Tiscali 2014 Annual Report Download - page 95

Annual financial report as at 31 December 2014
Date
File Name
Status
Page
-
Annual Report as at 31
December 2014
95
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%.
The result of the impairment test shows a positive difference between the recoverable value and
book value, thus the Group feels that it is not necessary to write down any of the balance sheet
assets.
(iii) Sensitivity analysis of the impairment test results
In consideration of the current scenario and the results of the impairment tests performed for the
period ended 31 December 2014, 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
parameter in the estimate of recoverable value. An increase of 1% would lower the positive
difference between estimated recoverable value and book value. This difference would continue to
be positive.
(iv) Considerations on the presence of external impairment indicators
Considering the current market situation, certain considerations on the presence of external
impairment indicators were made especially with regard to evidence from the financial market. For
that purpose, the market capitalization of the Tiscali Group does not give rise to elements
departing from the results of the impairment tests.