AmazonScience/document-haystack

114 Impairment testing of goodwill and indefinite life intangible assets2An impairment loss is recognised for any amount by which an asset’s carrying amount exceeds its recoverable amount. The recoverable 3amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are 4grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).5Within UK, European Retail, CEE, and Tab NZ Retail, the cash-generating units (“CGUs”) are generally an individual Licensed Betting 6Office (“LBO”) and, therefore, impairment is first assessed at this level for licences (intangibles) and property, plant and equipment, with 7any impairment arising booked to licences and property, plant and equipment on a pro-rata basis. Since goodwill and brand names have 8not been historically allocated to individual LBOs, a secondary assessment is then made to compare the carrying value of the segment 9against the recoverable amount with any additional impairment then taken against goodwill first.10For Online the CGU is the relevant geographical location or business unit, for example Australia, European digital (defined as websites 11hosted by proprietary platforms based in European constituent countries), Digital (defined as websites hosted by Entain proprietary 12platforms) etc. and any impairments are made firstly to goodwill, next to any capitalised intangible asset and then finally to property, 13plant and equipment. The expected cash flows generated by the assets are discounted using appropriate discount rates that reflect the 14time value of money and risks associated with the group of assets.15For both tangible and intangible assets, the future cash flows are based on the forecasts and budgets of the CGU or business discounted 16to reflect time value of money. The key assumptions within the UK and European Retail budgets are OTC wagers (customer visits and 17spend per visit), the average number of machines per shop, gross win per shop per week, salary increases, the potential impact of the 18shop closures and the fixed costs of the LBOs. The key assumptions within the budgets for Online are the number of active customers, net 19revenue per head, win percentage, marketing spend, revenue shares and operating costs. All forecasts take into account the impact of the 20Group’s commitment to be Net Zero by 2035 as well as the impact of climate change.21The value in use calculations use cash flows based on detailed, Board approved, financial budgets prepared by management covering a 22three-year period. These forecasts have been extrapolated over years 4 to 8 representing a declining growth curve from year 3 until the 23long-term forecast growth rate is reached. The growth rates used from years 4 to 8 range from 0% to 10%. From year 9 onwards long-term 24growth rates used are between 0% and 2% (2022: between 0% and 2%) and are based on the long-term GDP growth rate of the countries 25in which the relevant CGUs operate or the relevant outlook for the business. An eight-year horizon is considered appropriate based on the 26Group’s history of underlying profit as well as ensuring there is an appropriate decline to long-term growth rates from those growth rates 27currently observed in our key markets. A 0% growth rate has been used for the UK Retail operating segment. All key assumptions used in 28the value in use calculations reflect the Group’s past experience unless a relevant external source of information is available. Whilst the 29same approach is adopted for Tab NZ impairment reviews, the value-in-use is assessed over the 25-year life of the licence rather than 30into perpetuity.31The discount rate calculation is based on the specific circumstances with reference to the WACC and risk factors expected in the industry 32in which the Group operates.33The pre-tax discount rates used, which have remained consistent year-on-year, and the associated carrying value of goodwill by CGU is 34as follows:35Goodwill36202337 38%39202240 41%42202343 44£m45202246restated 1 47£m48Digital 11.1 12.6–12.9 2,263.4 2,230.749UK Retail 12.6 12.6 76.4 76.450Australia 13.5 13.5 145.0 347.551European Retail 9.5–13.3 9.5–13.3 147.1 161.552European Digital 9.5–13.3 9.5–13.3 343.3 350.453Enlabs 11.8 11.8 205.3 209.654BetCity 12.7 n/a 200.1 n/a55SuperSport 11.5 11.8 527.8 538.456STS 11.7 n/a 389.1 n/a57365Scores 12.3 n/a 86.8 n/a58Tab NZ 11.1 n/a 255.5 n/a59All other segments 11.1–12.6 12.4 76.2 66.4604,716.0 3,980.9611. Restatement of prior year intangible valuations has been made in relation to the prior year SuperSport acquisition during the subsequent measurement period. See note 32 for 62further details.63It is not practical or material to disclose the carrying value of individual licences by LBO.64Impairment recognised during the year65Impairments of intangible assets and property, plant and equipment are recognised as separately disclosed items within operating expenses. 66Australia impairment67During the current year, the Group recorded a non-cash impairment charge of £190.0m against the Online division. The charge has arisen in the 68Group’s Australian CGU and is a result of the impact of ongoing increases in the rate of Point of Consumption tax across certain states and a 69forecast decline in Australian revenues in 2024 as a result of a reduced market outlook. 701 Overview 8 Strategic report 88 Governance 140 Financial statements71Entain plc Annual Report 202318272Notes to the consolidated  73financial statements 74for the year ended  7531 December 2023