Note 2: Business Combinations continued Key Judgements and Estimates A contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by occurrence or non-occurrence of uncertain future events not wholly within the control of the Group. A contingent liability may also be a present obligation arising from past events but is not recognised on the basis that a future settlement of economic benefits is not probable. If the expected settlement of the liability becomes probable, a provision is recognised. The outcomes of litigation are inherently difficult to predict, and judgement has been applied in assessing the likely outcome of legal claims and determining which claims require recognition of a provision or disclosure of a contingent liability. Contingent liabilities are recognised at fair value within provisions on acquisition date in connection with a business combination after consideration of a range of possible outcomes unless the economic outflows are not possible. A number of pending legal matters have been identified from the acquisition of CSL Vifor, which include matters relating to intellectual property, contractor, competitor and regulatory disputes, product liability claims and various other matters. Management has recorded such contingent liabilities at fair value on the date of the Vifor acquisition, which requires the use of significant judgements, estimates and assumptions and is subject to uncertainty. The key estimates that may have a significant impact on the estimated contingent liability in the future reporting periods include the timing and final amounts of any payments. These uncertainties can also cause reversals in previously recognised liabilities once final settlement is reached. (g) Non-controlling interests In connection with the acquisition of CSL Vifor, the Group acquired 55% of the share capital and voting rights of Vifor Fresenius Medical Care Renal Pharma (VFMCRP). For the non-controlling interests in VFMCRP, the Group elected to recognise the non-controlling interests at its fair value on acquisition date. The fair value was estimated by applying an income approach. The fair value estimates are based on an assumed discount rate, long-term sustainable growth rate and a control premium discount. Further detail on the Group’s non-controlling interests are disclosed in Note 23. (h) Goodwill Where the fair value of the consideration paid for a business acquisition exceeds the fair value of the identifiable assets, liabilities and contingent liabilities acquired, the difference is treated as goodwill. The goodwill is attributable to future business growth opportunities, an assembled workforce and synergies expected to be realised from the Group’s acquisition of CSL Vifor. The acquisition of CSL Vifor resulted in the recognition of goodwill of $6,892m. Goodwill has been allocated to each of the relevant cash generating units (CGUs) which are expected to realise the synergies from the acquisition. The recoverability of goodwill is monitored at the segment (business unit) level, represented by CSL Behring ($4,281m), CSL Seqirus ($911m) and CSL Vifor ($1,700m). (i) Deferred tax The net deferred tax liability recognised of $658m principally related to the deferred tax impact of the fair value uplifts on intangible assets, inventories, property, plant and equipment and recognised contingent liabilities. ( j) Revenue and profit contribution CSL Vifor contributed revenues of $1,989m and segment contribution of $921m to the Group for the period from 9 August 2022 to 30 June 2023. If the acquisition had occurred on 1 July 2022, consolidated pro-forma revenue and segment contribution for the year ended 30 June 2023 would have been $2,126m and $1,045m respectively. (k) Acquisition and integration costs During the year ended 30 June 2023, the Group has incurred $184m of acquisition and integration planning costs (pre-tax) in connection with the transaction that are primarily recognised as general and administrative expenses. CSL Limited Annual Report 2022/23 123
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