Investor Presentaiton

132 Notes to the Consolidated Financial Statements 3.9 3.10 Assets and liabilities 3 133 Annual Report 2023 Woolworths Group Investments accounted for using the equity method (continued) Significant Accounting Policies Investments accounted for using the equity method Investments accounted for using the equity method comprise investments in associates and joint ventures. An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Investments accounted for using the equity method are initially recognised at cost, and are subsequently accounted for using the equity method by including the Group's share of profit or loss and other comprehensive income or loss of the associate or joint venture in the carrying amount of the investment until the date on which significant influence or joint control ceases. Dividends received reduce the carrying amount of the investment in associate or joint venture. Impairment of non-financial assets An impairment loss is incurred when the carrying amount of an asset or a cash-generating unit exceeds its estimated recoverable amount. 3.10 Impairment of non-financial assets (continued) Sensitivity analysis Sensitivity analysis is performed to determine the point at which the recoverable amount is equal to the carrying amount for each CGU. In addition, for all CGUs, other than New Zealand Food and MyDeal, the Group determined that based on current economic conditions and CGU performance, any reasonably possible changes to the key assumptions used in the determination of the recoverable amounts would not result in an impairment loss. The Group assessed the recoverable amounts for both the New Zealand Food and MyDeal CGUs using VIU, which is primarily based on the most recent Board approved three-year business plan. Cash flows beyond the three years were extrapolated using a long-term growth rate. NEW ZEALAND FOOD Notwithstanding that the recoverable amount exceeded its carrying amount as at 25 June 2023, any reasonably possible changes, such as adverse trading conditions, increased competition, or challenges impacting the Group's ability to execute the three-year business plan, may result in a future impairment loss. Assuming all other variables are held constant, either a 0.6% increase in discount rate or a 4.8% reduction in EBITDA within the terminal year, would result in the recoverable amount approximating its carrying amount. MYDEAL The acquisition of MyDeal continues to enhance the Group's Marketplace capabilities in furniture, homewares and everyday needs, and complements BIG W's existing general merchandise offer and Australian Food's 'Everyday Market' marketplace proposition. As MyDeal was recently acquired during the period, the estimated recoverable amount approximates its carrying amount as at 25 June 2023. Any adverse changes to the discount rate applied or challenges in the achievement of the MyDeal strategic plan may lead to an impairment loss. Therefore, management has performed a sensitivity analysis and assuming all other variables are held constant, either a 1% increase in the discount rate or a 10% reduction in EBITDA within the terminal year, would result in an impairment loss of approximately $16 million. 1 highlights Performance 2 Business review 3 Report Directors' At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. If any indication exists, the recoverable amount of the asset is estimated as the higher of fair value less costs of disposal (FVLCOD) or value in use (VIU), and is determined for an individual asset where possible, otherwise, for the cash-generating unit (CGU) to which it belongs. An impairment loss is incurred when the carrying amount of an asset or a CGU exceeds its recoverable amount. For the purposes of impairment testing, indefinite life intangible assets are allocated to each of the Group's CGUs that are expected to benefit from the synergies relating to the business combination, grouped at the lowest levels for which the assets are monitored for internal management purposes, as follows: Australian Food New Zealand Food BIG W PFD Quantium MyDeal Carrying amount at end of period 2023 2022 GOODWILL1 $M BRAND NAMES² $M BRAND GOODWILL NAMES $M $M 866 3 627 3 2,077 240 2,067 240 50 - 360 43 361 43 143 19 143 19 8 3,504 305 3,198 305 1 During the period, the Group finalised its acquisition accounting and its allocation of the $182 million of goodwill relating to the acquisition of MyDeal. As a result, $124 million and $50 million was allocated to the Australian Food and BIG W reportable segments respectively, based on where the expected benefits from the MyDeal acquisition are expected to be earned. Also included in Australian Food is $103 million of goodwill relating to the acquisition of Shopper during the period. 2 As at 25 June 2023, brand names includes $305 million of brand names with indefinite useful lives and $14 million with finite useful lives. The recoverable amounts for all CGUS, which were determined based on VIU, exceeded their respective carrying amounts and as a result, no impairment loss was recognised during the period. Significant Accounting Policies Calculation of recoverable amount The recoverable amount of an asset is the higher of its fair value less costs of disposal or value in use. For an asset that does not generate largely independent cash inflows, the recoverable amount is assessed at the CGU level, which is the smallest group of assets generating cash inflows independent of other CGUs that benefit from the use of the asset. An impairment loss is recognised in the Consolidated Statement of Profit or Loss when the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses that are recognised in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of other assets in the CGU on a pro-rata basis. Reversal of impairment An impairment loss is reversed, other than for goodwill, if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 4 Report Financial LO Other information