NOTES TO THE FINANCIAL STATEMENTS continued
13. Intangible assets:// CONTINUED 13.1 Goodwill
2018 $M
2017 $M
Goodwill by reportable segment
Regulated Networks
1,050.2
1,021.5
Gas Trading Technology
156.8
156.8
62.6
87.7
Total
1,269.6
1,266.0
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. 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. During the year ended 30 June 2018, the group has allocated a total of $28.7 million of goodwill recognised through the acquisitions of E-Co Products Group Limited and PowerSmart NZ Limited to the electricity cash generating unit (CGU) within the Regulated Networks segment. 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. 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. The recoverable amounts attributed to the electricity, gas distribution, metering, gas trading and communications CGUs are calculated on the basis of value-in-use using discounted cash flow models. 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% (2017: 1.0% to 2.0%) and post-tax discount rates between 4.8% to 9.0% (2017: 4.8% and 7.6%) 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.
Allocation
Impairment testing
Judgements
Assumptions
87
Vector://AR 18
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