7. Intangible assets
continued
Amortisation expense of
7 million (2007: 1 million) relating to intangibles has been charged to cost of sales.
The remaining amortisation periods for intangible assets range between one and 20 years.
Computer software and related licences include internally generated computer software, whilst internally generated product development
costs are included within the total for development costs and other.
Goodwill is the only identified intangible with an indefinite life.
For the purposes of impairment testing, goodwill is allocated to the Group's Maisons which represent the lowest level within the Group
at which goodwill is monitored.
The carrying amount of the goodwill was determined to be lower than its recoverable amount, therefore no impairment loss was recognised.
The recoverable amount of
11 million (2007: 13 million) for a Hong Kong-based clothing and accessories retailer was determined
by discounting the future cash flows generated from the continuing operations, applying the following key assumptions:
· pre-tax cash flows are based on the approved five-year business plan;
· revenue growth was projected between 15 and 18 per cent in years 2009-2013; and
· a pre-tax discount rate of 10.6 per cent was applied in determining the recoverable amount of the unit.
The above estimate is particularly sensitive in the following areas:
· an increase of 22 per cent in the discount rate would have resulted in an impairment loss of
1 million; and
· a 45 per cent decrease in future planned revenue would have resulted in an impairment loss of
2 million.
The goodwill of
32 million recognised during the year arises from the Group's acquisition of certain manufacturing entities.
The recoverable amount for the manufacturing entities, was determined by discounting the future cash flows generated from the
continuing operations, applying the following key assumptions:
· pre-tax cash flows are based on the approved ten-year business plan;
· revenue growth was projected at 5 per cent in years 2010-2013; and
· a pre-tax discount rate of 8.5 per cent was applied in determining the recoverable amount of the unit.
The above estimate is particularly sensitive in the following areas:
· an increase of 10.5 per cent in the discount rate would have resulted in an impairment loss of
1 million; and
· a 32 per cent decrease in future planned revenue would have resulted in an impairment loss of
2 million.
Richemont Annual Report and Accounts 2008
85
Consolidated financial statements