Qantas 2016 Annual Report Download - page 75

Notes to the Financial Statements continued
For the year ended 30 June 2016
18 IMPAIRMENT TESTING OF CASH GENERATING UNITS
Identification of an asset’s Cash Generating Unit (CGU) involves judgement based on how Management monitors the Qantas Group’s
operations and how decisions to acquire and dispose of the Qantas Group’s assets and operations are made. Management has
identified the lowest identifiable group of assets that generates largely independent cash inflows, being Qantas International, Qantas
Domestic, Qantas Freight, Qantas Loyalty and the Jetstar Group CGUs. The value in use was determined by discounting the future
cash flows forecast to be generated from the continuing use of the units and were based on the following assumptions:
Assumption How determined
Cash flows Cash flows were projected based on the approved Financial Plan. Cash flows to determine a terminal value
were extrapolated using a constant growth rate of 2.5 per cent per annum, which does not exceed the
long-term average growth rate for the industry.
Cash outflows include capital expenditure for the purchase of aircraft and other property, plant and
equipment. These do not include capital expenditure that enhances the current performance of assets and
related cash flows have been treated consistently.
Discount rate A pre-tax discount rate of 10 per cent per annum has been used in discounting the projected cash flows
of the CGUs, reflecting a market estimate of the weighted average cost of capital of the Qantas Group
(2015: 10 per cent per annum). The discount rate is based on the risk-free rate for 10 year Australian
Government Bonds adjusted for a risk premium to reflect both the increased risk of investing in equities
and the risk of the specific CGU.
The following CGUs have goodwill and other intangible assets with indefinite useful lives as follows:
2016
$M
2015
$M
Goodwill
Qantas Domestic 10 10
Qantas Loyalty 13 13
Qantas Freight 49 49
Jetstar Group 136 134
Total Goodwill 208 206
Other intangible assets with indefinite useful lives
Qantas International 35 35
Jetstar Group 26 25
Total other intangible assets with indefinite useful lives 61 60
No impairment was recognised for the identified CGUs during the year ended 30 June 2016 (2015: nil).
19 SHARE-BASED PAYMENTS
The Group provides benefits to Executives of the Group in the form of share-based payments, whereby Executives render services
in exchange for rights over shares. The total equity-settled share-based payment expense for the year was $37 million
(2015: $29million). The total cash-settled share-based payment expense for the year was $2 million (2015: $6 million).
Further details regarding the operation of equity plans for Executives are outlined in the Directors’ Report from pages 26 to 49.
(A) LONG TERM INCENTIVE PLAN (LTIP)
Generally, participation in the LTIP is limited to Senior Executives of the Qantas Group in key roles or other participants who have
been identified as high potential Executives. All Rights are redeemable on a one-for-one basis for Qantas shares, subject to the
achievement of performance hurdles. Dividends are not payable on the Rights. For more information on the operation of the LTIP,
seepages 38 to 39.
Number of Rights
Performance Rights reconciliation 2016 2015
Rights outstanding as at 1 July 80,309,588 33,579,432
Rights granted during the period 6,086,500 64,317,000
Rights forfeited during the period (3,995,000) (1,914,000)
Rights lapsed during the period (1,719,450) (15,614,000)
Rights exercised during the period (9,790,023) (58,844)
Rights outstanding as at 30 June 70,891,615 80,309,588
Rights exercisable as at 30 June 111,115 157,58 8
Performance hurdles in relation to the 2014–2016 LTIP were tested as at 30 June 2016. As a result, 10,208,000 Rights vest and
convert to shares subsequent to 30 June 2016.
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QANTAS ANNUAL REPORT 2016