annual-report-FY2020

319 MAHINDRA & MAHINDRA LTD. INTEGRATED ANNUAL REPORT 2019-20 Segment wise allocation of goodwill Goodwill is monitored by the management at the level of operating segments as described in Note 38. The carrying amount of goodwill has been allocated to segments as below. Rupees crores Particulars 2020 2019 Automotive............................................................................................................................................................... 32.88 32.78 Farm Equipment....................................................................................................................................................... 112.28 129.39 Financial Services...................................................................................................................................................... 1.34 1.34 Real Estate................................................................................................................................................................ 103.59 103.59 Hospitality................................................................................................................................................................. 115.38 111.19 Others........................................................................................................................................................................ 1,146.84 1,695.31 Total ........................................................................................................................................................................... 1,512.31 2,073.60 The Group tests goodwill on an annual basis and whenever there is an indication that the CGU to which the goodwill has been allocated may be impaired. The goodwill impairment test is performed at the level of the CGU or group of CGUs that benefit from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes. The recoverable amount is determined based on higher of value-in-use and fair value less cost of disposal. Where there is no basis for making a reliable estimate of the price at which an orderly transaction to sell the asset would take place between market participants at the measurement date under current market conditions, the recoverable amount is determined by value-in-use. In determining the value-in-use, cash flow projections approved by appropriate level of management are considered. In circumstances where a reliable value-in-use estimate is difficult to make whereas market value of the asset or the CGU or group of CGUs is readily available, the latter is used for the determination of recoverable amount with appropriate adjustments, where applicable. Apart from the observable market information, significant management estimates and judgments are used to determine the recoverable amounts based on value-in-use. Key assumptions on which management has based its determination of recoverable amount includes estimated growth rates (including terminal growth rates), margins and discount rates. Cash flow projections are usually considered for next 3-5 years and represent management’s best estimate about future developments with due consideration for past performance. Cash flows beyond the five-year period are extrapolated using terminal growth rates. Since mid-March 2020, the outbreak of Covid - 19 global pandemic started impacting the economic environment in which these cash generating unit operates. In certain cases, the performance of the cash generating units were below their expected levels. Accordingly, the Group assessed such cash generating units for the recoverable amounts based on fair value less cost of disposal and value-in-use estimates and recognised impairment of goodwill amounting to Rs. 663.42 crores for the year ended 31 st March, 2020. The goodwill impairment has been recognised as ‘Exceptional item’ in the Statement of Profit and Loss and is attributable to the following operating segments: (a) ‘Farm Equipment’ segment - Rs. 9.42 crores . This relates to goodwill allocated to an international subsidiary. (b) ‘Others’ segment - Rs. 654.00 crores . This relates to goodwill allocated to a domestic subsidiary and is based on its market price of the shares with appropriate adjustments for control premium which considers synergies available for a market participant. 5. Goodwill (contd.)