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NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
For the year ended 31 May 2016
BLUE LABEL INTEGRATED ANNUAL REPORT 2016
124
4.
Non-financial instruments
Non-financial instruments comprise:
•
Goodwill
•
Intangible assets
•
Property, plant and equipment
•
Inventories
•
Provisions
Impairment of non-financial assets
The Group evaluates the carrying value of assets with finite useful lives when events and circumstances indicate that
the carrying value may not be recoverable and when there are indicators of impairment. Intangible assets that have
an indefinite useful life are not subject to amortisation and are tested annually for impairment.
An impairment loss is recognised in the income statement when the carrying amount of an asset exceeds its
recoverable amount. An asset’s recoverable amount is the higher of the fair value less cost of disposal (the amount
obtainable from the sale of an asset in an arm’s-length transaction between knowledgeable willing parties), or its
value-in-use. Value-in-use is the present value of estimated future cash flows expected to arise from the continuing
use of an asset and from its disposal at the end of its useful life. The estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows.
An impairment loss recognised for an asset, other than goodwill, in prior years is reversed if there has been a
change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognised and the recoverable amount exceeds the new carrying amount. The reversal of the impairment is limited
to the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment
loss been recognised in prior years. The reversal of such an impairment loss is recognised in the income statement in
the same line item as the original impairment charge.
4.1 Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary, associate or jointly controlled entity at the date of acquisition.
Goodwill is attributable to synergies that the Group expects to derive from the transaction. If the cost of acquisition
is less than the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Goodwill on the acquisition of subsidiaries is included in “goodwill” in the statement of financial position. Goodwill
on acquisitions of associates and joint ventures is included in “investments in and loans to associates and joint
ventures”.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Impairment is determined by
assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable
amount of the cash-generating unit is less than the carrying amount, an impairment is recognised.
Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.