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65
Cathay Pacific Airways Limited Annual Report 2006
9. Intangible assets
Group Company
Goodwill
HK$M
Computer
systems
HK$M
Total
HK$M
Computer
systems
HK$M
Cost
At 1st January 2006 176 582 758 558
Additions 7,214 39 7,253 39
Purchase of a subsidiary – 15 15 –
At 31st December 2006 7,390 636 8,026 597
At 1st January 2005 176 640 816 617
Additions – 61 61 60
Disposals – (119) (119) (119)
At 31st December 2005 176 582 758 558
Accumulated amortisation
At 1st January 2006 – 498 498 475
Charge for the year – 40 40 39
Purchase of a subsidiary – 15 15 –
At 31st December 2006 – 553 553 514
At 1st January 2005 – 468 468 445
Charge for the year – 44 44 44
Disposals – (14) (14) (14)
At 31st December 2005 – 498 498 475
Net book value
At 31st December 2006 7,390 83 7,473 83
At 31st December 2005 176 84 260 83
The carrying amount of goodwill allocated to the airline operation is HK$7,351 million (2005: HK$137 million).
The addition of the goodwill relates to the acquisition of Dragonair. In accordance with HKAS 36 “Impairment
of Assets” the Group completed its annual impairment test for goodwill allocated to the Group’s various
cash generating units (“CGUs”) by comparing their recoverable amounts to their carrying amounts as at the
balance sheet date. The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash flow projections based on five-year financial budgets, with reference to past performance
and expectations for market development, approved by management. Cash flows beyond the five-year period are
extrapolated with an estimated general annual growth rate which does not exceed the long-term average growth
rate for the business in which the CGU operates. The discount rates used of approximately 9% are pre-tax and
reflect specific risk related to the relevant segments. Management believes that any reasonably foreseeable
change in any of the above key assumptions would not cause the carrying amount of goodwill to exceed the
recoverable amount.
Notes to the Accounts Balance Sheet