Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 60 Notes to the Financial Statements 31 December 2016 (cont’d) 4. SIGNIFICANT ACCOUNTING POLICIES (cont’d) 4.7 Intangible assets (cont’d) (b) Other intangible assets (cont’d) Research and development (cont’d) Capitalised product development costs are amortised on a straight line basis over a period of three (3) to ten (10) years. Development expenditure not satisfying the criteria mentioned and expenditure arising from research or from the research phase of internal projects are recognised in profit or loss as incurred. Development assets are tested for impairment annually. Trademarks and copyrights Acquired trademarks and copyrights have finite useful lives and are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the accumulated straight line method to allocate the cost of trademarks and copyrights over their estimated useful lives of ten (10) years. 4.8 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out formula. The cost of replacement parts comprises all costs of purchase plus the cost of bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. 4.9 Impairment of non-financial assets The carrying amounts of assets, except for financial assets (excluding investments in subsidiaries) and inventories, are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Goodwill and intangible assets that have an indefinite useful life are tested annually for impairment or more frequently if events or changes in circumstances indicate that the goodwill or intangible assets might be impaired. The recoverable amount of an asset is estimated for an individual asset. Where it is not possible to estimate the recoverable amount of the individual asset, the impairment test is carried out on the cash generating unit (‘CGU’) to which the asset belongs. Goodwill acquired in a business combination is from the acquisition date, allocated to each of the Group’s CGU or groups of CGU that are expected to benefit from the synergies of the combination giving rise to the goodwill irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. Goodwill acquired in a business combination shall be tested for impairment as part of the impairment testing of the CGU to which it relates. The CGU to which goodwill is allocated shall represent the lowest level within the Group at which the goodwill is monitored for internal management purposes and not larger than an operating segment determined in accordance with MFRS 8 Operating Segments . The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its value in use. In estimating value in use, the estimated future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal 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 for which the future cash flow estimates have not been adjusted. An impairment loss is recognised in profit or loss when the carrying amount of the asset or the CGU, including the goodwill or intangible asset, exceeds the recoverable amount of the asset or the CGU. The total impairment loss is allocated, first, to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU on a pro-rata basis of the carrying amount of each asset in the CGU. The impairment loss is recognised in profit or loss immediately.