,000) will expire between 2009 and 2011 (2007: 2008 and 2012). The deductible temporary differences and capital allowances do not expire under current tax legislation.
Deferred tax assets have not been recognised under the following circumstances:
| a. |
Where they are qualified for offset against the tax liabilities of member companies within the Group under the Loss Transfer System of Group Relief but the terms of the transfer have not been ascertained as at year end; and |
| b. |
Where it is uncertain that future taxable profit will be available against which the Group can utilise the benefits. |
|
|
|
|
|
