48 AVESCOGROUPPLC ANNUAL REPORT 2009
www.avesco.com
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 30 SEPTEMBER 2009
Impairment tests of goodwill
In accordance with the accounting policy stated in note 2.7, the Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of
cash-generating units have been determined based on the higher of value-in-use calculations and fair value less costs to sell. These calculations require the use
of estimates.
Goodwill is allocated to the Group’s cash-generating units (CGUs). For the basis of goodwill allocation, CGUs are equivalent to Group subsidiaries. The
recoverable amount of a CGU is determined based on the higher of value in use calculations and fair value less costs to sell. These calculations use cash flow
projections based on financial forecasts approved by management covering a five year period. Cash flows beyond the five year period are extrapolated using
the estimated growth rates stated below.
The key assumptions used in the value in use calculations are as follows:
Fountain
CT Germany Television
Weighted average growth rate (1) 2.5% 2.5%
Pre-tax discount rate applied to projections (2) 19.5% 15.0%
(1) Revenue growth was based on management’s expectations of future economic and market conditions. Operating cash flows were calculated based on
management’s expectations of revenues and operating costs.
(2) The discount rates used are pre-tax and reflect specific risks relating to each CGU.
The assumptions have been used for the analysis of each CGU.
After performing testing, it was concluded that goodwill in both CT Germany and Fountain Television was impaired during the period and as such has been
written off to the income statement in operating expenses.
Other intangible assets
Other intangible assets relate to assets recognised as a result of business combinations. The net book value of these assets is as follows:
2009 2008
£000s £000s
Customer relationships 243 624
Tradenames - 50
243 674
Impairment tests of acquired intangible assets.
In accordance with IAS 36 the Group has considered the impact of the current economic climate and its effect on Group forecasts to be an indicator of potential
impairment. As such the Group has performed tests to determine whether acquired intangibles have suffered any impairment. The recoverable amounts of
cash-generating units have been determined based on the higher of value-in-use calculations and fair value less costs to sell. These calculations require the use
of estimates.
Acquired intangible assets are allocated to the Group’s cash-generating units (CGUs). For the basis of allocation, CGUs are equivalent to Group subsidiaries. The
recoverable amount of a CGU is determined based on the higher of value in use calculations and fair value less costs to sell. These calculations use cash flow
projections based on financial forecasts approved by management covering a five year period. Cash flows beyond the five year period are extrapolated using
the estimated growth rates stated below.
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72