Page 86 - Paragon Annual Report 2

82 | Group financial statements
Notes to the consolidated financial statements (continued) 12 Goodwill
Cost and carrying amount of goodwill
At 1 July 2015
Acquisitions
At 30 June 2016
Acquisitions (note 11)
At 30 June 2017
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from the business combination. The CGUs represent the lowest level within the Group at which the associated goodwill is monitored for internal management purposes.
During the year, as a result of the continued growth of the Group, the Directors took the decision to re-organise the Group’s reporting structure. This resulted in the recognition of new CGUs. These are:
• Paragon Customer Communications – provides a range of services to our clients to improve their communications with their customers
• Paragon ID – delivers RFID and contactless solutions for personal identification, mass transit, smart cities, brand protection and
traceability
• Paragon Graphic Services – is a digital print network offering design and marketing services to businesses, as well as reprographic services to the engineering, construction and retail sectors
The reasons for and benefits of this reporting structure is discussed further in the Strategic Report on pages 2 to 44.
This re-organisation resulted in the re-allocation of the Group’s previously recognised goodwill to these CGUs. In accordance with IAS 36, this re-allocation was executed on the basis of the relative value of the units concerned. The comparatives have been re-stated. This reallocation has not resulted in an impairment.
Paragon Customer Communications (PCC) Paragon ID (PID)
Paragon Graphic Services (PGS)
For the purpose of impairment testing, the key assumptions applied to these CGUs were:
27,607 12,766 2,867 43,240
Paragon Customer Communications Paragon ID
Paragon Graphic Services
Impairment testing of goodwill
Pre Tax discount rates
12.4% (2016: 12.4%) 12.4% (2016: 12.4%) 12.7% (2016: 12.7%)
Long term growth rate
0.9% (2016: 0.9%) 0.9% (2016: 0.9%) 0.9% (2016: 0.9%)
Goodwill acquired through business combinations has been allocated to CGUs for the purpose of impairment testing. Impairment of goodwill occurs when the carrying value of a CGU is greater than the present value of the cash that it is expected to generate (i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if there is an indication that the CGU may be impaired.
The recoverable amount of each CGU is based on a value in use computation. The cash flow forecasts employed for this computation are extracted from budgets that have been formally approved by the Board of Directors and specifically excludes future acquisition activity. Cash flows for a further period are based on the assumptions underlying the budgets. The weighted average long term growth rate used in the impairment testing are noted above.
A present value of the future cash flows is calculated using a before-tax discount rate representing the Group’s estimated before tax weighted average cost of capital, adjusted to reflect risks associated with each CGU. The pre-tax discount rates used are presented above.
Paragon Group Limited – 05258175
2017
€000
43,240
31,689
–
43,240
74,929
2017
2016
€000
27,997
41,765
5,167
€000
74,929