media release (15-005MR)

GoConnect Limited: half-year results 31 December 2014

Published

ASIC has welcomed the announcement of a $4.3 million impairment charge to goodwill assets by ASX-listed, GoConnect Limited, to be reflected in its results for the half-year ended 31 December 2014.

ASIC reviewed GoConnect Limited’s financial report for the year ended 30 June 2014 as part of its ongoing financial reporting surveillance program. Following inquiries of the company, ASIC questioned whether the assumptions used in the calculation of the recoverable amount of the goodwill assets were reasonable and supportable.

GoConnect Limited had recognised the goodwill assets as a result of two acquisitions which occurred at the beginning of the 30 June 2011 financial year.

Goodwill assets are impaired and must be written down where the carrying amount in the company's books exceeds the recoverable amount of the assets.  The recoverable amount is the higher of value-in-use and fair value of the assets.

The cash flows generated from the acquired businesses have not been sufficient to produce a value-in-use which is higher than the carrying amount of the goodwill assets. The company relied on a fair value calculation to produce a recoverable amount which exceeded the carrying amount of goodwill assets. However, ASIC did not consider there to be sufficient evidence to support a fair value measurement of the goodwill assets.

As outlined in 14-294MR Focus for 31 December 2014 financial reports, impairment testing and asset values remain a focus area of our financial reporting surveillances. ASIC reminds companies and those involved in preparing and approving financial reports that in calculating the recoverable amount of assets, cash flow and other assumptions used in value-in-use calculations should be realistic and fair values should be based on appropriate models, assumptions and inputs.

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