Annual Report & Accounts 2013 - Pinewood Studios

Pinewood Shepperton plc 59Annual Report & Accounts 2013Notes to the consolidated financial statements continued2. Accounting policies continuedImpairment of assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any suchindication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’srecoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair valueless costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups of assets. Where the carrying amount ofan asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverableamount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risks specific to the asset.In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroboratedby valuation multiples, quoted share price for the publicly traded Pinewood Shepperton plc or other fair value indicators.Impairment losses of continuing operations are recognised in the income statement in those expense categoriesconsistent with the function of the impaired asset. An assessment is made at each reporting date as to whether thereis any indication that previously recognised impairment losses may no longer exist or may have decreased. If suchindication exists, the Group estimates assets or CGUs recoverable amount. A previously recognised impairment loss isreversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since thelast impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverableamount. That increased amount cannot exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in theincome statement. After such reversal the depreciation charge is adjusted in future periods to allocate the asset’s revisedcarrying amount, less any residual value, on a systematic basis over the remaining useful life.GoodwillGoodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over theacquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initialrecognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill is reviewed for impairmentannually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.For the purpose of impairment testing, goodwill is allocated to the related cash-generating unit monitored bymanagement. Where the recoverable amount of the cash-generating unit is less than the carrying amount, includinggoodwill, an impairment loss is recognised in the income statement.Intangible assetsIntangible assets, when identified, are capitalised at cost and subsequently amortised over their useful economic life.Long-term assetsCosts incurred in the establishment of long-term agreements are capitalised on the statement of financial position andcategorised as long-term assets.These costs are reviewed at least annually for any impairment in their carrying value and once the long-term agreementbecomes operational the costs are amortised over the term of the agreement.Impairment costs and amortisation are expensed to the Group Income Statement.