NOTES TO THE FINANCIAL STATEMENTS 17. Intangible Assets Accounting Policy (a) Goodwill Goodwill represents the excess of the consideration transferred over the fair value of the Group’s share of the assets transferred, the liabilities incurred to the former owners of the acquired asset and the equity interests issued by the Group. Goodwill is treated as an asset of the entity acquired and, where attributable to a foreign entity, is translated at the period- end closing rate. Goodwill is stated at cost less accumulated impairment. Goodwill is allocated to cash-generating units (“CGUs”) for the purpose of impairment testing, which is performed annually, or more often if an impairment indicator exists. Impairment charges recognised in respect of goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. (b) Computer software Computer software licences acquired are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their estimated useful lives of three to five years. Costs associated with maintaining computer software programmes are recognised as expenses as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software costs recognised as assets are amortised over their estimated useful lives of three to five years. Critical Accounting Estimates and Judgements The Group recognised HK$1,419 million of goodwill when it took control of Taikoo Li Chengdu (formerly known as “Sino-Ocean Taikoo Li Chengdu”) in the Chinese Mainland during the year. The goodwill is mainly attributable to the growth opportunity in the Chinese Mainland. It also represents the premium paid over the market price to obtain control of the business. Goodwill is subject to impairment test at each reporting date and when there is indication that the carrying value may not be recoverable. These tests require the use of estimates to calculate recoverable amounts. The goodwill is allocated to property investment segment of Taikoo Li Chengdu in the Chinese Mainland. Management has determined the recoverable amount of this CGU by assessing the fair value less cost of disposal of the underlying assets. The valuation is considered to be level 3 in the fair value hierarchy due to unobservable inputs used in the valuation. 170