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## NOTEs TO THE FINANCIAL sTATEMENTs 

FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013 

## 14. INTANGIBLE AssETs (CONTINUED) 

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The carrying value of intangibles should be considered with reference to accounting policies described in Note 1(D) and (E). The carrying value of intangible assets is an area of significant accounting estimate and judgement as described in Note 1(X) of the Group’s accounting policies. The assumptions used in this estimation of recoverable amount and the sensitivities around the key assumptions are outlined in (i)-(ii) below. 

## (i) iMPAiRMenT oF CASH GeneRATinG uniTS (CGu) inCludinG GoodWill And indeFiniTe liFe ASSeTS 

A CGU is the grouping of assets at the lowest level for which there are separately identifiable cash flows. CGU Groups are an aggregation of CGUs which have similar characteristics. The recoverable amount of each CGU which includes goodwill or indefinite life intangibles has been tested. 

The value in use calculations prepared by the company use discounted cash flow methodology. Key components of the calculation and the basis for each component are set out below: 

## year 1 cash flows 

This is based upon the annual budget for 2014 which includes the impact of the Fairfax of the Future program. 

## year 2 and 3 cash flows 

These cash flows are forecast using year 1 as a base and a growth or decline factor applied to revenue and expenses in years 2 and 3. The rate of change takes account of management’s best estimate of the likely results in these periods, industry forecasts, historical actual rates and the impact of the Fairfax of the Future restructure. Revenue declines of between 3% and 8.5% have been used in publishing where management expect the cyclical downturn and structural change to continue. In the digital businesses, revenue growth of 5% to 25% depending on the maturity of the market, has been adopted including the introduction of digital subscription models. Expenses have been adjusted to account for the revenue growth or decline, Fairfax of the Future restructuring and other committed management initiatives. 

## Terminal growth factor 

A terminal growth factor that estimates the long term average growth for that CGU is applied to the year 3 cash flows into perpetuity. A rate of 3.5% (2012: 3.5%) has been used for digital cash flows. Metropolitan Media, Australian Regional Media, New Zealand Media and Printing Operations were calculated at nil growth (2012: Regional/New Zealand 2.5%; Metropolitan/ Printing nil) and Broadcasting calculated at 2.5% (2012: 2.5%). 

