Carphone Warehouse 2013 Annual Report Download - page 75

ANNUAL REPORT 2013 CARPHONE WAREHOUSE GROUP PLC 73
BUSINESS REVIEW GOVERNANCE FINANCIAL STATEMENTS
13 INTERESTS IN JOINT VENTURES continued
c) ANALYSIS OF ASSETS AND LIABILITIES
The Group’s share of the assets and liabilities of its joint ventures is as follows:
2013 2012
Best Buy Europe £m £m
Non-current assets 548.3 662.4
Cash and overdrafts (net) 123.6 165.3
Other borrowings (3.2) (194.7)
Other assets and liabilities (net) 172.6 203.2
Net assets 841.3 836.2
Group share of net assets 420.6 418.1
2013 2012
Virgin Mobile France £m £m
Non-current assets 100.0 127.4
Cash and overdrafts (net) 2.0 10.1
Loans from the Group (20.5) (24.3)
Other borrowings (21.9) (26.2)
Other assets and liabilities (net) (74.8) (107.9)
Net liabilities (15.2) (20.9)
Group share of net liabilities (7.0) (9.8)
2013 2012
Total Group share £m £m
Total Group share of net assets and liabilities of joint ventures 413.6 408.3
There are no material contingent liabilities in relation to the Group’s joint ventures. Best Buy Europe and Virgin Mobile France
hadnocapital commitments at the end of either period.
Within the cash and overdrafts of Best Buy Europe, £28.0m (2012: £37.0m) is held by its insurance business to cover regulatory reserve
requirements; these funds are not available to offset other Best Buy Europe borrowings.
The Group’s principal CGUs are its joint venture investments and freehold properties, which are tested annually for impairment or
more frequently if there are indications that they might be impaired. Best Buy Europe tests for impairment and allocates its goodwill
toCGUs generally based on geographical location.
The recoverable amounts of the CGUs are determined from value in use calculations or fair market value as appropriate. The Group
and its joint ventures prepare cash flow forecasts derived from the most recent financial budgets approved by management for the next
four or five years and extrapolate cash flows in perpetuity based on a growth rate of 1.5% to 4.5% (2012: 1.3% to 4.6%). The pre-tax
rates used to discount the forecast cash flows range between 6.5% and 10.2% (2012: 6.5% and 11.8%).
The key assumptions for the value in use calculations are those in relation to the discount rates, growth rates and expected changes
toselling prices and direct costs, all of which are based on historical patterns and expectations of future market developments.
Management estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money
andtherisks specific to the CGUs.
The Group recognised an impairment charge of £1.0m (2012: £0.8m) in relation to one of its freehold properties. Otherwise the directors
do not consider that there are any other CGUs in the wholly-owned Group where a realistic change to one of the key assumptions on
which thevalue in use calculations are based would result in the CGU’s recoverable amount falling below its carrying value.
Within the net assets of Best Buy Europe is goodwill of £148.0m (2012: £214.0m), following the impairment of goodwill in relation to
CPW Europe’s French operation (see note 4). The directors of Best Buy Europe consider that Germany is the only CGU for which a
reasonably possible change during thenext year in key assumptions would cause the recoverable amount of the CGU to fall below
itscarrying amount. At 31 March 2013, the recoverable amount exceeded the carrying value by £94m in Germany, incorporating a
long-term growth rate of1.5% and a pre-tax discount rate of 7.7% as key assumptions. If the pre-tax discount rate increased above
11.8% or forecast EBITDA reduced by more than 40%, the recoverable amount in Germany would fall below its carrying amount.