Urbanise.com Annual Report 2019

16. Carrying value of non-financial assets For impairment testing, goodwill acquired through business combinations and intangible assets are allocated to the Strata, Facilities and Utilities CGUs. Carrying amount of goodwill and intangible assets allocated to each of the CGUs: Strata Facilities Utilities Total 2019 2018 2019 2018 2019 2018 2019 2018 Goodwill 4,786,480 4,786,480 – – – – 4,786,480 4,786,480 Intellectual property 2,387,332 3,180,932 – – – – 2,387,332 3,180,932 Development cost 2,131,118 1,730,123 – – – – 2,131,118 1,730,123 Trademarks 790,000 790,000 – – – – 790,000 790,000 Customer relationships 103,319 138,743 – – – – 103,319 138,743 Total 10,198,249 10,626,278 – – – – 10,198,249 10,626,278 The Group performed its annual impairment test in June 2019 and 2018 to support the carrying value of goodwill, intangible assets and property, plant and equipment. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 30 June 2019, the market capitalisation of the Group was above the book value of its equity, the Group continue to be loss making and have cash outflows, indicating a potential impairment of goodwill and impairment of assets. Goodwill is allocated to CGUs according to applicable business operations. The recoverable amount of a CGU is based on value in use calculations. These calculations are based on projected cash flows approved by the board for the first year and management projections covering a further four years. Management’s determination of cash flow projections is based on past performance and its expectation for the future performance. Key assumptions used in value in use calculations and to changes in assumptions The calculation of value in use is most sensitive to the following assumptions: –– Future cash flows –– Discount rates –– Revenue growth –– Expenses Future cash flows - VIU calculations, inclusive of working capital movements and forecast capital expenditure based on financial projections approved by the Board for 1 year and a further 4 years forecasted by management, extended to utilise tax losses generated in the forecast period, then reverting to a terminal value. Discount rates - Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments. Adjustments to the discount rate are made to factor in the specific amount and timing of the future tax flows in order to reflect a pre-tax discount rate. Revenue growth - Forecast revenue growth based on Board approved budget for year one and management projections for a further 4 years, and an assessed conversion of known revenue opportunities for the business. Years 6 onwards assume modest growth (in line with the long-term growth rate used in the terminal value) is achieved within existing business markets and geographies. Expenses - Forecast growth based on Board approved budget for year one and management projections for a further 4 years, and an assessed cost growth for the business. Years 6 onwards assume modest growth (in line with the long- term growth rate used in the terminal value) within existing business markets and geographies. The carrying value of Goodwill and other intangible assets relate to the Strata CGU only. The allocation of goodwill is made to those cash generating units that are expected to benefit from the business combination in which the goodwill arose. Notes to the Consolidated Financial Statements for the year ended 30 June 2019 (continued) 67