Creative 2010 Annual Report Download - page 26

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
2.4 Impairmentofnon-nancialassets
(a) Goodwill
Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Goodwill
included in the carrying amount of an investment in an associated company is tested for impairment as part of the investment,
rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”)
expected to benet from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount
of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.
The total impairment loss of a CGU is allocated rst to reduce the carrying amount of goodwill allocated to the CGU and
then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised in prot or loss and is not reversed in a subsequent period.
(b) Intangible assets
Property and equipment
Investments in subsidiaries and associated companies
Intangible assets, property and equipment and investments in subsidiaries and associated companies are tested for impairment
whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the
value-in-use) is determined on an individual asset basis unless the asset does not generate cash inows that are largely
independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the
asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in prot or loss.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates
used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of
this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that
would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised
for the asset in prior years.
A reversal of impairment loss for an asset other than goodwill is recognised in prot or loss.
2.5 Cash and cash equivalents
Cash and cash equivalents include cash at bank and on hand and short-term bank deposits with various banks which are
subject to an insignicant risk of change in value.
2.6 Financial assets
 (a) Classication
The Group classies its nancial assets in the following categories: loans and receivables and nancial assets, available-for-
sale. The classication depends on the nature of the asset and the purpose for which the assets were acquired. Management
determines the classication of its nancial assets at initial recognition.
notes to tHe fInAncIAl stAteMents
– For the nancial year ended 30 June 2010
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)