IBERSOL | Annual Report 2020

ANNUAL REPORT 2020 recoverable amount. The recoverable amount is the highest of an asset’s fair value less the costs inherent in its sale and its value in use. For carrying out impairment tests, assets are grouped at the lowest level at which cash flows (cash flow generat- ing units) can be separately identified. A cash-generating unit (CGU) is the smallest group of assets that includes the asset and that generates cash inflows from continued use that are largely independent of the cash inflows from other assets or groups of assets. In the case of property, plant and equipment, intangible assets and rights of use, each restaurant was generally identified as a cash-generating unit. There are, however, other property, plant and equipment and intangible assets that are not associated with CGU - restaurants. Restaurants with signs of impairment are tested, considering operating results less amortization, depreciation and impairment losses on property, plant and equipment, intangible assets and goodwill, as well as other cash-generating units whenever cir- cumstances dictate or unusual facts occur. . Goodwill is distributed among the units (or group of units) generating the flows (CGU) of the Group, identified in each business segment. The recognized amount of Goodwill is compared with the recoverable amount, which is the higher of the value in use and the fair value less costs to sell. The value in use of a CGU is determined based on cash flow projections based on financial budgets approved by managers, covering at least a period of 5 years. The Board of Directors determines the budgeted gross margin based on past per- formance and on its market growth expectations. The average weighted growth rate used is consistent with provisions included in the sector’s reports. The discount rates used after taxes and reflect specific risks related with the assets from a CGU. 2.10 FINANCIAL ASSETS 2.10.1 Classification The Group classifies its other financial assets at the time of initial recognition in accordance with the requirements introduced by IFRS 9, in the following asset cat- egories. a) Assets measured at amortized cost A financial asset is measured at amortized cost if the objective inherent to the busi- ness model is achieved by collecting the respective contractual cash flows and if the underlying contractual cash flows represent only the payment of principal and interest. Assets classified in this category are initially recognized at fair value and subsequently measured at amortized cost. Loans and accounts receivable from customers are generally held for the purpose of collecting contractual cash flows and it is expected that the underlying contractual cash flows represent only the payment of principal and interest and therefore com- ply with the requirements for measurement at amortized cost provided for in IFRS 9. 323