Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 54 55 55 Donaco International Limited / 2017 Annual Report Donaco International Limited / 2017 Annual Report 54 Notes to the Financial Statements for the year ended 30 June 2017 Notes to the Financial Statements for the year ended 30 June 2017 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Goodwill Land right Casino licence Total Consolidated $ $ $ $ Balance at 1 July 2015 2,426,187 38,390 – 2,464,577 Additions through business combinations – – 400,543,357 400,543,357 Disposal – – – – Exchange differences – 309 – 309 Amortisation expense – (2,302) – (2,302) Balance at 30 June 2016 2,426,187 36,397 400,543,357 403,005,941 Additions through business combinations – – – – Disposals – – – – Exchange differences – (1,881) (13,861,663) (13,863,544) Amortisation expense – (2,163) – (2,163) Balance at 30 June 2017 2,426,187 32,353 386,681,694 389,140,234 Impairment testing of goodwill and intangibles with indefinite useful lives Goodwill is monitored by the Chief Operating Decision Maker (CODM) at the cash-generating unit level. CODM reviews the business performance based on geography and type of business. It has identified two reportable cash-generating units, Lao Cai and DNA Star Vegas. A business-level summary of the goodwill allocation is presented below: Consolidated 2017 2016 $ $ Lao Cai International Hotel JVC 2,426,187 2,426,187 Total goodwill 2,426,187 2,426,187 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Leasehold buildings Furniture and fittings Machinery and equipment Motor vehicles Office equipment and other Consumables Total Consolidated $ $ $ $ $ $ $ Balance at 1 July 2015 60,709,290 – 14,266,923 393,558 1,311,121 5,337,017 82,017,909 Acquisition of a subsidiary 90,768,919 1,245,292 2,662,344 354,580 46,903 – 95,078,038 Additions 1,434,892 246,750 3,077,746 – 251,858 391,951 5,403,197 Disposals – – (704) – – – (704) Exchange differences (1,008,995) – (35,554) (11,668) 12,909 370,278 (673,030) Transfers in/(out) (165,779) (52,327) 52,328 – – – (165,778) Depreciation expense (4,278,759) (483,024) (2,786,083) (115,978) (285,413) (1,994,417) (9,943,674) Balance at 30 June 2016 147,459,568 956,691 17,237,000 620,492 1,337,378 4,104,829 171,715,958 Additions 1,461,303 7,045 693,813 319,835 1,168,053 – 3,650,049 Disposals (480,951) (20,817) – (66,429) (21,604) (1,224,055) (1,813,856) Impairment (160,011) (22,348) – – (16,426) – (198,785) Exchange differences (4,854,177) (4,734) (3,509,508) (14,027) 2,791,554 1,631,937 (3,958,955) Transfers in/(out) – – 3,698,497 – (1,621,399) – 2,077,098 Depreciation expense (4,115,611) (478,683) (1,936,041) (303,678) (1,519,440) (1,773,683) (10,127,136) Balance at 30 June 2017 139,310,121 437,154 16,183,761 556,193 2,118,116 2,739,028 161,344,373 Consumables represent low value, high turnover items that are depreciated in accordance with company policy and local legislation. Note 14. Non-current assets – intangibles Consolidated 2017 2016 $ $ Goodwill – at cost 2,426,187 2,426,187 Land right – at cost 67,004 70,047 Less: accumulated amortisation (34,651) (33,650) 32,353 36,397 Casino licence 386,681,694 400,543,357 389,140,234 403,005,941 Lao Cai – goodwill The recoverable amount of the cash-generating unit of Lao Cai has been determined based on the value in use calculation. To calculate this, cash flow projections are based on financial budgets approved by senior management covering a five-year period. The Group determines whether goodwill is impaired at least on an annual basis. To do so, the Group employs a value in use calculation using cash flow projections from financial budgets approved by senior management. Management has forecast a strong growth rate in budgeted gross margin for FY18 based on the growth in revenue from Aristo’s main gaming floor, VIP gaming, and the increase in the number of slot machines. The new hotel room, entertainment, restaurant and bar revenue lines, with associated marketing programs, will increase visitation to the new hotel, which will also contribute to overall revenue growth. Gross margin projections for future years are based on past performance and management’s expectations for future performance in each segment. Management determined budgeted gross margin based on past performance and its expectations for the future and are considered to be reasonably achievable. The weighted average growth rates used are consistent with forecasts included in industry reports. The discount rates used reflect specific risks relating to the relevant segments and the countries in which they operate.