Page 158 - MEDIASET ESPAÑA / 2013. Financial Statements, Management and Corporate Governance Report

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MEDIASET ESPAÑA COMUNICACIÓN, S.A. AND SUBSIDIARIES
NOTES TOTHE CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2013
(Expressed in thousand of euros)
9. GOODWILL AND BUSINESS COMBINATIONS
Goodwill amounting to 287,357 thousand euros arose from the purchase of the Cuatro Group, which became effective
on December 31, 2010, as well as an asset with an indefinite useful life amounting to 85,000 euros.
Impairment testing of goodwill
The impairment test was carried out by comparing the recoverable value of the cash-generating unit to which the
goodwill and intangibles with indefinite lives are assigned with the carrying value of the cash-generating unit.
The cash-generating unit is the free-to-air TV business.
To test its goodwill for impairment, the Company took the free-to-air TV business’ strategic plan and discounted the
estimated future cash flows.The assumptions used in the cash flow estimates include the best estimate of future trends
of advertising markets, audiences and costs.
The Group’s estimates on the future trend of the advertising market are based on market forecasts and historic
performance, as well as its correlation with economic conditions, using reasonable projections in accordance with
external information sources.
Projected income estimated for upcoming years is calculated based on the abovementioned advertising market
trend, while taking into account reasonable hypotheses regarding audience numbers. Using this hypothesis, the Group
considered the possible impact of the contingency described in Note 16.
Programming cost assumptions took into account forecasted internal and external audiovisual production costs, as well
as the amount of investment necessary to maintain audience levels.
The estimates cover a period of five years and for cash flows not considered, income to perpetuity is estimated using
a growth rate of around 2% (2012: 2%). Estimated cash flows are discounted at a rate that represents the current
market assessment of the risk-free rate and the specific situation of the industry. The discount rate used is 9.57%
(2012: 9.75%).
Based on the assumptions used and the estimated cash flows calculated, no impairment was identified for either
goodwill or intangibles with indefinite lives.
Sensitivity to changes in assumptions
Management believes that, based on information currently available, no reasonably possible change in any of the above
key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.