12. GOODWILL

Cost
Balance at January 1, 2020	$	7,130
Additions		-
Impairments		(1,449	)
Balance at December 31, 2020	$	5,681
Additions		-
Impairments		-
Balance at December 31, 2021	$	5,681

Impairment testing for cash-generating units

In accordance with its accounting policy, the Corporation tests CGUs or groups of CGUs with indefinite life intangible assets and/or allocated goodwill for impairment as at December 31 of each calendar year or when an indicator of impairment is considered to exist. For the year ended December 31, 2021, Management has determined that the Corporation was operating as a single CGU. The entire balance of the goodwill and indefinite life intangible assets was allocated to the single CGU.

Key Assumptions

When assessing whether or not there is impairment, the Corporation determines the recoverable amount of a CGU based on value in use ("VIU"), the model which Management believes to result in a higher recoverable amount. VIU is estimated by discounting estimated future cash flows to their present value. Management estimates the discounted future cash flows and a terminal value. The future cash flows are based on estimates of expected future operating results of the CGU after considering economic conditions and a general outlook for the CGU's industry, including assumptions of when the travel industry will recover to pre-COVID levels. Discount rates consider market rates of return, debt to equity ratios and certain risk premiums, among other things. The terminal value is the value attributed to the CGU's operations beyond the projected time period of the cash flows using a perpetuity rate based on expected economic conditions and a general outlook for the industry.

Management has made certain assumptions for the discount rates and terminal growth rates to reflect variations in expected future cash flows. These assumptions may differ or change quickly depending on economic conditions or other events. It is therefore possible that future changes in assumptions may negatively affect future valuations of the Corporation's CGU, which could result in impairment losses.

Impairment testing for the cash-generating unit as at December 31, 2021

The table below provides an overview of the methods and assumptions that Management has used to determine recoverable amounts for the CGU and the carrying values of indefinite life intangible assets and goodwill within the CGU.

(In thousands of dollars, except years and percentages)	Carrying value of goodwill	Carrying value of indefinite-life intangible assets	Recoverable amount method	Period used (years)	Terminal growth rate %	Pre-tax discount rate %
	$5,681	$4,505	Value in Use	3	2.0%	18.4%

The Corporation concluded that there was no impairment as at December 31, 2021 and December 31, 2020.

Goodwill and CGU Impairment in Q2 2020

During the second quarter of 2020, it was determined that the recoverable amount for the legacy Points Travel CGU was lower than the carrying amount. As a result, the Corporation recorded an impairment charge of $1,798 in the second quarter of 2020, including the write-down of goodwill of $1,449, right-of-use assets of $150, prepaid expenses, deposits and other assets of $172 and intangible assets of $27.

The Corporation determined the recoverable amount of the legacy Points Travel CGU as at June 30, 2020 based on the VIU method, which was calculated by discounting the future cash flows generated from continuing use.

The Corporation included five years of cash flows in the model. The future cash flows were based on estimates of expected future operating results of the legacy Points Travel CGU after considering the current economic conditions and a general outlook for the travel industry. The cash flow forecasts were extrapolated beyond the five-year period using a terminal growth rate.

Discount rates considered market rates of return, debt to equity ratios and certain risk premiums, among other things. The pre-tax discount rate used in the recoverable amount calculation was 23.4%.

Given the high degree of uncertainty with the impact of COVID-19 at that time, Management used multiple, probability weighted cash flow projections in determining the recoverable amount of the legacy Points Travel CGU as at June 30, 2020.

The primary cause for the impairment was the severe downturn in the travel industry as a result of the COVID-19 pandemic, operating results during the second quarter of 2020 that were lower than expectations, and updated travel industry forecasts that projected a longer recovery period than what was originally expected at the beginning of the pandemic.