Ubisoft 2013 Annual Report Download - page 107

Financial Statements
2013
102
The discount rate applied to future cash flows is common to all CGU given the interdependence within
the Group, publishing/production and distribution activities on the one hand, and country risk
comparable in the main distribution areas of the Group (North America and Western Europe). It
corresponds to the estimate (updated annually) by the Group's management of the weighted average
cost of capital based on available industry data, especially with regard to the financing structure
(gearing) and beta coefficient on the equity market risk premium. It stood at 8.94% at March 31, 2013
(against 9.62% at March 31, 2012).
Regarding the current repartition of the Group’s activities, the allocation of goodwill by CGU and the
overall risk premium attached to the Group included in the discount rate, the use of a single rate for all
CGUs was considered appropriated for the impairment test.
The terminal value used for each CGU tested for impairment relates to overtime capitalization from
normativ cash flows at weighted average cost of capital decreased from perpetual growth rate. The
perpetual growth rate used is 1.50% at March 31, 2013 (no change from March 31, 2012).
Non-current assets with a fixed useful life
For property, plant and equipment and intangible assets with a fixed useful life, this impairment test is
carried out whenever indicators suggest a loss in value.
These tests involve comparing the net carrying amount of assets to their recoverable value – which is
the higher of fair value minus costs of sale, and value in use – estimated on the basis of the current
net value of future cash flows generated by their use.
When the fair value of property, plant and equipment or an intangible asset (excluding goodwill)
increases over a financial year, and the recoverable value exceeds the asset’s carrying amount, any
impairment recognized during previous years will be written back into profit or loss.
Type of asset
Impairment method
Office software
No impairment test in the absence of any indication of impairment.
Development costs related
to information systems
No impairment test in the absence of any indication of impairment.
Commercial software
At the end of each year and for each software program, expected cash flows are calculated
(over a maximum period of 2 years). When these cash flows are below the net carrying amount
of the software, impairment is recognized.
Engines
No impairment test in the absence of any indication of impairment.
External developments
At the end of each year and for each software program, expected discounted cash flows are
calculated (for a maximum period of two years). When these cash flows are below the net
carrying amount of the software, impairment is recognized.
Property, plant and
equipment
No impairment test in the absence of any indication of impairment.
Brand with a finitie useful life
No impairment test in the absence of any indication of impairment.
Investments in associates
Investments in associates include the Group’s share of the equity held in companies accounted for
under the equity method, together with any related goodwill.
Inventory and work in progress
Inventory is valued at the lower of cost or net realizable value.
Cost includes the purchase price plus incidental expenses and is valued according to the weight
average cost method (WAC).
Net realizable value is the estimated sale price in the normal course of business minus estimated
completion costs and estimated selling costs, which include marketing and distribution costs.
No borrowing costs are included in the cost of inventory.