ANNUAL REPORT 2016
2.7 IMPAIRMENT TANGIBLE FIXED ASSETS AND INTANGIBLE ASSETS
Intangible assets with a specific lifetime are not subject to amortisation and are, instead, sub-
ject to annual impairment tests. Assets subject to amortisation are revaluated to determine
any impairment whenever there are events or alterations in the circumstances causing their
accounting value not to be recoverable. An impairment loss is recognised in the consolidated
statement of comprehensive income by the amount by which the recoverable amount exceeds
the accounted amount. The recoverable amount is the highest amount between an asset’s fair
value minus the costs necessary for its sale and its utilisation value. To perform impairment
tests, assets are grouped at the lowest level at which it may be able to separately identify cash
flows (units generating cash flows).
A cash-generating unit (CGU) is the smallest group of assets which includes the asset and
that generates cash flows from continued use and which is generally independent from the
cash input from other assets or asset groups. In the case of tangible assets, each shop was
identified as a cash-generating unit. Shops with negative Ebitda for at least 2 years are sub-
ject to impairment tests.
Consolidation differences are distributed among the Group’s cash-flow generating units
(CGUs), identified according to the country of operation and the business segment.
The recoverable value of a CGU is determined based on calculating the utilisation value. Those
calculations apply cash flow forecasts based on financial budgets approved by the managers
and cover a 5-year period.
The Board of Directors determines the budgeted gross margin based on past performance
and on its market growth expectations. The average weighted growth rate used is consistent
with provisions included in the sector’s reports. The discount rates used after taxes and reflect
specific risks related with the assets from a CGU.
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