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67
APN
annual report
2011
notes to the financial statements
APN News & Media Limited and Controlled Entities
2011
$’000
2010
$’000
Allocation of goodwill and non-amortising intangible assets to CGUs
Name of CGU
Australian Regional Media
205,896
211,086
New Zealand Media – Metro
561,889
694,919
New Zealand Media – Regional
107,828
122,614
Australian Radio
300,158
300,158
New Zealand Radio
79,418
78,699
Outdoor – Australia
105,472
105,472
Digital Ventures
27,744
–
Other
17,172
17,112
Total goodwill and non-amortising intangible assets
1,405,577
1,530,060
Impairment of cash generating units (CGUs) including goodwill and indefinite life intangible assets
At the half year, it was determined that there were indicators of impairment of the Group’s New Zealand publishing assets, arising from the
natural disasters and subdued economic environment affecting the areas in which they operate. Therefore, in accordance with AASB 136
Impairment
, management performed an impairment review of the respective cash generating units.
As a result of the review, the carrying amount of goodwill and mastheads allocated to the New Zealand Metro and New Zealand Regionals
CGUs were reduced to their recoverable amounts through the recognition of an impairment loss. This impairment was a result of a number
of factors, including the impact of the Christchurch earthquakes on the New Zealand economy, the slower than expected recovery of the
advertising markets and the ongoing impacts of the global financial crisis. The impairment charge against the New Zealand Metro CGU was
$143.5 million and against the New Zealand Regionals CGU was $16.0 million.
Year-end impairment review
A comprehensive impairment review was conducted at 31 December 2011. The recoverable amount of each CGU which includes goodwill
or indefinite life intangible assets has been reviewed. The recoverable amount of each CGU is determined based on value in use calculations
using management budgets and forecasts for a five year period after adjusting for central overheads. Cash flows beyond five years are
extrapolated at growth rates not exceeding the long term average growth rate for the business in which the CGU operates.
The key assumptions used in the value in use calculations are:
–
–
Long term growth rates ranging from 2.5% to 4.0% (2010: 2.5% to 4.0%) per annum; and
–
–
Post tax discount rates ranging from 9.5% to 10.0% (2010: 10.0% to 10.2%) per annum. The current year discount rate equates to pre-tax
rates in the range of 12% to 14% per annum.
Value in use calculations are highly sensitive to changes in certain key assumptions. All CGUs except for the New Zealand Media division
CGUs, have sufficient headroom such that reasonable changes to key assumptions would not give rise to an impairment charge. For the
New Zealand Media CGU’s a 0.5% increase in the discount rate used would result in an increase in the impairment provision recognised by
$52 million. A 0.5% decrease in long-term growth rates would increase the impairment provision recognised by $45 million. If forecasted
cash flows were to decrease by 10% in each of the New Zealand Media CGUs, an increase in the impairment provision of $77 million would
be required.
The Directors remain satisfied with the carrying value of the Group’s intangible assets and have determined that no adjustment to the
impairment provisions recognised previously is required.