Impairment of assets in accordance with IAS 36

The coronavirus pandemic and its repercussions caused a fall in demand for air travel and the related commercial activities, which also impacted on the Zurich Airport Group. As these circumstances continue to indicate that the carrying amount of assets could be impaired, the company performs an impairment test for its cash-generating units (CGUs) 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 2032 and in the case of investments in airport operator projects from the budget over the remaining terms (4 to 27 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 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 2022 based on a value in use calculation using cash flow forecasts derived from the long-term budget approved for the period to 2032. 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 2022 based on value in use calculations using cash flow forecasts from the financial budgets for the remaining terms of the contractually agreed concessions (4 to 27 years). The country-specific WACC applied to the cash flow forecasts ranged from 9.0% to 10.5% (previous year: 9.0% to 10.3%).

Result

As at 31 December 2022, an impairment loss of CHF 4.3 million was required to be recognised for the airport operator project in Iquique (Chile) as a result of the impairment test on the CGUs and non-financial assets (see note 11, Intangible assets). This impairment loss was recognised through profit or loss in the reporting period. No impairment arose on the other assets.