In assessing goodwill and indefinite life intangible assets for impairment at December 31, 2012 and December 31, 2011, Newalta compared the aggregate recoverable amount of the assets included in the CGUs to their respective carrying amounts. The recoverable amount has been determined based on the value in use of the CGUs using the four year cash flow business plan approved by management and the Board of Directors that made use of observable markets for inputs. For periods beyond the four year business plan, cash flows were extrapolated using growth rates that do not exceed the long-term average in each CGU. The weighted average growth rate reflects a nominal inflationary rate as required by IFRS that is calculated over the remaining useful life of each CGU. There was no impairment as at December 31, 2012 and December 31, 2011.
Key assumptions included the following:
Year ended December 31, West East 2012 Periods Facilities Facilities Onsite VSC----------------------------------------------------------------------------Weighted average growth rate 2017 and beyond 2.9% 2.9% 3.6% 2.9%Pre-tax discount rate 2013 and beyond 12.7% 14.9% 17.5% 18.6%----------------------------------------------------------------------------Year ended December 31, West East 2011 Periods Facilities Facilities Onsite VSC----------------------------------------------------------------------------Weighted average growth rate 2016 and beyond 2.9% 2.9% 3.6% 2.9%Pre-tax discount rate 2012 and beyond 11.1% 11.9% 14.9% 18.5%----------------------------------------------------------------------------
In all CGUs, reasonably possible changes in key assumptions would not cause the recoverable amount of goodwill to fall below the carrying value.
NOTE 6. OTHER ASSETS
a) Other assets
BioteQ Environmental Technologies Inc. ("BioteQ")
During the first quarter of 2010, Newalta acquired 3,636,364 units, at a price of $1.10 per share from the treasury of BioteQ for cash consideration of $4 million. Each unit purchased included a common share and a warrant to acquire an additional common share of BioteQ at $1.375 during the first year, and $1.65 thereafter. The warrants expire after 5 years. The fair value of the warrants is estimated using a binomial methodology and the common shares based on a publicly available quoted price.
The common shares are classified as available-for-sale and are marked to market at each period end with changes in fair value recorded in other comprehensive income. As at December 31, 2012 an unrealized loss of $0.2 million (net of tax of nil) was recorded in accumulated other comprehensive income.
During 2012 an impairment test was performed for Newalta's investment in BioteQ. For the year ended December 31, 2012, Newalta recorded an impairment on common shares of $1.6 million due to a decline in investment value. The change in value has been reclassified from other comprehensive loss to finance charges in accordance with IAS 39 requirements.
The warrants are classified as fair value through profit and loss ("FVTPL") and are revalued at each period end with the change in fair value recognized in earnings. For the year ended December 31, 2012, the Corporation recorded an unrealized loss of $0.1 million (year ended December 31, 2011 - unrealized loss of $1.2 million) which is included in finance charges. As at December 31, 2012, the fair value was calculated using the following assumptions: an expected volatility of 55.2% (December 31, 2011 - 81.3%), a risk-free interest rate of 1.1% (December 31, 2011 - 1.2%) and no expected dividend (December 31, 2011 - no expected dividend).
