Tiscali 2012 Annual Report Download - page 136








31
Checks on the value reductions in equity investments in subsidiary companies
As at the date of the financial statements, also considering the presence of impairment indicators, an
impairment test was performed on assets, in accordance with IAS 36 and prescribed in the joint Bank of
Italy / Consob / ISVAP document.
The impairment test on assets was performed by comparing the value of assets reported at 31
December 2012 and their utilization value, determined based on the following essential elements.
(i) Definition of Cash Generating Units
The Group identified the Cash Generating Units with the segments set forth in the segment
reporting defined and structured by geographic area. The impairment test on assets was
performed with respect to the Cash Generating Unit “Italy” (essentially corresponding to the
subsidiary Tiscali Italia S.p.A.) and the entire Group.
(ii) Criteria for estimating the recoverable amount
The utilization value of the Cash Generating Units (CGU) was determined by discounting
the cash flows deriving from the last 2013-2017 Business Plan approved by the Board of
Directors.
With regard to the economic/financial objectives, the main assumptions concern:
Explicit forecast period equating to the remaining plan duration (5 years);
EBITDA emerging from market and business development hypothesis;
Investments to maintain the expected development of the business and the pre-
established level of profitability;
Determination of the terminal value calculated as perpetuity based on the
projection of the last year of the plan;
The WACC rate determined on the basis of market valuations of the cost of
money and specific risks related to the company’s core business;
Terminal growth rate (Long-Term Growth LTG) equal to 0.5%.
The cost of the capital was estimated considering the calculation criteria provided by the
CAPM (Capital Asset Pricing Model). In particular in the determination of the WACC:
the beta coefficient was valued considering both the value of Tiscali over various
timescales for a period of more than twelve months;
the spread of the credit on the risk free element was valued in line with the
conditions of current debt;
the risk premium was valued within a prudent range with respect to the current
conditions of financial markets.
Based on these parameters, the WACC used for the impairment tests was roughly 6.5%
The result of the impairment test, both for CGU Italy and the Group, shows a considerably positive
difference between the recoverable value and book value, thus the company feels that it is not
necessary to write down any of its assets.
(iii) Sensitivity analysis of the impairment test result
In consideration of the current scenario and the results of the impairment tests performed for the
year ended 31 December 2012, an analysis was made on the sensitivity of the recoverable value
estimated using the discounted cash flow method. The discount rate is considered a key