Annual Report 2017/18

Note 16 – Intangible assets

GoodwillAcquired intellectual property rights to games for platformsCapitalised expenditure for development works in respect of games for platformsTotal
Opening balance, 1 September 20168,67411,35821,87041,902
Exchange rate differences -69800-698
Closing balance, 31 August 20177,9764,49526,48138,952
Opening balance, 1 september 20177,9764,49526,48138,952
Exchange rate differences1,202001,202
Closing balance, 31 Augusti 201877,41534,77928,453140,287

Impairment testing of goodwill

Below is a summary of goodwill

 Opening carrying amountAdditionsSaleImpairmentTranslation differenceClosing carrying amount

Impairment testing of goodwill

Based on the fact that goodwill relates in its entirety to the acquisitions of MAG Games Ltd (formerly Delinquent Interactive Ltd) and Feo Media AB, which are both fully integrated into MAG Interactive AB,  the MAG Group is considered to constitute the smallest cash-generating unit for which the valuation of goodwill can be performed.

The value of goodwill is tested annually against the estimated recoverable value, which is either the value in use or the fair value minus sales-related costs. Goodwill has been tested against the value in use as of 31/08/2018, and as of 31/08/2017.

The value in use is based on estimated assessments of future cash flows before tax, which are based on reasonable and verifiable assumptions that represent the best estimates of the economic conditions that are expected to prevail. The assessment of future cash flows is based on budgets and forecasts for the period of the next three years. Cash flows after the forecast period are estimated with an assumption of a long-term rate of growth after the forecast period of 2 per cent per annum for 31 August 2018 (31 August 2017: 2 per cent).

Important assumptions in this estimate include the discount rate, sales growth and EBITDA margins.

The discount rate before tax is 13 per cent for 31 August 2018 (31 August 2017: 13 per cent).

No reasonable possible change in important assumptions would cause the carrying amount to exceed the recoverable value.