Document ID: chunk:federal_register_of_legislation:F2023C00180:reg:20:p5
Version: federal_register_of_legislation:F2023C00180
Segment Type: reg
Provision Reference: reg 20 (pt 5/17)
Character Range: 208412–216596

based would not cause C's carrying amount to exceed its recoverable amount.
Units A and B
The recoverable amounts of units A and B have been determined on the basis of value in use calculations. Those units produce complementary products, and their recoverable amounts are based on some of the same key assumptions. Both value in use calculations use cash flow projections based on financial budgets approved by management covering a four-year period, and a discount rate of 7.9 per cent. Both sets of cash flows beyond the four-year period are extrapolated using a steady 5 per cent growth rate. This growth rate does not exceed the long-term average growth rate for the market in which A and B operate. Cash flow projections during the budget period for both A and B are also based on the same expected gross margins during the budget period and the same raw materials price inflation during the budget period. Management believes that any reasonably possible change in any of these key assumptions would not cause the aggregate carrying amount of A and B to exceed the aggregate recoverable amount of those units.

                                                                                                                                                     Operation XYZ                                                                                                                                                                                        Unit C                                                                                                                                                                                                                                                                                                      Units A and B
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      (in aggregate)
Carrying amount of goodwill                                                                                                                          CU1,200                                                                                                                                                                                              CU3,000                                                                                                                                                                                                                                                                                                     CU800
Carrying amount of brand name with indefinite useful life                                                                                            –                                                                                                                                                                                                    CU1,000                                                                                                                                                                                                                                                                                                     –
Key assumptions used in value in use calculations(a)
Key assumption                                                                                                                                       Budgeted gross margins                                                                                                                                                                               5-year US government bond rate                                                                                                                                                                                                                                                                              Budgeted gross margins
Basis for determining value(s) assigned to key assumption                                                                                            Average gross margins achieved in period immediately before the budget period, increased for expected efficiency improvements.                                                                       Yield on 5-year US government bonds at the beginning of the budget period.                                                                                                                                                                                                                                  Average gross margins achieved in period immediately before the budget period, increased for expected efficiency improvements.
                                                                                                                                                     Values assigned to key assumption reflect past experience, except for efficiency improvements. Management believes improvements of 5% per year are reasonably achievable.                            Value assigned to key assumption is consistent with external sources of information.                                                                                                                                                                                                                        Values assigned to key assumption reflect past experience, except for efficiency improvements. Management believes improvements of 5% per year are reasonably achievable.
Key assumption                                                                                                                                       Japanese yen/US dollar exchange rate during the budget period                                                                                                                                        Raw materials price inflation                                                                                                                                                                                                                                                                               Raw materials price inflation
Basis for determining value(s) assigned to key assumption                                                                                            Average market forward exchange rate over the budget period.                                                                                                                                         Forecast consumer price indices during the budget period for North American countries from which raw materials are purchased.                                                                                                                                                                               Forecast consumer price indices during the budget period for European countries from which raw materials are purchased.
                                                                                                                                                     Value assigned to key assumption is consistent with external sources of information.                                                                                                                 Value assigned to key assumption is consistent with external sources of information.                                                                                                                                                                                                                        Value assigned to key assumption is consistent