| 2.2.17 | Impairment |
Noncurrent assets, plant and equipment and intangible assets are initially measured at acquisition or construction cost. However, if there are indications that the value of such assets will not be recoverable in the future, they are tested for impairment.
The indicators are analyzed every quarter and tested if there are indications of impairment. At the end of the year, the Company calculates impairment for all CGUs whose intangible assets originated from product development and goodwill for future profitability originated on the acquisition of new business, whether or not there are indications of impairment.
Assets are grouped in cash-generating units (CGU) taking into consideration the company’s business model and its monitoring of cash flows. In general, the CGUs are defined in accordance with the families/platforms of the aircraft or other goods and services produced by a Group company, irrespective of its geographic location.
The Company applies the value in use concept, using cash flow projections before income tax and social contribution, discounted at the WACC rate, which reflects the investors’ expectations of return. The cash flow projections for the CGUs take into consideration the Company’s medium and long-term strategic plan, based on the characteristics and expectations of the business.
The exception to this concept are aircraft that the Company maintains in its property, plant and equipment for lease purposes. In this case the aircraft is tested individually, using the higher of its value-in-use and its market value to determine its recoverable value.
Any impairment losses of a CGU are recognized in Other Operating Expense and allocated to relevant assets of the impaired CGU.