18. GOODWILL
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December 31, |
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2016 |
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2017 |
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|
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RMB |
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RMB |
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|
|
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Cost |
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14,016 |
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16,495 |
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Less: accumulated impairment losses |
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(7,663 |
) |
(7,861 |
) |
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|
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|
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|
|
|
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6,353 |
|
8,634 |
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Impairment tests for cash-generating units containing goodwill
Goodwill is allocated to the following Group’s cash-generating units:
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December 31, |
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Principal activities |
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2016 |
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2017 |
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RMB |
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RMB |
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Sinopec Beijing Yanshan Petrochemical Branch (“Sinopec Yanshan”) |
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Manufacturing of intermediate petrochemical products and petroleum products |
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1,157 |
|
1,004 |
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|
Sinopec Zhenhai Refining and Chemical Branch (“Sinopec Zhenhai”) |
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Manufacturing of intermediate petrochemical products and petroleum products |
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4,043 |
|
4,043 |
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Shanghai SECCO Petrochemical Company Limited (“Shanghai SECCO”)(Note 31) |
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Production and sale of petrochemical products |
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— |
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2,541 |
|
|
Sinopec (Hong Kong) Limited |
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Trading of petrochemical products |
|
941 |
|
879 |
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|
Multiple units without individually significant goodwill |
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|
|
212 |
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167 |
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|
|
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6,353 |
|
8,634 |
|
Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the above cash-generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 10.4% to 11.0% and 10.8% to 11.4% for the years ended December 31, 2016 and 2017, respectively. Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss was recognized.
Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross margin based on the gross margin achieved in the period immediately before the budget period and management’s expectation on the future trend of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period immediately before the budget period.