Telstra 2007 Annual Report Download - page 188

Telstra Corporation Limited and controlled entities
185
Notes to the Financial Statements (continued)
Impairment testing (continued)
We have used the following key assumptions in determining the
recoverable amount of our CGUs to which goodwill or indefinite life
intangible assets has been allocated:
(a) Discount rate represent s the pre tax discount rate applied to the
cash flow projections. The discount rate reflects the market
determined, risk adjust ed, discount rate which was adjusted for
specific risks relating to the CGU and the countries in which they
operate.
(b) Terminal value growth rate represents the growth rate applied to
ext rapolate our cash flows beyond the five year forecast period.
These growth rates are based on our expectat ion of the CGUs long
term performance in their respective markets. The terminal growth
rates for the Australian CGUs were aligned to three percent as part of
the impairment testing conducted for the half year ended 31
December 2006.
(c) During the year the Trading Post Group was int egrated into the
Sensis Group and as such is no longer considered a separate CGU. As
at 30 June 2007 the carrying value of the Trading Post mastheads was
tested for impairment based on value in use. This test resulted in an
impairment charge of $110 million being recognised in the financial
statements. The impairment arose as a result of increasing
competition in the tradit ional print classifieds market, challenges in
the highly competitive on-line classified market and the risks
associat ed with new initiatives.
As a result of the impairment, the carrying value of the Trading Post
mastheads at 30 June 2007 is $337 million which is equal to its
recoverable amount. Changes in the key assumptions used in
determining the forecast cash flows could result in changes to these
cash flows and furt her adjustments to the carrying value. Assuming
the forecast cashflows are either surpassed or missed by 10%, the
recoverable amount of the Trading Post mastheads will be higher or
lower than its carrying amount by $28 million respectively.
The post tax discount rate used in determining the carrying value of
the Trading Post mastheads was 12.6%. This discount rate includes a
risk premium given the changing nat ure of the Trading Post business.
Cash flows beyond year five have been extrapolated using an
estimated terminal growth rate of 3%. This rate has been determined
with regard to the projected growth rat es for the specific market in
which Trading Post participates and is not expected to exceed the long
term average growth rat es for this market.
25. Impairment (continued)
Discount rate
(a)
Termina l val ue
growth rate (b)
As at 30 June As at 30 June
2007 2006 2007 2006
%%%%
CSL New World Mobility Group 11.0 11.1 2.0 5.0
KAZ Group . . . . . . . . . . . . . 15.6 16.6 3.0 3.0
TelstraClear Group. . . . . . . . 16.5 18.0 3.0 3.0
Telstra Europe Group . . . . . . 11.4 14.9 3.0 3.0
Sensis Group . . . . . . . . . . . 13.1 13.7 3.0 3.0
Trading Post Group (c) . . . . . -15.3 -2.5
Universal Publishers . . . . . . 13.9 14.3 3.0 2.5
Adstream Group . . . . . . . . . 14.7 18.6 2.5 2.5
Telstra Business Systems. . . . 14.4 15.0 3.0 2.5
SouFun Group . . . . . . . . . . 18.8 -5.0 -