Section A: Impairment of Goodwill in Consolidated Financial Statements (CFS)
Vedanta Ltd . (31-3-2015)
From Notes to Financial Statements
Exceptional Items (Extracts)
Provision for impairment of goodwill includes:
(i) Non-cash impairment charge of acquisition goodwill, in respect of the group’s ‘Oil and Gas’ business aggregating Rs.19,180 crore. The impairment of goodwill was triggered by significant fall in the crude oil prices. For the purpose of impairment testing, goodwill has been allocated to the ‘Oil and Gas’ cash generating unit (“CGU”). The recoverable amount of the CGU was determined based on the net selling price approach, as it more accurately reflects the recoverable amount based on management view of the assumptions that would be used by a market participant. This is based on the cash flows expected to be generated by the projected oil or natural gas production profiles up to the expected dates of cessation of production sharing contract (PSC)/ cessation of production from each producing field based on current estimates of reserves and resources. It has been assumed that the PSC for Rajasthan block would be extended till 2030 on the same commercial terms. Discounted cash flow analysis used to calculate net selling price uses assumption for short term (five years) oil price and the long term nominal price of US$ 84 per barrel derived from a consensus of various analyst recommendations. Thereafter, these have been increased at a rate of 2.5% per annum. The cash flows are discounted using the post-tax nominal discount rate of 10.32% derived from the post-tax weighted average cost of capital. The impairment loss relates to the ‘Oil and Gas’ business reportable segments, however this has been shown as exceptional items and does not form part of the segment result for the purpose of segment reporting.
(ii) The mining operations at Copper Mines of Tasmania Pty Limited (“CMT”), Australia were temporarily suspended in January 2014 following a mud rush incident at the mines. On June 27, 2014, a rock fall occurred in the Prince Lyell mine affecting an access drive which connects the lower levels of the mine to surface. As a consequence, mining operations were put into Care and Maintenance. Non-cash impairment charge of acquisition goodwill, in respect of CMT aggregating to Rs.281.28 crore was recognised during the year ended March 31, 2015. The impairment of goodwill was as a result of continued care & maintenance of the operations with nil production and consequent delay in startup of operations which is dependent on fresh exploration efforts. For the purpose of impairment testing, goodwill has been allocated to the ‘CMT’ cash generating unit (“CGU”). The recoverable amount of the CGU was determined based on the net selling price approach. This is based on the cash flows expected to be generated by projected exploration & production profile of copper reserves. Discounted cash flow analyses used to calculate net selling price uses assumption for prices derived from the market projections. The cash flows are discounted using the post-tax nominal discount rate of 9.14% derived from the post-tax weighted average cost of capital. The impairment loss relates to the ‘Copper’ business reportable segment; however this has been shown as exceptional item and does not form part of the segment result for the purpose of segment reporting.
Tata Global Beverages Ltd . (31-3-2015)
From Notes to Financial Statements
During the year the Group recognised a non-cash impairment loss relating to its businesses in China and Eastern Europe. The impairment relating to the China business, a subsidiary company under joint venture control, of Rs.2,484 lakh within tea segment is on account of delays in start-up and stabilisation of technology for an enhanced product range. A pre-tax discount rate of 15.1% has been used for value in use computation.
In the case of Eastern Europe, the goodwill impairment mainly relates to Russia within coffee segment and to a lesser extent to Czech Republic within tea segment. In Russia, the impairment of Rs.4,480.51 lakh is arising due to adverse macroeconomic environment with resultant adverse impact on interest and discounting rates used for impairment assessment. A pre-tax discount rate of 20.4% has been used for value in use computation. In the case of Czech Republic, the impairment of Rs.2,573.91 lakh has been recognised based on current expectation of business performance. A pre-tax discount rate of 6.3% has been used for value in use computation. The impact of impairment has been accounted under exceptional items and is disclosed as unallocated items in the segment report.
Tata Steel Ltd . (31-3-2015)
From Notes to Financial Statements
Exceptional Items (Extracts)
During the year the Company has recognised a non-cash write down of goodwill and fixed assets of Rs.6,052.57 crore. The impairment is primarily due to the external economic environment and macro-economic conditions in each geography of operation, the underlying demandsupply imbalance facing the global steel industry, significant volatility in iron ore and coal prices in the last twelve months and the current long term view of steel and its raw material prices.
The impairment review was performed for cash generating units (CGUs) which were generally taken as legal entities or businesses within the group. The recoverable amount of CGUs and other assets were primarily based on their value in use. The discounting rates used for the value in use calculations were based on the pre-tax weighted average cost of capital and are in the range of 6% – 12%.
The impairment loss on tangible and intangible assets relate to the following primary business reportable segments, however the same has been shown as an exceptional item and does not form part of segment result for the purpose of segment reporting.
Tata Chemicals Ltd . (31-3-2015)
From Notes to Financial Statements
Exceptional Items (Extracts)
During the current year, the Group has recognised a noncash write down of goodwill of Rs.8.52 crore (previous year Rs.619.77 crore) and other assets (including capital work-in-progress and commitments in respect thereof) aggregating to Rs.188.43 crore (previous year Rs.363.91 crore) primarily relating to the Chemical and Bio-fuel overseas business (previous year relating to the Group’s Kenyan operations and the Fertiliser and Biofuel operations in India).
