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82 Huawei Investment & Holding Co., Ltd. 2014 Annual Report
Goodwill is allocated to the Group's CGUs expected
to benefit from the synergies of the acquisitions. For
impairment assessment purposes, the recoverable
amount of the CGUs are based on their value-in-
use calculations. The value-in-use calculations apply a
discounted cash flow model using cash flow projections
based on financial budgets approved by management
covering a five-year period, based on their industry
expertise.
The key assumptions for the calculation of value-in-use
include the discount rates and growth rates applied.
Discount rates used are pre-tax rates and reflect specific
risks relating to respective CGU or group of CGUs. Cash
flows beyond the aforementioned approved financial
budget's periods are extrapolated using an estimated
growth rate applied. The growth rate does not exceed
the long-term average growth rate for the business in
which the CGU or group of CGUs operates. Discount
rates and growth rates applied for the computation of
value-in-use are as follows:
As at December 31
2014 2013
%%
Sectors under Enterprise business group
– Discount rate 16.4 17.0
– Terminal value growth rate 3.0 5.0
Beijing Huawei Longshine
– Discount rate 15.5 17.9
– Terminal value growth rate 3.0 3.0
Due to technology development and market change, the Group's expectation for the future growth and
profitability of the acquired sectors under Enterprise business group are lower than previous estimates. Therefore,
the acquired sectors under Enterprise business group were determined to be impaired. During the year, based on
the abovementioned impairment test, impairment loss of CNY3,223 million and CNY222 million was recognized
respectively for the goodwill allocated to and the intangible assets of the acquired sectors under Enterprise business
group; and the goodwill relating to CGU was reduced to nil. The impairment loss is recognized in the consolidated
statement of profit or loss as "other (expenses)/income, net".