Consolidated Financial Statements 2022 · Page 43

Public Investment Fund and its subsidiaries 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 
(All amounts in million SAR unless otherwise stated) 
Classification: External Confidential 
40 
 
4. 
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued) 
 
4.20 Impairment of non-financial assets (continued) 
 
Impairment assessment of goodwill 
The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amount of the CGUs is generally 
determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on 
financial budgets approved by management covering five to ten-year period. Cash flows beyond the period used in the calculation are 
extrapolated using the estimated growth rates as stated in note 8. These growth rates are consistent with forecasts included in industry 
reports specific to the industry in which the CGU operates.  Where CGU represents a subsidiary for which quoted market price is available, 
the Group calculates the recoverable amount based on the fair value less cost to sell approach using the closing quoted market price of the 
CGU (i.e. subsidiary). 
 
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the 
Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, 
irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units. 
 
Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated 
to the units and then to reduce the carrying amount of other assets including the intangible assets in the unit (group of units) on a pro rata 
basis on condition that the carrying amount of other assets should not be reduced below their fair values. Where goodwill forms part of a 
cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated 
with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal off the 
operation. Goodwill disposed off in this circumstance is measured based on the relative values of the operation disposed-off and the portion 
of the cash-generating unit retained. 
 
4.21 Classification of financial assets 
 
When the Group classifies financial assets, it makes judgments to: 
• 
assess the business model within which the assets are held and whether the contractual terms of the financial asset are solely 
payments of principal and interest on the principal amounts outstanding; 
• 
determine the classification of certain financial assets as measured at FVTPL or at FVOCI; and 
• 
determine fair value at the time of reclassification. 
 
4.22 Fair value measurement of financial instruments  
 
When the fair values of financial assets and financial liabilities recorded in the consolidated financial statements cannot be measured based 
on quoted prices in active markets, their fair value is measured using a variety valuation technique including the discounted cash flow (DCF) 
model, market comparable approach, replacement cost model, and residual value method. The input to these models is derived from 
observable markets where available and possible, but whe