The Group recognized goodwill and brands with indefinite useful life in the consolidated financial statements. Their carrying amounts were allocated to the following cash-generating units which also represent the Group’s operating segments:
- ‘Retail‘ cash-generating unit:
- Goodwill recognized on the acquisition of INFO-TV-FM Sp. z o.o.
- Goodwill and brand recognized on the acquisition of entities comprising Ipla platform
- ‘Broadcasting and television production‘ cash-generating unit.
Goodwill and brand recognized on the acquisition of Telewizja Polsat S.A. (currently Telewizja Polsat Sp. z o.o.).
Goodwill
| 2012 | 2011 | |
|---|---|---|
| Balance as at 1 January | 2,412,285 | 52,022 |
| Acquisition of 100% shares of Telewizja Polsat S.A. | - | 2,360,263 |
| Acquisition of 100% shares of INFO-TV-FM Sp. z o.o. | 10,704 | - |
| Acquisition of 100% shares of entities comprising Ipla platform | 145,044 | - |
| Balance as at 31 December | 2,568,033 | 2,412,285 |
| Including: | ||
| ‘Retail‘ cash-generating unit | 207,770 | 52,022 |
| ‘Broadcasting and television production‘ cash-generating unit | 2,360,263 | 2,360,263 |
Brands:
| 2012 | 2011 | |
|---|---|---|
| Balance as at 1 January | 840,000 | - |
| Recognition of Polsat brand | - | 840,000 |
| Recognition of Ipla brand | 7,800 | - |
| Balance as at 31 December | 847,800 | 840,000 |
| Including: | ||
| ‘Retail‘ cash-generating unit | 7,800 | - |
| ‘Broadcasting and television production‘ cash-generating unit | 840,000 | 840,000 |
Impairment test on Polsat brand
Polsat brand allocated to ‘Broadcasting and television production‘ cash-generating unit was tested for impairment as at 31 December 2012. The impairment test did not indicate impairment.
The impairment test was based on the recoverable amounts of the cash generating unit to which the Polsat brand has been allocated. The recoverable amount of the cash-generating unit is determined based on the value-in-use calculations. The Group tests the total carrying amount of the cash-generating unit and any impairment identified is recognized in the profit or loss immediately with respect to goodwill first and is not subsequently reversed. If goodwill is fully impaired the remaining amount of the impairment loss is allocated to the brand and other assets of the cash-generating unit on a pro rata basis.
In the annual impairment test performed by the Group as at 31 December 2012 the calculation of value-in-use was based on discounted free cash flows and involved the use of estimates related to cash flow projections based on actual financial business plans covering the period until 2017.
The key financial assumptions
The most sensitive key financial assumptions used in the value-in-use calculations of the ‘Broadcasting and television production‘ cash-generating unit were as follows:
- discount rate
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans.
Broadcasting and television production
| 2012 | 2011 | |
|---|---|---|
| Terminal growth | 3% | 3% |
| Discount rate before tax | 10.2% | 13.1% |
Sensitivity analysis of key financial assumptions
The Group believes that the key assumptions made in testing for impairment of the ‘Broadcasting and television production‘ cash-generating unit as at 31 December 2012 are reasonable and are based on our experience and market forecasts that are published by the industry experts. Management believes that any reasonably possible change in the key assumptions on which the cash-generating unit’s recoverable amount is based would not cause the impairment charge to be recognized.
Impairment test on Ipla brand
Ipla brand allocated to ‘Retail‘ cash-generating unit was tested for impairment as at 31 December 2012. The impairment test did not indicate impairment.
The impairment test was based on the recoverable amounts of the cash generating unit to which the Ipla brand has been allocated. The recoverable amount of the cash-generating unit is determined based on the value-in-use calculations. The Group tests the total carrying amount of the cash-generating unit and any impairment identified is recognized in the profit or loss immediately with respect to goodwill first and is not subsequently reversed. If goodwill is fully impaired the remaining amount of the impairment loss is allocated to the brand and other assets of the cash-generating unit on a pro rata basis.
In the annual impairment test performed by the Group as at 31 December 2012 the calculation of value-in-use was based on discounted free cash flows and involved the use of estimates related to cash flow projections based on actual financial business plans covering the period until 2017.
The key financial assumptions
The most sensitive key financial assumptions used in the value-in-use calculations of the ‘Retail‘ cash-generating unit were as follows:
- discount rate;
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans.
Retail
| 2012 | 2011 | |
|---|---|---|
| Terminal growth | 2.1% | n.a. |
| Discount rate before tax | 8.8% | n.a. |
Sensitivity analysis of key financial assumptions
The Group believes that the key assumptions made in testing for impairment of the ‘Retail‘ cash-generating unit as at 31 December 2012 are reasonable and are based on our experience and market forecasts that are published by the industry experts. Management believes that any reasonably possible change in the key assumptions on which the cash-generating unit’s recoverable amount is based would not cause the impairment charge to be recognized.
Impairment test on goodwill allocated to the ‘Broadcasting and television production‘ cash-generating unit
Goodwill allocated to ‘Broadcasting and television production‘ cash-generating unit was tested for impairment as at 31 December 2012. The impairment test did not indicate impairment.
The impairment test was based on the recoverable amounts of the cash generating unit to which the goodwill has been allocated. The recoverable amount of the cash-generating unit is determined based on the value-in-use calculations. The Group tests the total carrying amount of the cash-generating unit and any impairment identified is recognized in the profit or loss immediately with respect to goodwill first and is not subsequently reversed. If goodwill is fully impaired the remaining amount of the impairment loss is allocated to the brand and other assets of the cash-generating unit on a pro rata basis.
In the annual impairment test performed by the Group as ‘at 31 December 2012 the calculation of value-in-use was based on discounted free cash flows and involved the use of estimates related to cash flow projections based on actual financial business plans covering the period until 2017.
The key financial assumptions
The most sensitive key financial assumptions used in the value-in-use calculations of the ‘Broadcasting and television production‘ cash-generating unit were as follows:
- discount rate;
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans.
Broadcasting and television production
| 2012 | 2011 | |
|---|---|---|
| Terminal growth | 3% | 3% |
| Discount rate before tax | 10.2% | 13.1% |
Sensitivity analysis of key financial assumptions
The Group believes that the key assumptions made in testing for impairment of the ‘Broadcasting and television production‘ cash-generating unit as at 31 December 2012 are reasonable and are based on our experience and market forecasts that are published by the industry experts. Management believes that any reasonably possible change in the key assumptions on which the cash-generating unit’s recoverable amount is based would not cause the impairment charge to be recognized.
Impairment test on goodwill allocated to the ‘Retail‘ cash-generating unit
Goodwill allocated to “Retail” cash-generating unit was tested for impairment as at 31 December 2012. The impairment test did not indicate impairment.
The impairment test was based on the recoverable amounts of the cash generating unit to which the goodwill has been allocated. The recoverable amount of the cash-generating unit is determined based on the value-in-use calculations. The Group tests the total carrying amount of the cash-generating unit and any impairment identified is recognized in the profit or loss immediately with respect to goodwill first and is not subsequently reversed. If goodwill is fully impaired the remaining amount of the impairment loss is allocated to the brand and other assets of the cash-generating unit on a pro rata basis.
In the annual impairment test performed by the Group as at 31 December 2012 the calculation of value-in-use was based on discounted free cash flows and involved the use of estimates related to cash flow projections based on actual financial business plans covering the period until 2017.
The key financial assumptions
The most sensitive key financial assumptions used in the value-in-use calculations of the ’Retail’ cash-generating unit were as follows:
- discount rate;
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans.
Retail
| 2012 | 2011 | |
|---|---|---|
| Terminal growth | 3% | 3% |
| Discount rate before tax | 8.8% | 11.6% |
Sensitivity analysis of key financial assumptions
The Group believes that the key assumptions made in testing for impairment of the ’Retail’ cash-generating unit as at 31 December 2012 are reasonable and are based on our experience and market forecasts that are published by the industry experts. Management believes that any reasonably possible change in the key assumptions on which the cash-generating unit’s recoverable amount is based would not cause the impairment charge to be recognized.
The key financial assumptions used in the value-in-use calculations
The most sensitive key financial assumptions used in the value-in-use calculations of ’Broadcasting and television production’ cash-generating unit and ’Retail’ cash-generating unit were as follows:
- discount rate;
- terminal growth rate used for estimating fee cash flows beyond the period of financial plans.
Discount rate – the discount rate reflects the estimate made by the management of the risks specific to each cash-generating unit, taking into account the time value of money and risks specific to the asset. The discount rate was estimated on the basis of weighted average cost of capital method (WACC) and considered Group’s and its operating segments’ business environment. WACC considers both debt and equity. Cost of equity is based on the return on investment excepted by the Group’s investors while cost of debt is based on the interest bearing debt instruments. Operating segment- specific risk is considered by the estimation of beta. Beta is estimated annually and is based on the market data.
Terminal growth rate – growth rates are based on widely available published market data such as IMF publications.
