Lendlease Annual Report 2022

Financial Statements 161 32.b. Goodwill Allocation Goodwill relating to the Construction business is allocated to CGUs identified as set out below. June 2022 June 2021 $m $m Construction Australia Core 573 573 Australia Non core - 151 Europe 238 251 Americas 204 187 Asia 8 8 Total construction goodwill 1,023 1,170 32.c. Impairment Tests and Key Assumptions Used – Construction The recoverable amount of the Construction CGUs is determined based on value in use (VIU) calculations. For the Construction CGUs, the assumptions used for determining the recoverable amount of each CGU are based on past experience and expectations for the future, utilising both internal and external sources of data and relevant industry trends. No impairment arose as a result of the review of goodwill for the Construction CGUs for the financial year ended 30 June 2022. Based on information available and market conditions at 30 June 2022, a reasonably foreseeable change in the assumptions made in this assessment would not result in impairment of Construction goodwill. The foreseeable change in the assumptions took the COVID pandemic and other economic conditions into consideration. The following describes the key assumptions on which management has based its cash flow projections when determining VIU relating to the Construction CGUs: Cash Flows The VIU calculations use pre tax cash flow projections based on actual operating results, and financial forecasts covering a five year period which have been approved by management. These forecasts are based on management estimates to determine income, expenses, capital expenditure and cash flows for each CGU. Growth Rate The terminal value growth rate used to extrapolate the cash flows beyond the five year period is 3.0 per cent (June 2021: 3.0 per cent). The growth rate reflects the forecast long term average growth rate for each CGU and the countries in which they operate. Discount Rate The discount rates applied to the cash flow projections vary between 9.2 per cent and 11.0 per cent (June 2021: between 8.9 per cent and 12.4 per cent). The Group’s weighted average cost of capital is used as a starting point for determining the discount rate, with appropriate adjustments for the risk profile relating to the relevant CGUs and the countries in which they operate. The discount rates used are pre tax. 33. Discontinued Operations Accounting Policies Discontinued operations relate to a component of the Group including its corresponding assets and liabilities that have been classified as held for sale and represent a separate major line of business or geographical area of operation. The group of assets and their corresponding liabilities (together referred to as a Disposal Group), may only be classified as held for sale once the following criteria are met: • The carrying amount will be recovered principally through a sale transaction rather than through continuing use • The sale must be highly probable. A Disposal Group is measured at the lower of its carrying amount and fair value less costs to sell. Where fair value is lower than the carrying amount, the difference is recognised as an impairment loss within the Income Statement. The results of discontinued operations are presented separately in the Income Statement and Statement of Comprehensive Income. Comparatives have also been re-presented for the Income Statement, Statement of Comprehensive Income and corresponding Notes to separately disclose the results of discontinued operations from continuing operations.