57 ―
10. Intangible assets continued 10.1 Goodwill
2020 $M
2019 $M
Goodwill by cash generating unit
881.0 169.2
Electricity
881.0 169.2 156.8
Gas Distribution
–
Gas Trading Natural Gas
10.3 40.2 40.5 22.9
– – –
LPG
Liquigas Metering
22.9
–
E-Co Products
4.4
Total
1,164.1
1,234.3
Policies
Goodwill represents the excess of the consideration transferred over the fair value of Vector’s share of the net identif iable assets of an acquired subsidiary. Goodwill is carried at cost less accumulated impairment losses. Goodwill is monitored internally at a group level. It is allocated to the group’s cash generating units (“CGUs”), for impairment testing purposes. Following the sale of its Kapuni gas interests on 31 March 2020, the group has reassessed its CGUs for impairment testing as at 30 June 2020. As a result of the sale, the group’s gas trading CGU has ceased to exist, with the remaining natural gas, LPG and Liquigas businesses being deemed as individual CGUs respectively. As at 30 June 2020, CGUs within the group are: electricity, gas distribution, metering, natural gas, LPG, Liquigas, communications, and E–Co Products. Goodwill is tested at least annually for impairment against the recoverable amount of the CGU to which it has been allocated. As at 30 June 2020, the group has recognised an impairment loss of $32.0 million (2019: $46.6 million) in respect of goodwill and intangible assets allocated to the E–Co Products (“E–Co”) CGU. The impairment reflects the post–acquisition performance of E–Co’s heat pumps and f ilters businesses continuing to fall below expectations. E–Co’s current year business performance has been affected by the impact of COVID–19 trading restrictions. COVID–19 has highlighted the challenging market conditions which E–Co faces, and as a result management have reassessed both the structure and the forecast f inancial performance for this business. The recoverable amount of the E–Co CGU has been determined based on value in use. Post–tax discount rates of between 7.5% and 8.2% (2019: 7.6% and 8.3%) have been applied in determining the recoverable amount for the E–Co CGU. To assess impairment, management must estimate the future cash flows of operating segments including the CGUs that make up those segments. This entails making judgements including: — the expected rate of growth of revenues; — margins expected to be achieved; — the level of future maintenance expenditure required to support these outcomes; and — the appropriate discount rate to apply when discounting future cash flows.
Allocation
Impairment
Key accounting judgements
Notes to the Financial Statements
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