RWS Annual Report 2022 web - Flipbook - Page 128
Notes to the Consolidated Financial Statements (continued)
in management’s conclusion included the integration of delivery of services to customers across fRWS and fSDL
businesses and commencing to internally report and plan resources on the combined businesses
In accordance with IAS 36, management performed a value in use impairment test on the pre-existing six CGUs and
determined there to be no impairment of goodwill within any CGU. Following this impairment test the Life Sciences
and SDL – Regulated Industries CGUs were merged to form the Regulated Industries CGU. Additionally, the Moravia
and SDL – Language Services CGUs are also merged to form a Language Services CGU.
At year end management has performed an additional value in use impairment test on the Group four CGUs as
detailed further below.
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 reflect current market assessments of the time value of money and the risk specific 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 five cash flows. This rate is
determined by the long term compound annual growth rate in adjusted operating profit 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 reflect 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 five-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.
As part of the value in use calculation, management prepares cash flow forecasts derived from the most recent
financial budgets and 5 year plan, both approved by the Board of Directors and extrapolates the cash flows for a
further year based on an estimated growth rate which is either based on management’s best estimate or 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 recoverable amount of each CGU
exceeds its carrying value.
The Directors believe there are no cash-generating units where reasonably possible changes to the underlying
assumptions exist that would give rise to impairment.
The allocation of goodwill to each CGU is as follows:
IP Services
2021
£m
35.8
31.3
Regulated Industries 1
150.4
133.6
Language Services 2
239.9
208.1
Language and Content Technology
266.5
242.8
At 30 September
692.6
615.8
1
128
2022
£m
Previously Life Sciences and SDL - Regulated Industries 2 Previously Moravia and SDL - Language Services
RWS — Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
