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Annual Report & Accounts 2016 - Notes
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88 Financial statements continued GVC Holdings PLC Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED for the year ended 31 December 2016 8. INTANGIBLE ASSETS CONTINUED 8.2 Impairment tests for cash-generating units containing goodwill and trademarks An Impairment Review of the Group's goodwill was carried out for the year ended 31 December 2016. The goodwill relates to the Group's acquisitions of bwin, Betboo, CasinoClub and Sportingbet. The carrying values of the assets were compared with the recoverable amounts, the recoverable amount was estimated based upon a value in use calculation, based upon management forecasts for the years ending 31 December 2017 and up to 31 December 2021. The assumptions detailed below have been determined based on past experience in this market which the Group's management believes is the best available input for forecasting this market. Goodwill can be broken down into the following: 2016 €m 2015 €m bwin 957.4 - Betboo 8.3 8.3 CasinoClub 40.4 40.4 Sportingbet 84.2 84.2 TOTAL GOODWILL 1,090.3 132.9 bwin The allocation of the bwin goodwill includes various CGUs, split along the Group's reporting segment and includes changes to the CGUs presented in the 2016 interim financial statements following a final review by management of the assumptions underlying the determination and allocation of goodwill and intangibles. The carrying value of these, together with the assumptions used within those individual CGUs are shown in the tables below. The discount rates used have been considered based on the risks involved in each of the underlying business units and terminal growth rates reflect the expected growth in underlying EBITDA expected from these units. These CGUs have been considered for impairment and sensitivities have been calculated around the terminal growth rates and discount factors used together with specific scenarios including the loss of revenue where those revenues might be considered to be at risk. No indicators of impairment have arisen as a result as the impact of all sensitivities were judged to be within tolerable levels. Goodwill in CGU €m Discount rate % Terminal growth rates % Sports labels 849.1 9.0 2.0 Games labels 108.3 11.8 2.0 Intertrader - 16.8 2.0 TOTAL GOODWILL 957.4 The goodwill of €6.5m relating to the Kalixa business acquired as part of the bwin acquisition was transferred to assets held for sale as at 31 March 2016 and its value has been considered as part of the fair value of that disposal group (see note 15). Betboo A terminal growth rate of 2% was included to reflect the likely competitive pressures on this brand. A discount rate of 35% was used, based on the internal rate of return of the Betboo acquisition. It was concluded that the carrying value of the goodwill and other intangibles was not impaired. CasinoClub A terminal growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies. A discount rate of 11.8% was used, based on risk profile. It was concluded that the carrying value of the goodwill and other intangibles was not impaired. Sportingbet A terminal growth rate of 2% was used to reflect the increasing competitive pressures from large online gaming companies. A discount rate range of 20%-35% was applied to each of the underlying brands, based on the risk profile of those brands. It was concluded that the carrying value of the goodwill and other intangibles was not impaired. Management has considered the sensitivities around its key assumptions used in the review of the carrying values of goodwill and other intangibles with an indefinite useful life. These sensitivities have considered the terminal growth rates and discount rates together with specific scenarios around the loss of revenue where those revenues might be considered to be at risk.