Experian 2015 Annual Report Download - page 143

Notes to the Group financial statements
for the year ended 31 March 2015 continued
20. Goodwill continued
(b) Goodwill by CGU
2015
US$m
2014
US$m
North America 2,518 2,537
Latin America 816 1,142
UK and Ireland 697 733
EMEA 250 288
Asia Pacific 112 107
At 31 March 4,393 4,807
(c) Key assumptions for value-in-use calculations by CGU
2015 2014
WACC
%
Long-term
growth rate
% p.a.
WACC
%
Long-term
growth rate
% p.a.
North America 12.2 2.3 12.7 2.3
Latin America 17.6 4.7 16.6 4.7
UK and Ireland 9.3 2.3 9.9 2.3
EMEA 12.3 3.1 12.6 3.1
Asia Pacific 13.0 5.3 12.4 5.3
Management’s key assumptions in setting the financial budgets for the initial five year period were as follows. Forecast revenue growth
rates were based on past experience, adjusted for the strategic opportunities within each CGU. The five year forecasts typically used
average nominal growth rates between 4% and 6%, with Asia Pacific in the range of 6% to 15%. EBIT was forecast based on historic
margins, which were expected to be broadly stable throughout the period in the mature regions, and improving to a low double-digit
margin in EMEA and Asia Pacific. Management forecasted operating cash flow conversion rates based on historic experience and its
performance expectations in a range of 90% to 95%.
Further details of the principles used in determining the basis of allocation by CGU and annual impairment testing are given in note 5.
(d) Results of annual impairment reviews
The annual impairment review for the EMEA CGU as at 31 March 2015 indicated that the recoverable amount exceeded the carrying value
by US$71m and that any decline in estimated value-in-use in excess of that amount would result in the recognition of an impairment
charge. The sensitivities, which result in the recoverable amount being equal to the carrying value, can be summarised as follows:
• an absolute increase of 2.2% in the WACC, from 12.3% to 14.5%; or
• an absolute reduction of 2.9% in the long-term growth rate, from 3.1% to 0.2%; or
• a reduction of 3.4% in the forecast terminal profit margin. This is forecast to improve to a low double-digit margin in the terminal
period but is below management’s expectations for a mature region. A reduction in the annual margin improvement of approximately
0.7% per year over the five-year forecast period would also reduce the recoverable amount to the carrying value.
The Asia Pacific review as at 31 March 2015 confirmed that the recoverable amount of that CGU exceeded its carrying value by US$40m
and that any decline in estimated value-in-use in excess of that amount would result in the recognition of an impairment charge. The
sensitivities, which result in the recoverable amount being equal to the carrying value, can be summarised as follows:
• an absolute increase of 1.3% in the WACC, from 13.0% to 14.3%; or
• an absolute reduction of 1.6% in the long-term growth rate, from 5.3% to 3.7%; or
• a reduction of 1.7% in the forecast terminal profit margin. This is forecast to improve to a low double-digit margin in the terminal
period but is below management’s expectations for a mature region. A reduction in the annual margin improvement of approximately
0.3% per year over the five-year forecast period would also reduce the recoverable amount to the carrying value.
The recoverable amount of the other CGUs significantly exceeded their carrying value on the basis of the above assumptions and any
reasonably possible changes thereof.
142 •Financial statements Notes to the Group nancial statements