3
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS CONTINUED¡
(b) Goodwill (Continued)
Key assumptions are made with respect to the expected growth in revenues and cost of services rendered, timing of
future capital expenditures, terminal value, growth rates and selection of discount rate, which approximately reflect the
risks involved. The growth in revenues will be a
ected by the growth in both the volume of containers handled and tari
.
The volume of containers handled will be impacted by economic and global market conditions, and influenced by the
performance and growth of regional and international trading economies. If key export markets for local exporters
experience an economic downturn or recession, export volumes may decrease. The growth of tari
depends on the
Group’s overall competitiveness, which is determined by a number of factors, such as geographical reach and connectivity,
operating e¢ciency, berth availability, mega vessel handling capability, technology o
erings, transportation and logistics
network and ancillary services and facilities.
A significant portion of cost of services rendered is labour cost which will be impacted by labour supply and inflation. In
addition, the introduction of ever larger vessels by shipping lines will require upgrading of equipment and new work practices
to increase productivity so as to remain competitive.
(c) Customer relationships
Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Customer
relationships are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method
over the expected life of the customer relationships.
The Group considers its impairment accounting policy to be a policy that requires one of the most extensive applications
of judgements and estimates by management. Intangible assets with definite useful lives that are subject to amortisation
are reviewed to determine whether there is any indication that the carrying value of these assets may not be recoverable
and have su
ered an impairment loss. If any such indication exists, the recoverable amounts of the intangible assets are
estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. Such impairment loss is recognised in the income statement. Management’s
judgements are required in the area of intangible asset impairment, particularly in assessing: (1) whether an event has
occurred that may indicate that the related asset values may not be recoverable; and (2) whether the carrying value of an
asset can be supported by the recoverable amount, being the higher of fair value less costs to sell or net present value of
future cash flows which are estimated based upon the continued use of the asset in the Group.
(d) Depreciation
Depreciation of operating assets constitutes a substantial operating cost for the Group. The cost of fixed assets is charged
as depreciation expense over the estimated useful lives of the respective assets using the straight-line method. The Group
periodically reviews changes in technology and industry conditions, asset retirement activity and residual values to determine
adjustments to estimated remaining useful lives and depreciation rates.
Actual economic lives may di
er from estimated useful lives. Periodic reviews could result in a change in depreciable lives
and therefore depreciation expense in future periods.
(e) Accrual of net revenue
Revenue is accrued at period end with reference to the throughput handled and the terms of agreements for container
handling service. Consequently, recognition of revenue is based on the volume of services rendered as well as the latest
tari
agreed with customers or best estimated by management. This estimate is based on the latest tari
and other industry
considerations as appropriate. If the actual revenue di
ers from the estimated accrual, this will have an impact on revenue in
future periods.
Notes to the
Financial Statements
085
ANNUAL REPORT 2015
HUTCHISON PORT HOLDINGS TRUST
