Lenovo 2009 Annual Report Download - page 121
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2008/09 Annual Report Lenovo Group Limited
119
18 Intangible assets (continued)
Impairment tests for goodwill and intangible assets with indefinite useful lives
As explained in Note 5, the Group uses geographical segment as its primary segment for reporting segment information. For
the purposes of impairment testing, goodwill and trademarks and trade names with indefinite useful lives are allocated to the
Group’s cash-generating units (CGU). The carrying amounts of goodwill and trademarks and trade names with indefinite useful
lives as at March 31, 2008 and 2009 are presented below:
Asia Pacific
Europe, (excluding
Middle East Greater Greater
Americas and Africa China) China Total
US$ million US$ million US$ million US$ million US$ million
At March 31, 2008 and 2009
Goodwill 364 102 152 679 1,297
Trademarks and trade names 107 30 45 198 380
The Group completed its annual impairment test for goodwill allocated to the Group’s various CGU by comparing their
recoverable amounts to their carrying amounts as at the reporting date. The recoverable amount of a CGU is determined
based on value in use. These assessments use cash flow projections based on financial budgets approved by management
covering a 5-year period with a terminal value related to the future earnings potential of the CGU beyond the next five years.
Future cash flows are discounted at the rate of 11 percent (2008: 11 percent). The estimated growth rates adopted do not
exceed the long-term average growth rates for the businesses in which the CGU operates. These assumptions have been
used for the analysis of each CGU within the geographical segment.
Management determined budgeted gross margins based on past performance and its expectations for the market
development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The
discount rates are pre-tax and reflect specific risks relating to the relevant segments.
The directors are of the view that there was no evidence of impairment of goodwill and trademarks and trade names as at
March 31, 2009 arising from the review (2008: Nil).
A one percentage point increase or decrease in the discount rate would result in a decrease or increase in the recoverable
amount of 11 percent and 13 percent respectively. A one percentage point increase or decrease in forecasted growth rates
would result in an increase or decrease in the recoverable amount of 3 percent respectively. A one percentage point increase
or decrease in forecasted operating margins would result in an increase or decrease in the recoverable amount of 18 percent
respectively.