ANNUAL REPORT 2025 155 NOTES TO THE FINANCIAL STATEMENTS 3 Critical accounting estimates and judgements (Continued) (b) Goodwill (Continued) A signifi cant portion of cost of services rendered is labour cost which will be impacted by labour supply, infl ation and cost initiatives adopted. In addition, the introduction of ever larger vessels by shipping lines will require upgrading of equipment and new work practices to increase productivity so as to remain competitive. (c) Customer relationships Customer relationships acquired in a business combination are recognised at fair value at the acquisition date. Customer relationships are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationships. The Group considers its impairment accounting policy to be a policy that requires one of the most extensive applications of judgements and estimates by management. Intangible assets with defi nite useful lives that are subject to amortisation are reviewed to determine whether there is any indication that the carrying value of these assets may not be recoverable and have suff ered an impairment loss. If any such indication exists, the recoverable amounts of the intangible assets are estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. Such impairment loss is recognised in the income statement. Management’s judgements are required in the area of intangible asset impairment, particularly in assessing: (1) whether an event has occurred that may indicate that the related asset values may not be recoverable; and (2) whether the carrying value of an asset can be supported by the recoverable amount, being the higher of fair value less costs to sell or net present value of future cash fl ows which are estimated based upon the continued use of the asset in the Group. (d) Depreciation Depreciation of operating assets constitutes a substantial operating cost for the Group. The cost of fi xed assets is charged as depreciation expense over the estimated useful lives of the respective assets using the straight-line method. The Group periodically reviews changes in technology and industry conditions, asset retirement activity and residual values to determine adjustments to estimated remaining useful lives and depreciation rates. Actual economic lives may diff er from estimated useful lives. Periodic reviews could result in a change in depreciable lives and therefore depreciation expense in future periods. (e) Accrual of net revenue Revenue is accrued at period end with reference to the throughput handled and the terms of agreements for container handling service. Consequently, recognition of revenue is based on the volume of services rendered as well as the latest tariff agreed with customers or best estimated by management. This estimate is based on the latest tariff and other industry considerations as appropriate. If the actual revenue diff ers from the estimated accrual, this will have an impact on revenue in future periods. (f) Pension The Group operates several defi ned benefi t plans. Pension costs for defi ned benefi t plans are assessed using the projected unit credit method in accordance with HKAS 19 (2011), Employee Benefi ts. Under this method, the cost of providing pensions is charged to the income statement so as to spread the regular cost over the future service lives of employees in accordance with the advice of the actuaries who carry out a valuation of the plans. The pension assets/obligations are measured at the present values of the estimated future cash outfl ows using interest rates determined by reference to market yields at the end of the reporting period based on high quality corporate bonds with currencies and terms similar to the estimated terms of benefi t obligations. Remeasurements arising from defi ned benefi t plans are recognised in other comprehensive income in the year in which they occur and refl ected immediately in pension reserve. Remeasurements comprise actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defi ned benefi t liability/ asset) and any change in the eff ect of the asset ceiling (excluding amounts included in net interest on the net defi ned benefi t liability/asset).
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