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Notes to the Financial Statements
Washington H. Soul Pattinson and Company Limited
Annual Report 2016
112
27
NOTE 27
INTANGIBLE ASSETS (continued)
Fixed Assets
The recoverable amount of the cash generating units for which goodwill has been allocated is determined based
on the fair value less cost of disposal method. Assumptions and methodology applied to each cash-generating
unit are as follows:
(i) Energy
The brought forward balance of goodwill relates to acquisitions by New Hope Corporation Limited, including
Queensland Bulk Handling Pty Limited (goodwill of $5.596 million), Northern Energy Corporation Limited
(goodwill of $12.271 million).
The recoverable amount of the cash-generating unit to which the Northern Energy Corporation Limited goodwill
is attributable has been based on the Fair value less cost of disposal method. This assessment is determined under
Level 2 of the fair value hierarchy based on observable external market data for reserve and resources transaction
multiples, rather than quoted prices (refer note 21 for an explanation on Fair value hierarchy). The transaction
multiples observed are based on transactions in the last 3 years for Australian coal exploration projects with the
same coal exploration projects with the same coal type as the cash-generating unit assets. Estimation of the
resources used to determine the recoverable amount requires judgement and assumptions as detailed in note 25.
The recoverable amount of Queensland Bulk Handling Pty Limited cash generating units has been based on
value in use calculations using discounted cash flow model. The future cash flows have been discounted using a
post-tax rate of 10% (2015: 10%).
Goodwill impairment – Energy
There was impairment of goodwill in the year ended 31 July 2015 of $4.157 million. This relates to goodwill on oil
producing assets within Bridgeport (acquired 2012). Details of impairment assessment are included in note 25.
(ii) Consulting
Brought forward goodwill relates to obtaining control of Pitt Street Real Estate Partners Pty Limited.
Key Estimates
Impairment of goodwill
At each reporting date the Group considers the recoverable value of goodwill. Goodwill is allocated to cash-gen-
erating units for which the recoverable value is determined. The recoverable value may be determined based on
fair value less costs to sell and is estimated based on recent market transaction information. These calculations
require the use of assumptions.