Lenovo 2015 Annual Report Download - page 167

165
2014/15 Annual Report Lenovo Group Limited
NOTES TO THE FINANCIAL STATEMENTS
3 FINANCIAL RISK MANAGEMENT (continued)
(d) Fair value estimation (continued)
The movements in the financial assets and liabilities included in Level 3 fair value hierarchy for the years ended March
31, 2015 and 2014 are as follows:
Available-for-sale financial assets
2015 2014
US$’000 US$’000
At the beginning of the year 24,702 16,162
Exchange adjustment (459) (10)
Additions 9,865 8,550
At the end of the year 34,108 24,702
Contingent considerations and written put option liability
2015 2014
US$’000 US$’000
At the beginning of the year 524,340 517,385
Exchange adjustment (8) (235)
Recognized in consolidated income statement 7,068 7,190
At the end of the year 531,400 524,340
Total losses for the year included in profit or loss under “finance costs” 7,060 6,955
Changes in unrealized losses for the year included in profit or loss 7,060 6,955
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 28.
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, were 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.