GOODWILL

Impairment test for goodwill

Goodwill is allocated and monitored based on the group’s CGUs identified according to business segments as referred to in the segmental analysis in note 6.

An operating segment-level summary of the goodwill allocation is as follows:

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the board of directors. These cash flows were determined in a similar manner to the cash flows utilised in the assessment of the impairment of property, plant and equipment (refer to note 16).

The key assumptions used for value-in-use calculations are as follows:

• Ebitdar margin – management determined budgeted gross Ebitdar margin based on past performance and its expectations of market development;
• Long-term growth rate – cash flows beyond the first five-year period are extrapolated using estimated long-term growth rates in order to calculate the terminal recoverable amount. The growth rate estimations consider risks associated with the hospitality industry in which the CGUs operate; and
• Discount rate – the discount rate is calculated by using a weighted average cost of capital (‘WACC’) of the respective CGUs. WACC is calculated using a bond risk-free rate and an equity premium adjusted for specific risks relating to the relevant operating segments.

The following assumptions have been used for the analysis of the CGUs within the operating segments:

The group’s impairment reviews are sensitive to changes in the key assumptions described above. Based on the group’s sensitivity analysis, a reasonable possible change in a single assumption will not cause a material impairment loss in any of the group’s CGUs, as the group’s CGUs have significant headroom available between the calculated values in use and the goodwill allocated to each CGU shown above.

The following changes to the assumptions will lead to a recognition of an impairment in the goodwill: