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Escher Group Holdings plc
Annual report 2011
43
Financial statements
Corporate governance
Business review
Overview
12. Intangible assets
Goodwill
US$’000
RiposteTrEx
development
US$’000
COTS
US$’000
Other
intangibles
US$’000
Total
US$’000
Cost
At 31 December 2009
31,260
—
—
— 31,260
Additions
—
1,021
—
—
1,021
At 31 December 2010
31,260
1,021
—
— 32,281
At 31 December 2010
31,260
1,021
—
— 32,281
Additions
—
1,421
597
189
2,207
Exchange differences
(133)
—
—
—
(133)
At 31 December 2011
31,127
2,442
597
189
34,355
Accumulated amortisation
At 31 December 2009
—
—
—
—
—
Charge for the year
—
(34)
—
—
(34)
At 31 December 2010
—
(34)
—
—
(34)
At 31 December 2010
—
(34)
—
—
(34)
Charge for the year
—
(358)
—
—
(358)
At 31 December 2011
—
(392)
—
—
(392)
Net book value
At 31 December 2009
31,260
—
—
— 31,260
At 31 December 2010
31,260
987
—
— 32,247
At 31 December 2011
31,127
2,050
597
189
33,963
During 2011 there was US$2.2 million of costs capitalised for intangible assets. US$1.4 million of this related to the ongoing
development of the
RiposteTrEx
product. US$0.6 million was capitalised for development of our new “Complete out of the
box solution” (COTS) and US$0.2 million for other products being developed.
Amortisation of US$358,000 (2010: US$34,000) on
RiposteTrEx
is included in cost of sales in the income statement.
With the exception of
RiposteTrEx,
these products are still in the development phase and no amortisation has occurred.
The average remaining amortisation period of the
RiposteTrEx
development is 50 months. In the year there was US$1.9 million
(2010: US$1.8 million) of research and development expenditure recognised as an expense in the income statement as the state
of completion was not viewed as being sufficiently developed to warrant capitalisation.
The Group has two main operating entities. The combination of the two CGUs represent the lowest level at which goodwill
is monitored by the Group and the lowest level at which management captures information for internal management reporting
purposes about the benefits of the goodwill. The combined CGUs are not larger than an operating segment.
Impairment test of goodwill and other indefinite life assets
The value of goodwill and intangible assets was tested as at 31 December 2011, after business planning had been completed.
Impairment testing methodology
The recoverable amount of a CGU is determined on the basis of value-in-use, using the discounted cash flow (DCF) method.
At 31 December 2011, these calculations use pre-tax cash flow projections based on business plans approved by the Board
of Directors covering a five‑year period up to 31 December 2016. For the period beyond five years a terminal growth rate
of 2.5% has been applied. The cash flows are discounted using the discount rate stated overleaf.
In addition to this value-in-use test a separate fair value less costs to sell calculation has been performed. This supports
the findings of the overleaf value-in-use test.