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Annual Report & Accounts 2012 - NOTES
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GVC HOLDINGS PLC NOTES TO THE FINANCIAL STATEMENTS Management originally estimated the deferred consideration payable to be €8,963k, and the discount to be €4,076k, resulting in the discounted value being €4,887k. The revised earn out results in total deferred consideration increasing to €18,530k and the discount to €8,588k resulting in the new discounted value being €9,942k. The fair values of the revised earn out has been estimated using cash flow projections for the 4 years to 31 December 2014, and discounted using the estimated weighted average cost of capital of 21%. The fair values of the intangible assets acquired in the transaction and the impact of the revised earn out, including the tax amortisation benefit, and their useful economic lives are as follows: Year ended 31/12/2012 €000's Acquisition price of Betboo - Initial consideration 2,840 - Acquisition costs 300 - Deferred consideration 18,530 Fair value 21,670 Discount (8,588) Net 13,082 Assets acquired at fair values Useful economic life - Trade name 4 years 696 - Customer list 4 years 1,703 - Software 4 years 2,455 - Goodwill Indefinite 8,333 13,188 Net current liabilities (106) Net 13,082 The deferred consideration has been discounted to reflect its fair value at the date of acquisition. The effect of this discount will be unwound over the period of the deferral with a charge to the income statement contained within interest expense. The expected impact of this over the earn-out period is shown below: 2009 2010 2011 2012 2013 2014 2015 Total €000's €000's €000's €000's €000's €000's €000's €000's Balance at 1 January - 5,354 6,170 12,940 12,283 13,960 14,670 - Fair value of deferred consideration on acquisition 4,887 - - - - - - 4,887 Fair value of additional deferred consideration on revision of earn out - - 5,055 - - - - 5,055 Unwinding of discount charged to income statement 467 1,087 2,387 2,206 1,677 710 55 8,589 Advance of deferred consideration - (271) (672) (2,863) - - - (3,806) Balance at 31 December 5,354 6,170 12,940 12,283 13,960 14,670 14,725 14,725 43