axiata group berhad | annual report 2015
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4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
(b) Critical accounting estimates and assumptions (continued)
The main risks relating to the Group’s business are as follows:
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Increasing competition in the countries the Group operates in
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Challenges in expanding business in certain emerging markets
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Political, regulatory and social developments in the region the Group operates in
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Significant expansion of capital investments required
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Increasing substitution for traditional voice and data market
To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group’s results and
financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next year are mentioned below.
(i) Impairment assessment of goodwill
The Group tests goodwill for impairment annually in accordance with its accounting policy and whenever events or change in circumstances
indicate that this is necessary within the financial year. Recoverable amount is measured at the higher of the FVLCS for that asset and its
VIU.
The recoverable amounts of certain CGUs have been determined based on VIU calculations. These calculations require the use of estimates.
The calculations are inherently judgemental and susceptible to change from period to period because they require the Group to make
assumptions about revenue growth, exchange rates, an appropriate discount rate and terminal growth rate.
The assumptions used, results and sensitivity of the impairment assessment of goodwill are disclosed in Note 24 to the financial statements.
(ii) Impairment assessment of PPE and investments
The Group and the Company assess impairment of the assets or CGUs mentioned above whenever the events or changes in circumstances
indicate that the carrying amount of an asset or CGU may not be recoverable i.e. the carrying amount of the asset is more than the
recoverable amount. Recoverable amount is measured at the higher of the FVLCS for that asset or CGU and its VIU.
Projected future cash flows used in impairment testing of the assets or CGUs mentioned above are based on Group’s and Company’s
estimates calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and
other available information.
The recoverable amounts of the asset or CGUs have been determined based on VIU calculations. These calculations require the use of
estimates. The calculations are inherently judgemental and susceptible to change from period to period because they require the Group
and the Company to make assumptions about revenue growth, exchange rates, an appropriate discount rate and terminal growth rate.
The assumptions used and results of the impairment assessment of investment in an associate are disclosed in Note 28 to the financial
statements.
(iii) Estimated useful lives of PPE
The Group reviews the estimated useful lives of PPE based on factors such as business plan and strategies, expected level of usage and
future technological developments at the end of each reporting period. Future results of operations could be materially affected by
changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of PPE would
increase the recorded depreciation charge and decrease the PPE balance.
