NOTES TO THE FINANCIAL STATEMENTS
15. Intangible assets:// CONTINUED
15.1 Goodwill
2017 $000
2016 $000
Goodwill by reportable segment
Regulated Networks
1,021,458
1,021,458
Gas Trading Technology
156,826 87,721
156,826 19,853
Total
1,266,005
1,198,137
Policies
Goodwill represents the excess of the consideration transferred over the fair value of Vector’s share of the net identifiable assets of an acquired subsidiary. Goodwill is carried at cost less accumulated impairment losses.
Allocation
Goodwill is monitored internally at a group level. However, it is allocated to operating segments for impairment testing purposes as this is the highest level permissible under NZ IFRS.
Impairment testing
Goodwill is tested at least annually for impairment against the recoverable amount of the operating segments to which it has been allocated. For all segments the recoverable amount of each segment to which goodwill is allocated exceeds the net assets plus goodwill allocated. Therefore the group has determined that no impairment to goodwill has occurred during the period. As at 30 June 2016, the group recognised an impairment loss of $64.0 million in respect of goodwill allocated to the gas trading segment. The gas trading segment comprises the group’s natural gas, LPG, gas storage and processing, and cogeneration businesses. To assess impairment, management must estimate the future cash flows of operating segments including the cash generating units (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. The recoverable amounts attributed to the electricity, gas distribution, metering and communications CGUs are calculated on the basis of value-in-use using discounted cash flow models. For the gas trading CGU, both value in use and fair value less costs to sell were considered. Future cash flows are forecast based on actual results and business plans. For the electricity, gas distribution and metering CGUs, a ten year period has been used due to the long-term nature of the group’s capital investment in these businesses and the predictable nature of their cash flows. A five year period has been used for the gas trading and communications CGUs. Terminal growth rates in a range of 1.0% to 2.0% (2016: 1.0% to 2.0%) and post-tax discount rates between 4.8% and 7.6% (2016: 5.3% and 8.1%) are applied. Rates vary for the specific segment being valued. Projected cash flows for regulated businesses are sensitive to regulatory uncertainty. Estimated future regulated network revenues and the related supportable levels of capital expenditure are based on default price-quality path determinations issued by the Commerce Commission and are in line with estimates published in the asset management plans.
Judgements
Assumptions
97
Vector://AR 17
Made with FlippingBook Annual report