Lenovo 2013 Annual Report Download - page 141

2012/13 Annual Report Lenovo Group Limited 139
3 Financial risk management (continued)
(d) Fair value estimation (continued)
Other non-current liabilities
Group Company
2013 2012 2013 2012
US$’000 US$’000 US$’000 US$’000
At the beginning of the year 428,915 –256,093 –
Additions 255,680 426,666 41,550 252,708
De-recognition (170,645) –(1,500) –
Exchange adjustment (4,426) (2,662) 349 –
Recognized in consolidated
income statement 7,861 4,911 4,621 3,385
At the end of the year 517,385 428,915 301,113 256,093
No sensitivity analysis for unlisted equity investments is presented as a reasonably possible change in key assumptions
used in the sensitivity analysis would not result in any significant potential financial impact. Sensitivity analysis in respect
of contingent considerations and written put option liability is disclosed in Note 29.
4 Critical accounting estimates and judgments
The preparation of financial statements often requires the use of judgment to select specific accounting methods and
policies from several acceptable alternatives. Estimates and judgments used in preparing the financial statements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the related actual results. The following are the more
significant assumptions and estimates, as well as the accounting policies and methods used in the preparation of the financial
statements:
(a) Impairment of non-financial assets
The Group tests at least annually whether goodwill and other assets that have indefinite useful lives have suffered any
impairment. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset exceeds its recoverable amount. The recoverable amounts of an asset or a cash-
generating unit have been determined based on value-in-use calculations. These calculations require the use of
estimates.
The value-in-use calculations primarily use cash flow projections based on financial budgets, in general covered five
years, approved by management and estimated terminal values at the end of the five-year period. There are a number of
assumptions and estimates involved for the preparation of cash flow projections for the period covered by the approved
budget and the estimated terminal value. Key assumptions include the expected growth in revenues and operating
margin, growth rates and selection of discount rates, to reflect the risks involved and the earnings multiple that can be
realized for the estimated terminal value.
Management prepared the financial budgets reflecting actual and prior year performance and market development
expectations. Judgment is required to determine key assumptions adopted in the cash flow projections and changes to
key assumptions can significantly affect these cash flow projections and therefore the results of the impairment reviews.
(b) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining
the worldwide provision for income taxes. There are certain transactions and calculations for which the ultimate
tax determination is uncertain during the ordinary course of business. The tax liabilities recognized are based on
management’s assessment of the likely outcome.
The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be
due.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying values in the financial statements.