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Straco Corporation Limited • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
3
Significant accounting policies (cont’d)
3.7 Impairment (cont’d)
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been
allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the
combination.
The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs
on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of
any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of units) on a
pro
rata
basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.8 Inventories
Inventories are stated at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle, and includes
expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location
and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling
expenses.
3.9 Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have
no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an
employee benefit expense in profit or loss in the periods during which services are rendered by employees.
