Holiday Inn 2013 Annual Report Download - page 132

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12. Goodwill
2013
$m
2012
$m
Cost
At 1 January 234 233
Exchange adjustments (13) 1
At 31 December 221 234
Impairment
At 1 January and 31 December (141) (141)
Net book value
At 31 December 80 93
At 1 January 93 92
Goodwill arising on business combinations that occurred before 1 January 2005 was not restated on adoption of IFRS as permitted by IFRS 1.
Impairment charges are included within impairment on the face of the Group income statement and all cumulative impairment losses
relate to the Americas managed cash-generating unit (CGU) (see below).
Goodwill has been allocated to CGUs for impairment testing as follows:
Cost Net book value
2013
$m
2012
$m
2013
$m
2012
$m
AMEA franchised and managed operations 80 93 80 93
Americas managed operations 141 141 ––
221 234 80 93
The Group tests goodwill for impairment annually, or more frequently if there are any indications that an impairment may have arisen.
Therecoverable amounts of the CGUs are determined from value in use calculations. These calculations use pre-tax cash flow forecasts
derived from the most recent financial budgets and strategic plans approved by management covering a five-year period or, in the
absence of up-to-date strategic plans, the financial budget for the next year with an extrapolation of the cash flows for the following four
years, using growth rates based on management’s past experience and industry growth forecasts. After the five-year planning period,
the terminal value of future cash flows is calculated based on perpetual growth rates that do not exceed the average long-term growth
rates for the relevant markets. Pre-tax discount rates are used to discount the cash flows based on the Group’s weighted average cost of
capital adjusted to reflect the risks specific to the businessmodel and territory of the CGU being tested.
Asia, Middle East and Africa (AMEA) goodwill
At 31 December 2013, the recoverable amount of the CGU has been assessed based on the approved budget for 2014 and strategic plans
covering a five-year period, a perpetual growth rate of 3.5% (2012 3.5%) and a discount rate of 15.5% (2012 14.3%). In previous years,
the goodwill was allocated to Asia Australasia franchised and managed operations but, due to a change in management structure,
this CGU no longer exists as the business is now managed at the AMEA level.
Impairment was not required at either 31 December 2013 or 31 December 2012 and management believe that the carrying value of the
CGU would only exceed its recoverable amount in the event of highly unlikely changes in the key assumptions.
Americas goodwill
Goodwill relating to the Americas managed operations was impaired in full in 2009. As goodwill impairment cannot be reversed, there is
no sensitivity around any assumptions that could lead to further impairment adjustments.
130 IHG Annual Report and Form 20-F 2013
Notes to the Group Financial Statements continued