Annual report and accounts 2023 - Flipbook - Page 164
A.G. BARR p.l.c. Annual Report and Accounts 2023
Notes to the Accounts continued
11. Intangible assets continued
Key assumptions for each CGU:
2023
Rubicon
FUNKIN
MOMA
Boost
2022
Long-term
growth rate
%
Discount
rate
%
Long-term
growth rate
%
Discount
rate
%
3.0
3.0
3.0
2.3
9.5
9.5
9.5
9.5
2.0
2.0
3.0
–
8.7
8.7
18.0
–
Key assumptions used in value in use calculations
The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:
• Volume growth rates – reflect management expectations of volume growth based on growth achieved to date, current strategy and expected market trends, and will vary
according to each CGU.
• Marginal contribution – being revenue less material costs and all other marginal costs that management considers to be directly attributable to the sale of a given product.
Marginal contribution is based on approved financial budgets. Key assumptions are made within these budgets about pricing, discounts and costs based on historical data,
current strategy and expected market trends.
• Advertising and promotional spend – financial budgets approved by management are used to determine the value assigned to advertising and promotional spend. This is
based on planned spend for year one and strategic intent thereafter.
• Raw material price, production and distribution costs, selling costs and other overhead inflation – based on approved financial budgets, which incorporate current material
coverage, current strategy and expected market trends.
• The discount rate reflects management’s estimate of post-tax cost of capital adjusted for the specific risks impacting on each operating unit. The estimated pre-tax cost of
capital is based on guidance provided by an independent third party to the Group.
Sensitivity analysis was carried out on the above calculations to review possible levels of impairment under a range of different assumptions, e.g. adjusting discount rates. At a
pre-tax rate of 20%, or a reduction in long-term growth of 1%, there would be no impairment. Whilst cash flow projections used within the impairment reviews are subject to
inherent uncertainty, reasonably possible changes to the key assumptions applied in assessing the value in use calculation would not result in a change in the impairment
conclusions reached.
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