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C5. Impairment of non-financial assets

Recognition and measurement

Tangible and intangible non-financial assets are measured using the cost basis and are considered to be impaired where their carrying value exceeds the recoverable amount.

The recoverable amount of an asset is the higher of its fair value less costs of disposal or its value in use. Any reduction in the carrying value of an asset that results in the carrying value being less than its recoverable amount is recognised as an expense in profit or loss as an impairment loss.

For assets that do not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit (CGU) to which that asset belongs. The Group’s CGU is determined according to the lowest level of aggregation for which the cash inflows are independent of cash inflows from other assets.

The Group has determined that assets which form part of the nbn™ access network, work together to achieve the delivery of products and services in order to generate cash inflows. As a result, the Group has determined that the ubiquitous broadband network is a single CGU (the NBN Co CGU).

At the end of the reporting period, the Group estimated the recoverable amount of the NBN Co CGU adopting a value in use approach. As a result of this analysis it has been determined that the recoverable amount of the NBN Co CGU exceeds its carrying amount as at 30 June 2020. In assessing the recoverable amount of the NBN Co CGU a number of factors were considered including historical financial performance, current economic and market conditions, and future revenue, capital expenditure and profitability expectations and forecasts based on the Group’s Integrated Operating Plan and application of a long-term growth rate and discount rate.