65 l BRADKEN LIMITED ANNUAL REPORT 2014
Notes to the consolidated financial statements
30 June 2014
(continued)
16 Intangible assets (continued)
Impact of reasonably possible changes in key assumptions
(a) Mining Products: $11.5 million
(b) Engineered Products: $33 million
(c) Cast Metal Services: $6.8 million
The Company has determined the assumptions based on past performance and expectations for the future. The growth rates
used are consistent with forecasts included in industry reports.
The directors believe there is a reasonably possible change in assumptions for the Mining Products and Engineered Products
CGUs that may result in an impairment. These changes are listed below. There is no reasonably possible change in assumptions
that would result in an impairment of goodwill allocated to the other CGU’s.
EBITDA Margin
The following changes in the EBITDA margin would be required to result in impairment for CGU’s considered to be significant in
comparison with the entity’s total carrying amount of goodwill.
Mining Products: a reduction of 2% in the EBITDA margins used would result in impairment.
Engineering Products: a reduction of 6% in the EBITDA margin used would result in impairment.
Cast Metal Services: a reduction of 5% in the EBITDA margins used would result in impairment.
Discount rates
The following changes in the post tax discount rate would be required to result in impairment for CGU’s considered to be
significant in comparison with the entity’s total carrying amount of goodwill.
Mining Products: an increase of 0.3% in the post tax discount rate would result in impairment.
Engineering Products: an increase of 1.0% in the post tax discount rate would result in impairment.
Cast Metal Services: an increase of 1.3% of the post tax discount rate would result in impairment.
In performing the value-in-use calculations, the company has applied a post tax discount rate to discount the forecast future
attributable post tax cash flows. Discount rates represent the current market assessment of the risks specific to each CGU,
taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in
the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating
segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity.
The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the
interest-bearing borrowings the Group is obliged to service. CGU-specific risk premiums have been incorporated into the
calculation of the discount rates.
The post tax discount rate used for the Australian based CGU’s, including Mining Products, Rail, Industrial and cast Metal
Services is 12% (2013: 8.5%), which equates to a pre tax discount rate of 17.1% (2013: 12.1%).
The post tax discount rate used in the United States based Engineering Products CGU is 11% (2013: 8.59%), which would
equates to a pre tax discount rate of 16.9% (2013: 13.2%).
The post tax discount rate used for the Mineral Processing CGU which operates in Canada and Australia is 11.5% (2013: 8.5%),
which would translate into a pre tax discount rate of 17.1% (2013: 12.1%).
The perpetual growth rates per CGU are as follows; Mining 3.0%, Mineral Processing 2.0%, Engineered Products 2.5%, Rail
1.5%, Industrial 2.5% and Cast Metal Services 3.0%.
Growth rate assumptions
The Company recognises that the volatility of the current economic climate and competitive pressures in the manufacturing
industry has an impact on growth rate assumptions.
The following changes in the long-term growth rate would be required to result in impairment for CGU’s considered to be
significant in comparison with the entity’s total carrying amount of goodwill.
Mining Products: a reduction of 0.3% in the long-term growth rate would result in impairment.
Engineering Products: a reduction of 1.3% in the long-term growth rate would result in impairment.
Cast Metal Services: a reduction of 1.6% in the long-term growth rate would result in impairment.
The difference between the carrying value and recoverable amount of the Mining Products and Engineered Products CGU's at 30
June 2014 is as follows;
The implications of the key assumptions for the recoverable amount are discussed below:
Page 65
Bradken Limited
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(CONTINUED)
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