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Goodwill acquired through business combinations and brands with indefinite lives have been allocated to two cash-generating units for impairment testing purposes. 

The cash-generating units have been based on geography, Canada and the U.S., which is consistent with the Company’s identified operating and reportable segments. Canada and the U.S. operating units are determined to be the smallest identifiable group of assets that generate cash inflows and are largely independent of the cash inflows from other assets. 

Carrying amount of goodwill and brands allocated to each of the cash-generating units are as follows: 

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The recoverable amount of the cash-generating units has been determined based on the fair value less costs to sell (“FVLCS”). In determining the FVLCS of each of the Canadian and U.S. CGUs, we utilized a discounted cash flow methodology. The discounted cash flow technique provides the best assessment of what each CGU could be exchanged for in an arm’s-length transaction as fair value is represented by the present value of expected future cash flows of the business together with the residual value of the business at the end of the forecast period. The discounted cash flow was applied on an enterprise value basis, where the after-tax cash flows prior to interest expense are discounted using a weighted average cost of capital (“WACC”). The cash flow projections, covering a five-year period, were based on financial projections approved by senior management using assumptions that reflect the Company’s most likely planned courses of action, given Management’s judgment of the most probable set of economic conditions, adjusted to reflect the perspective of the expectations of a market participant. 

The WACC (discount rate applied) terminal capitalization rate and growth rate applied to each CGU’s cash flow projection are outlined in the following table: 

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## Summary of key assumptions used in determining the fair value less costs to sell 

The discounted cash flow calculation used for the two cash-generating units is most sensitive to the following assumptions: 

• Discount rate applied (WACC); 

• Gross margins and raw materials price costs; 

• Inflation; 

• Market share during the projection period; 

• Growth rate used to extrapolate cash flows beyond the projection period; and 

• Costs to sell. 

