Atul Ltd 2019-20

185 Consolidated | Notes to the Financial Statements Significant estimate - Impairment of goodwill For the purpose of impairment testing, goodwill is allocated to a cash generating unit (CGU), representing the lowest level within the Group at which goodwill is monitored for internal management purposes andwhich is not higher than the operating segment of the Group. The impairment loss of the CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the CGU pro-rata on the basis of the carrying amount of such asset in the CGU. An impairment loss on goodwill is recognised in the Consolidated Statement of Profit and Loss. It is not reversed in the subsequent period. The goodwill of ` 20.58 cr pertains to the control acquisition of Amal Ltd. The recoverable amount of the cash generating unit has been determined based on the higher of fair value less costs of disposal and its value in use. The fair value less costs of disposal has been determined based on closing quoted share price of Amal Ltd on an active market as on March 31, 2020. The goodwill of ` 8.56 cr pertains to the Ambernath manufacturing facility, Active Pharma Ingredients business of Polydrug Laboratories Pvt Ltd, which was acquired by a subsidiary company during the previous year. The recoverable amount of this Ambernath manufacturing facility is determined based on value in use, which is derived by using five years cash flow projections with following key assumptions: Particulars Assumptions Annual growth rate Based on the estimated market share Terminal growth rate 1% Weighted average cost of capital % (WACC) before tax 18.1% Expected gross margins Based on prior experience Cash flow projections are based on the expected market share, gross margins and prior experience. The Management believes that any reasonably possible change in the key assumptions may not cause the carrying amount to exceed the recoverable amount of the cash generating units. Accordingly, there was no impairment recorded during the year. Note 5 Biological assets a) Biological assets of the Group consist: i) Immature tissue culture raised date palms that are classified as non-current biological assets. The Group has a production cycle of about four-five years. ii) Mature tissue culture raised date palms that are classified as current biological assets. b) Reconciliation of changes to the carrying value of biological assets between the beginning and the end of the current year are as follows: ( ` cr) Particulars Tissue culture raised date palms March 31, 2020 March 31, 2019 Mature Immature Mature Immature Opening balance 9.03 13.15 11.20 11.50 Increase due to production 0.19 12.48 0.17 11.70 Change due to biological transformation 10.68 (10.31) 10.05 (10.05) Decrease due to sale (8.56) - (13.42) - Decrease due to write off (0.30) (0.57) (0.13) - Change in fair value due to price changes 2.11 - 1.16 - Closing balance 13.15 14.75 9.03 13.15 Current assets 13.15 9.03 - Non-current assets* 14.75 - 13.15 Biological assets shown in Balance Sheet 13.15 14.75 9.03 13.15 *Non-current biological asset is expected to take more than 12 months from reporting date to become ready for dispatch.