Huawei 2015 Annual Report Download - page 63

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(ii) Impairment of other assets
Internal and external sources of information are
reviewed at the end of each reporting period
to identify indications that non-financial assets,
including property, plant and equipment, long-
term leasehold prepayments, intangible assets
and other long term assets may be impaired.
Goodwill is tested for impairment at least
annually. For the purposes of impairment testing,
goodwill is allocated to each cash generating
unit, or groups of cash generating units, that is
expected to benefit from the synergies of the
acquisition. Where impairment testing is of a
cash generating unit, goodwill is impaired first
where the recoverable value is less than the
carrying value of the unit.
Other assets are impaired and an impairment
loss is recognised in profit or loss where the
recoverable value of the asset is less than its
carrying amount, and reversed where there has
been a favourable change in the recoverable
amount. Impairment of goodwill is not reversed.
The recoverable amount of an asset or group of
assets is the greater of its fair value less costs of
disposal and value in use. Value in use is the total
estimated future cash flows from the asset or,
where the asset does not generate independent
cash flows independent of other assets, a group
of assets, discounted to their present value using
a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset.
(l) Inventories
Inventories are carried at the lower of cost and
net realisable value.
Cost is based on the standard cost method with
periodic adjustments of cost variance to arrive at
the actual cost, which approximates to weighted
average cost. Cost includes expenditures incurred
in acquiring the inventories and bringing them to
their present location and condition. The cost of
manufactured inventories and work in progress
includes an appropriate share of overheads based
on normal operating capacity.
Net realisable value is the estimated selling price
in the ordinary course of business, less the
estimated costs of completion and the estimated
costs necessary to make the sale.
When inventories are sold, the carrying amount
of those inventories is recognised as an expense
in the period in which the related revenue is
recognised. Any write-down of inventories to
net realisable value and all losses of inventories
are recognised as an expense in the period the
write-down or loss occurs.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank
and on hand, demand deposits with banks and
other financial institutions, and short-term, highly
liquid investments that are readily convertible into
known amounts of cash and which are subject
to an insignificant risk of changes in value.
Bank overdrafts that are repayable on demand
and form an integral part of the Group's cash
management are also included as a component
of cash and cash equivalents for the purpose of
the statement of cash flows.
(n) Employee benefits
(i) Short term employee benefits, contributions
to defined contribution retirement plans and
other long-term employee benefits.
Salaries, profit-sharing and bonus payments
paid annual leave and contributions to defined
contribution retirement plans are accrued in
the year in which the associated services are
rendered by employees. Where payment or
settlement is deferred and the effect would
be material, these amounts are stated at their
present values.