Carphone Warehouse 2014 Annual Report Download - page 83

Carphone Warehouse Group plc
Annual Report 2014 81
FINANCIAL STATEMENTS
10 GOODWILL AND INTANGIBLE ASSETS continued
ii) GOODWILL IMPAIRMENT TESTING
The recoverable amounts of the CGUs are determined from value in use calculations or fair market value as appropriate. The Group prepared
cash flow forecasts derived from the most recent financial budgets and long-term plans approved by management and extrapolated cash flows in
perpetuity based on country-specific growth rates. The cash flow forecasts reflect management’s expectations of EBITDA, capital expenditure
and working capital, all of which are based on historical patterns and expectations of future market developments.
Other key assumptions for the value in use calculations are growth rates and discount rates. Growth rates used were between .% to .%
(: .% to .%) and are determined based on third party long-term growth rate forecasts for the regions in which the CGUs operate.
This rate does not exceed the average long-term growth rate for the relevant markets. The pre-tax rates used to discount the forecast cash
flows reflect current market assessments of the time value of money and the risks specific to the CGUs, and ranged between .% and
.% (: .% to .%).
The carrying value of goodwill is tested for impairment on an annual basis, or more frequently if there are indicators that goodwill might
beimpaired, in accordance with the requirements of IFRS.
As explained in note u, expected future cash flows are inherently uncertain and may differ from the cash flows that ultimately arise which may
affect the recoverable value of the CGU. The Group conducted a sensitivity analysis on the impairment tests of CGUs. The directors consider that
the Netherlands is the only CGU for which a reasonably possible change in key assumptions during the next year would cause the recoverable amount
of the CGU to fall below its carrying amount. At  March , the recoverable amount exceeded the carrying value by £m in the Netherlands,
incorporating a long-term growth rate of .% and a pre-tax discount rate of .% as key assumptions. If the pre-tax discount rate increased above
.% or forecast EBITDA reduced by more than %, the recoverable amount in the Netherlands would fall below its carrying amount.
iii) INTANGIBLES ACQUIRED DURING THE YEAR AS PART OF CPW EUROPE ACQUISITION
a) Acquisition intangibles included customer relationships and brands. Each class of intangible asset was independently valued by experts
using appropriate valuation techniques.
b) Software and licences were independently valued using an amortised replacement cost method. Amortisation commences from the
point at which the software comes into use.
11 PROPERTY, PLANT AND EQUIPMENT
Short
Freehold land leasehold Fixtures
Computer
and buildings costs and fittings hardware Total
Cost £m £m £m £m £m
Balance at 1 April 2012 72 — — — 72
Disposals (42) — — — (42)
Balance at 31 March 2013 30 — — — 30
CPW Europe Acquisition —27 24 21 72
Additions — 2 11 720
Disposals (12) ———(12)
Foreign exchange — — (1) —(1)
Balance at 29 March 2014 18 29 34 28 109
Short
Freehold land leasehold Fixtures
Computer
and buildings costs and fittings hardware Total
Accumulated depreciation and impairment losses £m £m £m £m £m
Balance at 1 April 2012 (6) — — — (6)
Depreciation (1) — — — (1)
Impairment (1) — — — (1)
Disposals 5 — — — 5
Balance at 31 March 2013 (3) — — — (3)
Disposals 2 — — — 2
Depreciation (1) (5) (7) (5) (18)
Balance at 29 March 2014 (2) (5) (7) (5) (19)