Impairment of assets in accordance with IAS 36
The coronavirus crisis brought air traffic almost completely to a standstill in some cases. This and the related reduction in commercial activities resulted in lower demand at airports around the globe and also affected the Zurich Airport Group. As these circumstances indicate that the carrying amount of assets could be impaired, the company performed an impairment test for its cash-generating units (CGU) and non-financial assets in accordance with IAS 36.
An impairment exists if the carrying amount of a CGU or a non-financial asset exceeds its recoverable amount (higher of fair value less costs of disposal and value in use).
Value in use is calculated using the discounted cash flow (DCF) method. In doing so, cash flows are derived for the CGU Zurich Airport site from the long-term budget approved for the period to 2031 and in the case of investments in airport operator projects from the budget over the remaining terms (5 to 28 years) of the concession agreements. These budgets and forecasts are based on past experience and expected market trends and take into account the effects of the COVID-19 pandemic. The key assumptions used to determine recoverable amount for the different CGUs and non-financial assets are disclosed and explained in further detail below:
Zurich Airport site
Recoverable amount was determined for the CGU Zurich Airport site as at 31 December 2021 based on a value in use calculation using cash flow forecasts derived from the long-term budget approved for the period to 2031. The post-tax discount rate (WACC) applied to the cash flow forecasts was 5.5% (previous year: 5.5%) and the cash flows were extrapolated beyond the forecast period using a real growth rate of 0.5% (previous year: 0.5%).
Investments in airport operator projects
Recoverable amount was determined for investments in airport operator projects as at 31 December 2021 based on value in use calculations using cash flow forecasts from the financial budgets for the remaining terms of the contractually agreed concessions (5 to 28 years). The country-specific WACC applied to the cash flow forecasts ranged from 9.0% to 10.3% (previous year: 7.9% to 10.3%).
As at 31 December 2021, no impairment losses were required to be recognised for the assets concerned as a result of the impairment test on the CGUs and non-financial assets.