Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Impairment of intangible assets (refer to note C2) As required by Australian Accounting Standards, the We considered the methodology applied by the Group in Group assesses annually whether intangible assets that performing the impairment assessment at 27 January 2018 have an indefinite useful life should continue to be and 28 July 2018, and the judgements applied by the Group recognised or if any impairment is required. Where the in determining the CGUs of the business. We considered carrying value of an intangible asset is higher than its whether the division of the Group into CGUs for the recoverable amount, Australian Accounting Standards impairment testing of intangible assets was consistent with require the carrying value of the intangible asset to be our knowledge of the Group’s operations and internal written down (impaired). reporting. The Group considers the Myer and sass & bide businesses We developed an understanding of the key relevant internal to be separate cash generating units (CGUs) for the controls over the impairment assessment process. purposes of impairment testing of other intangible assets. To assess the Group’s value-in-use impairment models and At 27 January 2018, indicators of impairment identified calculations we performed the following procedures, by the Group included the market capitalisation of the amongst others: Group (the value of the Group derived by multiplying the Performed testing over the mathematical accuracy of the number of shares currently issued by the share price at period-end) being lower than the net assets of the Group, value-in-use impairment models. lower than expected earnings and cash flows, and the Compared the discount rate and long term growth rate competitive retail environment in which the Group applied to the impairment assessments for each CGU to operates. As a result, the Group assessed the recoverable our benchmark data. We found the rates utilised by the amount of the assets using a value-in-use discounted cash Group were consistent with our benchmark data. flow model that identified the carrying value exceeded the Compared the Group’s forecast annual growth rates and recoverable amount resulting in an impairment charge of $515.3 million. The impairment was allocated to Myer cash flow forecasts to Board approved budgets and goodwill ($465.0 million) and the Myer brand name forecasts, externally available economic data and ($50.3 million). historical actual results. No indicators of impairment were identified for the sass Considered the forecast financial data such as sales, cost & bide CGU at 27 January 2018. of sales, salaries and occupancy costs included in the value-in-use impairment models, noting the consistency As described in note C2 to the financial statements, after with our knowledge and understanding of the business. the impairment recorded at 27 January 2018, the Group Performed sensitivity analysis over the key assumptions held $371.6 million of brand names and trademarks at 28 July 2018. The brand names and trademarks arose on the including average EBITDA margin, discount rate and acquisitions of the Myer, sass & bide and Marcs and long term growth rate to consider the extent of change David Lawrence businesses. in those assumptions that either individually or in combination would be required for the intangible assets The Group performed a further impairment assessment to be impaired. for each CGU at 28 July 2018. This involved determining Evaluated the extent of the Myer Group impairment the recoverable amount of the intangible assets based on a value-in-use calculation for each CGU. No further charge recognised with reference to key assumptions Myer Annual Report 2018 89