Annual Report 2019

184 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED Notes to the Consolidated Financial Statements For the year ended 31 December 2019 16. GOODWILL AND INTANGIBLE ASSETS (CONTINUED) Notes: (a) Amortisation expenses charged for the year are included in the consolidated statement of profit or loss as follows: 2019 2018 HK$’million HK$’million Cost of sales 271 257 Administrative expenses — 1 271 258 (b) Goodwill is allocated to groups of CGUs identified according to location of operation and business segment. The goodwill analysed by operating segment is as follows: 2019 2018 HK$’million HK$’million Ports operation – Mainland China, Hong Kong and Taiwan – Pearl River Delta 2,345 2,391 – Others 627 641 – Brazil 3,959 4,890 6,931 7,922 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 a five-year period and discounted by rates specific to the relevant CGUs. 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. Cash flows beyond the five-year period are extrapolated using the estimated growth rate stated below. The key assumptions used for value in use calculations are as follows: Growth rate Discount rate (Note (i)) (Note (ii)) 2019 2018 2019 2018 Ports operation – Mainland China, Hong Kong and Taiwan – Pearl River Delta 1% - 3% 3% - 4% 9.79% - 12.30% 7.56% – Others 3% 5% 9.40% - 12.13% 7.56% – Brazil (Note (iii)) N/A 3% N/A 12.87%