REA Group Ltd Annual Report 2021

Annual Report 2021 | REA Group Ltd 6. Intangible assets and impairment (continued) (a) Impairment tests for goodwill and indefinite life intangibles The Group monitors goodwill at segment level and the carrying amount of goodwill acquired through business combinations has been assessed for impairment testing as follows: Discount rates Terminal growth rates Goodwill $’000 2021 2020 2021 2020 2021 2020 Asia 10.7% 11.1% - 17.6% 1.9% 2.3% - 4.3% 120,214 222,881 Australia – Financial Services 14.4% 13.9% 2.4% 3.0% 132,673 29,124 Australia – Property & Online Advertising 13.1% 12.6% 2.4% 3.0% 162,742 162,742 India N/A N/A N/A – 163,343 – Total 578,972 414,747 The recoverable amounts for Australia – Property and Online Advertising, Australia Financial Services and Asia have been determined based on a value-in-use calculation using cash flow projections based on financial forecasts approved by the Board. These cash flow projections cover a five-year period. Cash flows beyond the final year of cash flows are extrapolated using a terminal growth rate. The recoverable amount for India has been determined based on a fair value less costs of disposal calculation, based on a market value methodology utilising a revenue multiple and Board approved financial forecasts. The inputs would be categorised as Level 2 within the fair value hierarchy. (b) Result of impairment testing The Group has not recorded an impairment charge as at 30 June 2021 (2020: $106.7 million). The impairment charges in prior year are recorded in the Consolidated Income Statement and recognised in the Corporate segment for segment reporting purposes. (c) Key assumptions used for valuation calculations The calculation of value-in-use for each segment is most sensitive to the following assumptions: Discount rates (pre-tax) represent the current market specific to each segment, taking into consideration the time value of money and individual risks that have not been incorporated in the cash flow estimates. The discount rate calculation is based on specific circumstances of the Group and the segment and is derived from its weighted average cost of capital (“WACC”). Segment-specific risk is incorporated by applying additional regional risk factors. The WACC is evaluated annually based on publicly available market data. Growth rate estimates are based on industry research and publicly available market data. The rates used to extrapolate the cash flows beyond the budget period includes an adjustment to current market rates where required to approximate a reasonable long- term average growth rate. Over the extended forecast period, growth rate assumptions are above the terminal growth rate as the Group operates in a high growth industry. Real estate industry and lending industry conditions impact assumptions including volume of real estate and borrowing transactions, number of real estate agencies, broker productivity and new development project spend. Assumptions are based on research and publicly available market data. (d) Sensitivity to changes in assumptions There is no reasonable possible change in a key assumption used to determine the recoverable amount that would result in impairment. Year in review Directors’ Report Financial Statements Remuneration Report Sustainability Our Leaders 79