2014 Registration Document and Annual Financial Report - page 186

Financial Statemements
Consolidated Financial Statements and Notes
5
Cash-generating unit
Impairment tests are performed individually for each asset except
when an asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. In this
case, it is included in a cash-generating unit (CGU) and impairment
tests are performed at the level of the cash-generating unit.
In the opening balance sheet at January 1, 2014, goodwill was
reallocated between the HotelServices and HotelInvest strategic
businesses created to support the Group’s change of strategy and
related reorganization.
In previous years, goodwill was allocated by region, country or hotel.
The reallocation was based on discounted cash flow projections
between the two strategic businesses for each region or country.
In the HotelInvest strategic business, the CGU’s carrying amount
includes property and equipment and intangible assets for each
hotel, including allocated goodwill. Impairment tests are performed
at the level of each individual hotel.
In the HotelServices strategic business, the CGU’s carrying amount
includes the property and equipment and intangible assets used
in each region or country
Other assets, notably intangibles, are tested individually when they
generate separately identifiable cash inflows.
Methods used to determine recoverable value
Impairment tests consist of comparing the carrying amount of the
asset or the CGU with its recoverable value.The recoverable value
of an asset or a CGU is the higher of its fair value less costs to sell
and its value in use.
For property, plant and equipment and goodwill, the recoverable
value of all the assets or the CGUs is determined by two methods,
the EBITDA multiples method (fair value approach) and the after-tax
discounted cash flows method (value in use approach).
For intangible assets except goodwill, the recoverable value of an
intangible asset is determined according to the discounted cash
flow method only, due to the absence of an active market and
comparable transactions.
Description of the methods
1. Valuation by the EBITDA multiples method
HotelInvest recoverable amounts are estimated using fair values
calculated based on a standard EBITDAmultiple. For hotel properties,
this method is considered as the most appropriate approach to
estimating fair value less costs to sell, as it most closely reflects
the amount that would be expected to be recovered through the
sale of the asset.
The multiples method consists of calculating each hotel’s average
EBITDA for the last two years and applying a multiple based on
the hotel’s location and category. The multiples applied by the
Group correspond to the average prices observed on the market
for transactions and are as follows:
Segment
Coefficients
Luxury and Upscale Hotels
8 < x < 10.5
Midscale Hotels
7.5 < x < 9
Economy Hotels
6.5 < x < 8.5
This is a level 2 valuation technique under IFRS 13.
If the recoverable amount is less than the carrying amount, the
asset’s recoverable amount will be recalculated according to the
discounted cash flows method.
2. Valuation by the discounted cash flows method
HotelServices recoverable amounts are estimated using the value
in use determined by the discounted cash flows method.
The projection period is limited to five years. Cash flows are discounted
at a rate corresponding to the year-end weighted average cost of
capital. Separation calculations are performed based on each country/
region’s specific characteristics. The projected long-term rate of
revenue growth reflects each country/region’s economic outlook.
This is a level 3 valuation technique under IFRS 13.
Impairment loss measurement
If the recoverable amount is less than the carrying amount, an
impairment loss is recognized in an amount corresponding to
the lower of the losses calculated by the EBITDA multiples and
discounted cash flows methods. Impairment losses are recognized in
the income statement under “Impairment losses” (see Note 2.S.6).
Reversal of an impairment loss
In accordance with IAS 36 “Impairment of Assets”, impairment
losses on goodwill as well as on intangible assets with a finite
useful life, such as patents and software, are irreversible. Losses
on property, plant and equipment and on intangible assets with an
indefinite useful life, such as brands, are reversible in the case of a
change in estimates used to determine their recoverable amount.
E.7. Assets or disposal groups held for sale
Assets are classified as “held for sale” when they are available for
immediate sale in their present condition, their sale is highly probable,
management is committed to a plan to sell the asset and an active
program to locate a buyer and complete the plan has been initiated.
Registration Document 2014
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