Annual Report 2021

ANNUAL REPORT 2021 73 KEY AUDIT MATTERS (CONTINUED) Key audit matter How our audit addressed the key audit matter Impairment assessment of goodwill attributable to ports operation in Mega Shekou Container Terminals Limited (“MSCT”) and TCP Participações S.A. (“TCP”) We identified the impairment assessment of goodwill attributable to the Group’s ports operation in MSCT and TCP as a key audit matter due to the involvement of significant management judgement and assumptions in this assessment. As disclosed in note 15(b) to the consolidated financial statements, the carrying amount of goodwill attributable to the Group’s ports operation amounted to HK$5,641 million as at 31 December 2021, among which HK$5,127 million is attributable to MSCT and TCP. For the purpose of assessing impairment, the recoverable amounts of the cash-generating units of the Group’s port operations in MSCT and TCP have been determined by the management of the Group based on value in use calculations using financial budgets based on past performance and expectation for market development, where the key input parameters include growth rates and discount rates. Based on the management’s assessment, there is no impairment of goodwill attributable to any of the Group’s ports operation in MSCT and TCP as at 31 December 2021 based on the calculations of value in use. Our procedures in relation to the impairment assessment of goodwill of the Group’s ports operation in MSCT and TCP included: ‧ Understanding the Group’s impairment testing process, assumptions used and the extent of involvement of a valuer; ‧ Evaluating the historical accuracy and reasonableness of financial budgets by checking to current year financial information; ‧ Evaluating the reasonableness of the management’s estimate of growth rates in determining the value in use with reference to the historical performance, the latest budgets of the Group and relevant market data; ‧ Working with our internal valuation specialists to assess the appropriateness of basis of calculation of the value in use prepared by the management, including the reasonableness of the discount rates and terminal growth rate with reference to the current market risk- free rate of interest, national specific risk factor and the industry specific risk factor; ‧ Checking the mathematical accuracy of the value in use calculation of the recoverable amount of the cash- generating units of the Group’s ports operation in MSCT and TCP prepared by the management; and ‧ Evaluating the disclosure of the impairment assessment of goodwill attributable to the Group’s ports operation.