Universal Registration Document - Fiscal 2023

4. Consolidated financial statements

Recognition of impairment charges

An impairment charge recognized with respect to a CGU or group of CGUs is allocated initially to reducing the carrying amount of any goodwill allocated to that CGU, and then to reducing the carrying amount of the other assets of the CGU or group of CGUs in proportion to the carrying amount of each asset.

Reversal of impairment charges

Impairment charges recognized with respect to goodwill cannot be reversed.

Impairment charges recognized with respect to any other asset may only be reversed if there is an indication that the impairment charge is lower or no longer exists. The amount reversed is based on the new estimates of the recoverable amount.

The increased carrying amount of an asset resulting from the reversal of an impairment charge cannot exceed the carrying amount that would have been determined for that asset had no impairment charge been recognized.

Impairment charges, net of reversals, relating to property, plant and equipment and intangible assets (including goodwill) amounted to -5 million euros as of August 31, 2023 (1 million euros as of August 31, 2022) and taking into account a net amortization recognized in other operating expenses in Fiscal 2023 for 1 million euros (1 million euros in Fiscal 2022).

The following table indicates the main assumptions used for the main countries of each CGU group:

  FISCAL 2023 FISCAL 2022
  DISCOUNT RATE LONG-TERM GROWTH RATE DISCOUNT RATE LONG-TERM GROWTH RATE
North America        
Canada 9.1% 2.0% 8.4% 2.0%
United States 9.1% 2.1% 8.4% 2.0%
France 8.9% 1.6% 8.5% 1.6%
United Kingdom & Ireland        
United Kingdom 10.2% 2.0% 8.3% 2.0%
Continental Europe        
Belgium 9.1% 2.0% 8.6% 1.7%
Germany 8.9% 2.0% 8.5% 2.0%
Italy 11.8% 2.0% 10.2% 2.0%
Spain 10.8% 1.7% 9.6% 1.7%
Sweden 8.9% 2.0% 8.5% 2.0%
Asia-Pacific, Middle East & Africa        
Australia 8.9% 2.6% 8.5% 2.5%
China 9.3% 2.2% 8.7% 2.0%
India 11.8% 4.0% 10.2% 4.0%
Latin America        
Chile 9.5% 3.0% 8.7% 3.0%
Colombia 11.3% 3.0% 9.9% 3.0%
Mexico 11.3% 3.0% 9.6% 3.0%
Brazil 13.2% 3.0% 11.0% 3.0%

 

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SENSITIVITY ANALYSIS

Sodexo has analyzed the sensitivity of goodwill impairment test results to different financial and operational scenarios:

  • the results of the goodwill sensitivity analysis indicated no probable scenario where a change in the discount rate or long-term growth rate would result in the recoverable amount of segment assets becoming less than its carrying amount. In fact, the results of the impairment testing demonstrate that even an increase of 150 basis points in the discount rate or a reduction of 150 basis points in the long-term growth rate would not result in an impairment of the assets tested for any segment;
  • the Group also performed a sensitivity analysis on the operational assumptions used in order to determine whether a 10% decrease in forecast net cash flows over the time period of the business plans prepared by management and in terminal value would result in the recognition of an impairment in the Group’s consolidated financial statements as of August 31, 2023. The results of this analysis did not indicate any risk of impairment for any of the segments.