Telstra 2009 Annual Report Download - page 186

Telstra Corporation Limited and controlled entities
171
Notes to the Financial Statements (continued)
Impairment testing
Our impairment testing compares the carrying value of an individual
asset or CGU with its recoverable amount as determined using a value
in use calculation.
Our assumptions for determining the recoverable amount of each
asset and CGU are based on past experience and our expectations for
the future. Our cash flow projections are based on five year
management approved forecasts. These forecasts use management
estimates to determine income, expenses, capital expenditure and
cash flows for each asset and CGU.
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:
(g) Discount rate represents the pre tax discount rate applied to the
cash flow projections. The discount rate reflects the market
determined, risk adjusted, discount rate which was adjusted for
specific risks relating to the CGU and the countries in which they
operate.
(h) Terminal value growth rate represents the growth rate applied to
extrapolate our cash flows beyond the five year forecast period.
These growth rates are based on our expectation of the CGUs long
term performance in their respective markets. The terminal growth
rates for the Australian CGUs are aligned at three percent.
Telstra Entity CGU and HFC Network
With the integration of the Trading Post mastheads and TBS to the
Telstra Entity CGU, we are now required to test this CGU for
impairment on an annual basis.
The HFC network is only reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable.
Our impairment testing of the Telstra Entity CGU as at 30 June 2009
compares the carrying value of the CGU with its recoverable amount
determined using a value in use calculation. We have applied a pre tax
discount rate of 14.1% to the cash flow projections of the CGU. The
discount rate reflects the market determined, risk adjusted, discount
rate which was adjusted for specific risks relating to the CGU. The cash
flows have been extrapolated over the weighted average remaining
service life of our ubiquitous network of 9.24 years.
The cashflow projections and discount rate used in the impairment
testing of the Telstra Entity CGU, and our assessment of the HFC
network, are based on Telstra’s current operating model. As such,
they exclude any potential impact of the proposed National
Broadband Network (NBN). Given the significant level of uncertainty
that currently exists, the potential impacts of NBN on the Telstra
Entity CGU and the HFC network are unknown at this time.
21. Impairment (continued)
Discount rate
(g)
Terminal value
growth rate (h)
As at 30 June As at 30 June
2009 2008 2009 2008
%%%%
CSL New World Group. . . . . . . 11.2 10.7 2.0 2.0
TelstraClear Group. . . . . . . . . 13.0 14.0 3.0 3.0
Telstra Europe Group . . . . . . . 9.5 9.3 3.0 3.0
Sensis Group . . . . . . . . . . . . 13.0 13.3 3.0 3.0
Location Publishing Group. . . . 13.9 14.0 3.0 3.0
Adstream Group . . . . . . . . . . 13.2 14.1 3.0 3.0
Telstra Business Systems Pty Ltd -15.6 -3.0
SouFun Group . . . . . . . . . . . 15.0 17.8 5.0 5.0
1300 Australia Pty Ltd . . . . . . 13.6 16.2 3.0 3.0
Sequel Group . . . . . . . . . . . . 17.3 -5.0 -
Octave Group. . . . . . . . . . . . 19.5 -5.0 -
KAZ Group. . . . . . . . . . . . . . -14.8 -3.0
Trading Post mastheads . . . . . -14.7 -3.0