Republic Bank Limited
102
For the year ended September 30, 2015. Expressed in thousands of Trinidad and Tobago dollars ($’000) except where otherwise stated
Notes to theConsolidatedFinancial Statements
4
Financial
8 GOODWILL
(continued)
Impairment testing of goodwill
In accordance with IFRS 3, all assets that gave rise to goodwill were reviewed for impairment using the ‘value in use’ method. In
each case, the cash flow projections are based on financial budgets approved by senior management and the values assigned to key
assumptions reflect past performance.
The following table highlights the goodwill and key assumptions used in value in use calculations for each cash-generating unit:
Republic Bank Republic Bank Republic Bank
(Barbados)
(Cayman)
(Guyana)
Limited
Limited
Limited
TT$ million TT$ million TT$ million
Carrying amount of goodwill
145
32
92
Basis for recoverable amount
Value in use
Value in use
Value in use
Discount rate
12%
10%
8%
Cash flow projection term
3 yrs
3 yrs
3 yrs
Terminal Growth rate
1.75%
2.5%
3%
In conducting the goodwill impairment review, consideration was made for the decline in business in the Cayman Islands and the
impact on the goodwill that was acquired by Republic Bank (Cayman) Limited. Key assumptions were as follows:
Assumption
Value
Cost of Equity
10.32%
Terminal Growth Rate
2.50%
Growth in Free Cash Flows (2015 to 2023)
3% - 5%
As a result of these changes in key assumptions, the value in use of the cash generating unit was determined to be lower than the
carrying value of the company. A goodwill impairment expense of $31 million was therefore recorded for the Group’s investment in
Republic Bank (Cayman) Limited:
Carrying Value of RBL Cayman (TT$M)
472
Present value of future cashflows (TT$M)
441
Impairment
31
