5. INTANGIBLE ASSETS
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Mining |
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Mineral |
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Computer |
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rights and |
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exploration |
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software |
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Goodwill |
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others |
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rights |
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and others |
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Total |
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Year ended December 31, 2016 |
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Opening net carrying amount |
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2,345,837 |
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6,771,023 |
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1,143,482 |
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178,673 |
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10,439,015 |
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Additions |
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— |
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341,687 |
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1,190 |
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1,222 |
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344,099 |
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Disposal |
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— |
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— |
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— |
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(6,827) |
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(6,827) |
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Amortization |
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— |
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(211,325) |
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— |
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(32,446) |
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(243,771) |
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Transfer from property, plant and equipment |
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— |
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42,165 |
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10,408 |
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143 |
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52,716 |
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Reclassification |
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— |
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36,686 |
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(36,686) |
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— |
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— |
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Currency translation differences |
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1,016 |
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9,351 |
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13,192 |
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— |
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23,559 |
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Closing net carrying amount |
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2,346,853 |
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6,989,587 |
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1,131,586 |
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140,765 |
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10,608,791 |
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As at December 31, 2016 |
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Cost |
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2,346,853 |
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8,231,287 |
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1,131,586 |
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399,631 |
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12,109,357 |
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Accumulated amortization and impairment |
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— |
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(1,241,700) |
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— |
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(258,866) |
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(1,500,566) |
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Net carrying amount |
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2,346,853 |
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6,989,587 |
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1,131,586 |
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140,765 |
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10,608,791 |
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Mining |
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Mineral |
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Computer |
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rights and |
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exploration |
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software and |
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Goodwill |
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others |
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rights |
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others |
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Total |
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Year ended December 31, 2017 |
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Opening net carrying amount |
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2,346,853 |
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6,989,587 |
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1,131,586 |
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140,765 |
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10,608,791 |
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Additions |
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— |
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280,340 |
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— |
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4,827 |
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285,167 |
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Acquisition of a subsidiary |
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— |
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— |
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— |
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188 |
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188 |
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Disposals |
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— |
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— |
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— |
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(11,168) |
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(11,168) |
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Disposal of subsidiaries |
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— |
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— |
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— |
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(562) |
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(562) |
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Amortization |
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— |
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(242,261) |
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— |
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(34,616) |
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(276,877) |
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Transfer from property, plant and equipment (note 6) |
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— |
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53,565 |
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— |
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22,614 |
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76,179 |
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Impairment losses |
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— |
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— |
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— |
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(8,134) |
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(8,134) |
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Currency translation differences |
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(923) |
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(7,433) |
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(12,053) |
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— |
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(20,409) |
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Closing net carrying amount |
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2,345,930 |
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7,073,798 |
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1,119,533 |
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113,914 |
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10,653,175 |
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As at December 31, 2017 |
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Cost |
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2,345,930 |
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8,554,713 |
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1,119,533 |
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399,707 |
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12,419,883 |
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Accumulated amortization and impairment |
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— |
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(1,480,915) |
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— |
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(285,793) |
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(1,766,708) |
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Net carrying amount |
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2,345,930 |
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7,073,798 |
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1,119,533 |
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113,914 |
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10,653,175 |
For the years ended December 31, 2015, 2016 and 2017, the amortization expenses of intangible assets recognized in profit or loss are analyzed as follows:
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2015 |
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2016 |
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2017 |
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Cost of sales |
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223,068 |
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211,325 |
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242,261 |
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General and administrative expenses |
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32,030 |
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32,446 |
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34,616 |
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255,098 |
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243,771 |
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276,877 |
As at December 31, 2017, the Group has pledged intangible assets with a net carrying value amounting to RMB1,112 million (December 31, 2016: RMB1,114 million) for bank and other borrowings as set out in note 24 to the financial statements.
As at December 31, 2017, the Group was in the process of applying for the certificates of mining rights with a carrying value amounting to RMB1,680 million (December 31, 2016: RMB1,577 million). There have been no litigations, claims or assessments against the Group for compensation with respect to the use of these rights to date. As at December 31, 2017, the carrying value of these rights only represented approximately 0.84% of the total asset value of the Group (December 31, 2016: approximately 0.83%). Management considers that it is probable that the Group can obtain the relevant ownership certificates from the appropriate authorities. The directors of the Company are of the opinion that the Group legally owns and has the rights to use the above mining rights, and that there is no material adverse impact on the overall financial position of the Group.
Impairment tests for goodwill
The lowest level within the Group at which goodwill is monitored for internal management purposes is the operating segment level. Therefore, goodwill is allocated to the Group’s cash-generating units ("CGUs") and groups of CGUs according to operating segments. A summary of goodwill allocated to each segment is presented below:
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December 31, |
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December 31, |
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2016 |
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2017 |
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Primary |
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Primary |
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Alumina |
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aluminium |
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Alumina |
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aluminium |
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Qinghai Branch |
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— |
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217,267 |
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— |
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217,267 |
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Guangxi Branch |
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189,419 |
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— |
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189,419 |
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— |
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Lanzhou Branch |
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— |
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1,924,259 |
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— |
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1,924,259 |
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PT. Nusapati Prima ("PTNP") |
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15,908 |
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— |
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14,985 |
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— |
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205,327 |
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2,141,526 |
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204,404 |
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2,141,526 |
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the 5‑year period are extrapolated using the estimated growth rate of 2% (2016: 2%) not exceeding the long-term average growth rate for the businesses in which the CGU operates. Other key assumptions applied in the impairment tests include the expected product price, demand for the products, product costs and related expenses. Management determined these key assumptions based on past performance and their expectations on market development. Furthermore, the Group adopts a pre-tax rate of 12.62% (2016: 12.62%) that reflects specific risks related to CGUs and groups of CGUs as the discount rate. The assumptions above are used in analysing the recoverable amounts of CGUs and groups of CGUs within operating segments.
The directors of the Company are of the view that, based on their assessment, there was no impairment of goodwill as at December 31, 2017 (December 31, 2016: no impairment).