Tiscali 2014 Annual Report Download - page 150

Annual financial report as at 31 December 2014
Date
File Name
Status
Page
-
Annual Report as at 31
December 2014
150
Checks on the value reductions in equity investments in subsidiary companies
In consideration of 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 2014 and their utilization value, determined based on the following essential elements.
(v) Definition of Cash Generating Units
The Group identified the Cash Generating Units with the segments set forth in the
segment reporting. The impairment test on assets was performed with respect to the Cash
Generating Units identified;
(vi) 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 2015-2018 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;;
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 1.5%.
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 8.59%.
At Tiscali S.p.A. level, the impairment test was carried out by comparing the value of the equity
investment in Tiscali Italia recorded in the financial statements of Tiscali S.p.A. (book value), with
the enterprise value of the Tiscali Italia CGU, inclusive of Veesible (recoverable value).
The result of the impairment test shows a positive difference between the recoverable value and
book value, therefore Tiscali S.p.A. is not obliged to make any write-down of the investment in
Tiscali Italia.
(vii) Sensitivity analysis of the impairment test results