Annual Report 2021

CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED 140 Notes to the Consolidated Financial Statements For the year ended 31 December 2021 15. GOODWILL AND INTANGIBLE ASSETS (CONTINUED) Notes: (a) Amortisation expenses charged for the year are included in cost of sales in the consolidated statement of profit or loss. (b) Goodwill is allocated to 8 groups of CGUs identified according to location of operation and business segment. The goodwill analysed by operating segment is as follows: 2021 2020 HK$’million HK$’million Ports operation – Mainland China, Hong Kong and Taiwan – Pearl River Delta (comprising 5 groups of CGUs) 2,547 2,479 – Others (comprising 2 groups of CGUs) 241 235 2,788 2,714 – Brazil 2,853 3,045 5,641 5,759 Included in the ports operation in Pearl River Delta and Brazil as at 31 December 2021 are the goodwill attributable to Mega Shekou Container Terminals Limited and TCP Participações S.A. (“TCP”) amounting to HK$2,274 million (2020: HK$2,207 million) and HK$2,853 million (2020: HK$3,045 million), respectively. In addition to goodwill and intangible assets above, property, plant and equipment and right-of-use assets (including allocation of corporate assets) that generate cash flows together with the related goodwill and intangible assets are also included in the respective CGU for the purpose of impairment assessment. The recoverable amount of a CGU is determined based on the higher of fair value less costs of disposal and value in use calculations. The value in use calculations use pre-tax cash flow projections based on financial budgets approved by management covering periods ranging from 5 years to 10 years (2020: 5 years to 10 years) and 27 years (2020: 28 years) for ports operation in Mainland China, Hong Kong and Taiwan and in Brazil, respectively, and discounted by rates specific to the relevant CGUs taking into consideration of the operating period of concession right and development plans. Management determines the financial budgets based on past performance and its expectations for market development, including the expected economic growth in developed and emerging economies in the short-term and medium-term, prospective GDP growth rates of respective regions, future developments of the ports, among others. The cash flow projections, growth rates and discount rate have been reassessed as at 31 December 2021 taking into consideration higher degree of estimation uncertainties in the current year due to how the COVID-19 pandemic may progress and evolve and volatility in financial markets, including potential disruptions of the Group’s operation. Cash flows beyond the budgeted period are extrapolated using the estimated growth rate stated below. The Group engages an independent qualified valuer, Greater China Appraisal Limited, to determine the future growth rates and discount rates used in the value in use calculations prepared by the management of the Group.