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GOODWILL AND INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2021
Disclosure of goodwill and intangible assets [Abstract]  
GOODWILL AND INTANGIBLE ASSETS
14.
GOODWILL AND INTANGIBLE ASSETS
 
 
  
Goodwill
US$‘000
    
Development
costs
US$‘000
    
Patents and
licences
US$‘000
    
Other
US$‘000
    
Total
US$‘000
  
Cost
                              
At January 1, 2020
     81,689       156,377       9,951       34,266       282,283  
Additions
     -       6,896       30       89       7,015  
Disposals or retirements
     (2,507
)
     (34,318
)
     (1,034
)
     (1,044
)
     (38,903
)
Exchange adjustments
     -       22       -       -       22  
                                         
At December 31, 2020
     79,182       128,977       8,947       33,311       250,417  
 
                                        
At January 1, 2021
     79,182       128,977       8,947       33,311       250,417  
Additions
     -       6,771       102       21       6,894  
Disposals or retirements
     -       (14,576
)
     (342
)
     (134
)
     (15,052
)
Exchange adjustments
     -       1       -       -       1  
 
                                        
At December 31, 2021
     79,182       121,173       8,707       33,198       242,260  
 
                                        
Accumulated amortisation and Impairment losses
                                        
At January 1, 2020
     (69,098
)
     (133,599
)
     (9,819
)
     (26,113
)
     (238,629
)
Charge for the year
     -       (959
)
     (5
)
     (439
)
     (1,403
)
Disposals or retirements
     2,507       34,318       1,034       1,044       38,903  
Impairment losses
     -       (15,287
)
     -       (135
)
     (15,422
)
Exchange adjustments
     -       (6
)
     -       -       (6
)
 
                                        
At December 31, 2020
     (66,591
)
     (115,533
)
     (8,790
)
     (25,643
)
     (216,557
)
 
                                        
At January 1, 2021
     (66,591
)
     (115,533
)
     (8,790
)
     (25,643
)
     (216,557
)
Charge for the year
     -       (482
)
     (7
)
     (428
)
     (917
)
Disposals or retirements
     -       14,573       342       132       15,047  
Impairment losses
     (54
)
     (2,053
)
     (106
)
     (1,640
)
     (3,853
)
Exchange adjustments
     -       1       -       -       1  
 
                                        
At December 31, 2021
     (66,645
)
     (103,494
)
     (8,561
)
     (27,579
)
     (206,279
)
 
                                        
Carrying amounts
                                        
At December 31, 2021
     12,537       17,679       146       5,619       35,981  
 
                                        
At December 31, 2020
     12,591       13,444       157       7,668       33,860  
 
Included within development costs are costs of US$7,994,000 which were not amortised in 2021 (2020: US$6,980,000). These development costs are not being amortised as the projects to which the costs relate were not fully complete at December 31, 2021 or at December 31, 2020. As at December 31, 2021 these projects are expected to be completed during the period from January 1, 2022 to December 31, 2024 at an expected further cost of approximately US$5,857,000.
 

The following represents the costs incurred during each period presented for each of the principal development projects:

 
Product Name
 
2021
 US$’000
    
2020
 US$’000
  
Premier Instrument for Haemoglobin A1c testing
    
2,538
      
1,359
  
HIV screening rapid test
    
1,488
      
2,278
  
COVID tests
    
1,320
      
467
  
Autoimmune Smart Reader
    
550
      
666
  
Mid-tier haemoglobins instrument
    
303
      
243
  
Tri-stat point-of-care instrument
    
245
      
203
  
Uni-gold raw material stabilisation
    
144
      
-
  
Sjögrens tests
    
88
      
99
  
Uni-Gold antigen improvement
    
-
      
556
  
Syphilis point-of-care test
    
-
      
618
  
Column enhancement
    
-
      
151
  
Other projects
    
95
      
256
  
Total capitalised development costs
    
6,771
      
6,896
  
 
All of the development projects for which costs have been capitalised are judged to be technically feasible, commercially viable and likely to produce future economic benefits. In reaching this conclusion, many factors have been considered including the following:
 
  (a)
The Group only develops products within its field of expertise. The R&D team is experienced in developing new products in this field and this experience means that only products which have a high probability of technical success are put forward for consideration as potential new products.
 
  (b)
A technical feasibility study is undertaken in advance of every project. The feasibility study for each project is reviewed by the R&D team leader, and by other senior management depending on the size of the project. The feasibility study occurs in the initial research phase of the project and costs in this phase are not capitalised.
 
  (c)
Nearly all of our new product developments involve the transfer of our existing product know-how to a new application. The Group does not engage in pure research. Every development project is undertaken with the intention of bringing a particular new product to market for which there is an expected demand.
 
  (d)
The commercial feasibility of each new product is established prior to commencement of a project by ensuring it is projected to achieve an acceptable income after applying appropriate discount rates.
 
Other intangible assets
 
Other intangible assets consist primarily of acquired customer and supplier lists, trade names, website and software costs.
 
Amortisation
 
Amortisation is charged to the statement of operations through the selling, general and administrative expenses line.
 
Impairment testing for intangibles including goodwill and indefinite lived assets
 
Goodwill and other intangibles are subject to impairment testing on a periodic basis. The recoverable amount of seven CGUs is determined based on a value-in-use computation. Among other macroeconomic considerations, the impact of the COVID-19 pandemic has been factored into our impairment testing.
 
The value-in-use calculations use cash flow projections based on the 2022 projections for each CGU and a further four years projections using estimated revenue and cost average growth rates of between 0% and 5%. At the end of the five year forecast period, terminal values for each CGU, based on a long term growth rate of 2%, are used in the value-in-use calculations. The value-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each CGU. The pre-tax discount rates used range from 16% to 25% (2020: 16% to 44%).
 
Sources of estimation uncertainty
 
The cash flows have been arrived at taking into account the Group’s financial position, its recent financial results and cash flow generation and the nature of the medical diagnostic industry, where product obsolescence can be a feature. However, expected future cash flows are inherently uncertain and are therefore liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are subjective and include projected EBITDA margins, net cash flows, discount rates used and the duration of the discounted cash flow model. Significant under-performance in any of the Group’s major CGUs may give rise to a material impairment which would have a substantial impact on the Group’s income and equity.
 
2021 impairment test
 
The impairment tests performed at June 30, 2021 and at December 31, 2021 identified an impairment loss in three CGUs, Immco Diagnostics Inc, Trinity Biotech Do Brasil and Biopool US Inc. A specific impairment loss on an intangible asset owned by Trinity Biotech Manufacturing Limited was also incurred in 2021.
 
The table below sets forth the impairment loss recorded for each of the CGU’s:
 
   
December 31, 2021
    
December 31, 2020
  
   
US$’000
    
US$’000
  
             
Immco Diagnostics Inc
    
4,979
      
-
  
Trinity Biotech Manufacturing Limited
    
856
      
-
  
Trinity Biotech Do Brasil
    
956
      
919
  
Biopool US Inc.
    
153
      
154
  
Primus Corp
    
-
      
16,706
  
                 
Total impairment loss
    
6,944
      
17,779
  
 
The carrying value of the intangible assets for the COVID-19 antibody rapid test was written off in full in the year ended December 31, 2021 and is included in the total impairment charge in the table above. This product development was an asset of Trinity Biotech Manufacturing Limited and the impairment charge recorded for this asset was US$856,000.
 
The COVID-19 antibody rapid test was submitted to the FDA under an Emergency Use Authorisation (“EUA”) application. The FDA informed the Company that given the volume of EUA requests it has received, it was not currently prioritising this type of serological test for review and thus would not review an EUA application for the test at this time. The Company has examined other potential pathways to regulatory approval to allow US sales of this test, but it is expected that these would require significant additional investment. Due to the advent and widespread adoption of COVID-19 vaccines since this antibody test was envisaged and the focus of public health authorities on using evidence of vaccination rather than the presence of antibodies as proof of immunity, the Company now expects that the use for such tests will be limited and thus the potential revenues from the sales of this product to be minimal. Given this current limited market demand for such antibody tests, the Company decided not to devote additional investment to this test and the full costs to date for the development of the rapid test was written off. Instead, the Company is focusing its resources on a COVID-19 antigen test for which we expect a much larger market.
 
Immco Diagnostics Inc., which recorded the largest impairment loss of any CGU in this financial year, has been particularly impacted by the pandemic and changes to its product offering.
 
The table below sets forth the breakdown of the impairment loss for each class of asset:
 
 
  
December 31, 2021
    
December 31, 2020
  
   
US$’000
    
US$’000
  
Goodwill and other intangible assets (see Note 14)
     3,853       15,422  
Property, plant and equipment (see Note 13)
     2,508       1,795  
Prepayments (see Note 18)
     583       562  
                 
Total impairment loss
     6,944       17,779  
 
The value-in-use calculation is subject to significant estimation, uncertainty and accounting judgements and the following sensitivity analysis has been performed:
 
  •
In the event that there was a reduction of 10% in the assumed level of future growth in revenue growth rate, which would represent a reasonably likely range of outcomes, there would be  no additional impairment loss recorded at December 31, 2021.
 
  •
In the event there was a 10% increase in the discount rate used to calculate the potential impairment of the carrying values, which would represent a reasonably likely range of outcomes, there would be no additional impairment loss recorded at December 31, 2021.
 
Significant Goodwill and Intangible Assets with Indefinite Useful Lives
 
CGUs or combinations of CGUs for which the carrying amount of goodwill is significant for the purposes of impairment testing periodically, in comparison with the Group’s total carrying amount of goodwill are those where the percentage is greater than 20% of the total.
 
The additional disclosures required for the CGU with significant goodwill are as follows:
 
Fitzgerald Industries
  
December 31,
2021
    
December 31,
2020
  
Carrying amount of goodwill (US$’000)
     12,591       12,591  
Discount rate applied (real pre-tax)
     19.66
%
     19.98
%
Excess value-in-use over carrying amount (US$’000)
     3,496       7,915  
% EBITDA would need to decrease for an impairment to arise
     18.15
%
     31.98
%
Long-term growth rate
     2.0
%
     2.0
%
 
The key assumptions and methodology used in respect of this CGU are consistent with those described above. The assumptions and estimates used are specific to the individual CGU and were derived from a combination of internal and external factors based on historical experience.
 
Intangible Assets with Indefinite Useful lives
(included in other intangibles)
  
December 31, 2021
US$‘000
    
December 31, 2020
US$‘000
  
Fitzgerald Industries International CGU
            
Fitzgerald trade name
     970       970  
RDI trade name
     560       560  
Primus Corporation CGU
                
Primus trade name
     365       365  
Immco Diagnostic CGU
                
Immco Diagnostic trade name
     2,069       2,938  
Total
     3,964       4,833  
 
The trade name assets purchased as part of the acquisition of Fitzgerald in 2004, Primus and RDI in 2005 and Immco Diagnostics in 2013 were valued using the relief from royalty method and based on factors such as (1) the market and competitive trends and (2) the expected usage of the name. It was considered that these trade names will generate net cash inflows for the Group for an indefinite period.
 
In 2020, an impairment loss of US$135,000 was allocated against the Primus trade name as the carrying value of the CGU’s net assets exceeded its discounted future cashflows. In 2021, an impairment loss of US$869,000 was allocated against the Immco Diagnostic trade name as the carrying value of the CGU’s net assets exceeded its discounted future cashflows.