RWS AR 23 Final Single pages - Flipbook - Page 133
The Group has four CGUs and in accordance with IAS 36, Management performed a value in use impairment test at 30
September 2023. The key assumptions for the value-in-use calculations are those regarding discount rates and revenue
growth rates. All of these assumptions have been reviewed during the year. Management estimates discount rates using
pre-tax rates that re昀氀ect current market assessments of the time value of money and the risk speci昀椀c to each CGU.
This has resulted in a range of discount rates being used within the value in use calculations.
Determination of key assumptions
The long-term growth rate is the rate applied to determine the terminal value on year 昀椀ve cash 昀氀ows. This rate is
determined by the long term compound annual growth rate in adjusted operating pro昀椀t as estimated by Management
with reference to external benchmarks.
The discount rate is the pre-tax discount rate calculated by Management based on a series of inputs starting with a risk
free rate based on the return on long term, zero coupon government bonds. The risk free rate is adjusted with a beta to
re昀氀ect sensitivities to market changes, before consideration of other factors such as a size premium.
Revenue growth is the average annual increase in revenue over the 昀椀ve-year projection period. The revenue growth
rate is determined by Management based on the most recently prepared budget for the future period and adjusted for
longer term developments within operating segments where such developments are known and possible to reliably
forecast.
The trading projections for the 昀椀ve-year period underlying the value-in-use re昀氀ect assumptions for EBITDA margins.
The EBITDA margin is based on a number of elements of the operating model over the longer-term, including pricing
trends, volume growth and the mix of complexity of translation activity and assumptions regarding cost in昀氀ation.
As part of the value-in-use calculation, Management prepares cash 昀氀ow forecasts derived from the most recent 昀椀nancial
budgets as approved by the Board of Directors and extrapolates the cash 昀氀ows for future years based on estimated
growth rates which are based on Management’s best estimate of the expected growth rate of the market in which the
CGU operates.
The Group has conducted sensitivity analyses on the value in use/recoverable amount of each of the CGUs. Based on
the result of the value in use calculations undertaken, the Directors conclude that the allocation of goodwill to each of
the CGUs is as shown in the table below:
The allocation of goodwill to each CGU is as follows:
2023
£m
2022
£m
IP Services
33.2
35.8
Regulated Industries
141.8
150.4
Language Services
223.9
239.9
Language and Content Technology
209.7
266.5
At 30 September
608.6
692.6
Goodwill assessment
The value-in-use calculations performed con昀椀rm that the recoverable goodwill amount for IP Services, Regulated
Industries and Language Services CGUs each exceed their asset carrying value. The calculation for the Language and
Content Technology CGU gave a value-in-use result of £333.3m which was £62.4m below the asset carrying value and
accordingly an equivalent impairment loss has been recognised.
This impairment loss has been recognised within administrative expenses in the Consolidated Statement of
Comprehensive Income in the period. The impairment has arisen primarily due to the signi昀椀cant increase in discount
rates as a result of macroeconomic factors and to a lesser extent, uncertainty regarding longer term growth rates.
Whilst the Group expects long-term growth from the Technology strategy, the accounting standard (IAS 36) for
impairment assessments does not allow forecasts to be used where assumptions cannot be evidenced or have not
yet been fully implemented (e.g. cost savings). As a result, whilst the Group is focused on committing to delivering its
growth strategy, the ongoing cost reduction and e昀케ciency programmes restrict the available evidence to demonstrate
this growth as at the balance sheet date. Consequently, the full extent of potential longer-term gains are not re昀氀ected in
the impairment modelling.
NOTES TO THE CONSOLIDATED STATEMENTS
RWS Holdings plc — Annual Report 2023
133
