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ENAV Group Consolidated Financial Statements

5. Use of management’s estimates and judgement

The preparation of consolidated financial statements requires that Directors apply
principles and methodologies, which at times, are based on difficult and subjective
evaluations and estimates based on past experience and on assumptions, which
are deemed reasonable and realistic from time to time in relation to the relative
circumstances. The application of these estimates and assumptions impacts the
reported amounts and information provided. The reported amounts in the current
balance sheet where these estimates and assumptions were used, can differ
from those in previous balance sheets due to the uncertainty that characterises
assumptions and the conditions under which the estimates are based. Estimates
and assumptions are periodically revised, and the effects of any change are reflected
in the accounts in the period in which the estimate was revised, if the revision only
influences the current period, or also in subsequent periods if the revision influences
the current and future periods.
A brief description follows below of the accounting treatments that require higher
levels of judgement in the calculation of estimates and where a change in the
conditions underlying the assumptions could have a significant impact on the
consolidated financial figures.

Impairment of assets and cash-generating units

An impairment of an asset is exists when the carrying value of an asset or a Cash
Generating Unit (CGU) exceeds its recoverable value.At each reporting date, or when
circumstances or events require more frequent testing, the Group carries out an
assessment for all non-financial assets to determine whether there is any indication
of impairment.
Goodwill and other intangible assets with an indefinite useful life are not subject to
amortisation; the recoverability of their carrying value is assessed at least annually,
and when events occur that could indicate a reduction in their value. With regard to
goodwill, the assessment is carried out at CGU level, based upon which Management
assesses the return on the investment, which includes the goodwill itself. In the
absence of active markets where fair value may be identified, the impairment test is
performed by calculating the value in use of the CGU using the discounted cash flow
model. When preparing the value in use calculations, the directors have to estimate
the expected cash flows of the CGU and identify a suitable discount rate in order to
calculate the present value of those flows. The cash flows that are discounted for the
next five years are derived from the business plans approved by management, which
are drawn up on the basis of assumptions that to a large extent are conditional.
The recoverable value of an asset or a CGU is the higher of its fair value, less costs
to sell and its value in use; the latter is intended as the present value of future
cash flows estimated for that asset. In measuring the value in use, future expected
cash flows are discounted, using a discount rate that reflects the current market
assessment of the cost of money and the specific risks applicable to the asset.

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