Avon 2013 Annual Report Download - page 38

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PART II
Key assumptions used in measuring the fair value of Silpada during these impairment assessments included the discount rate (based on the
weighted-average cost of capital) and revenue growth, as well as silver prices and Representative growth and activity rates. To estimate the
fair value of Silpada, we forecasted revenue and the resulting cash flows over ten years using a DCF model which included a terminal value
at the end of the projection period. We believed that a ten-year period was a reasonable amount of time in order to return Silpada’s cash
flows to normalized, sustainable levels. The fair value of Silpada’s indefinite-lived trademark was determined using a risk-adjusted DCF
model under the relief-from-royalty method. The royalty rate used was based on a consideration of market rates. The fair value of the
Silpada finite-lived customer relationships was determined using a DCF model under the multi-period excess earnings method.
The impact of the impairment charges in 2012 and 2011 associated with Silpada are reflected within Discontinued Operations. There is no
risk of additional impairments associated with Silpada as the business was sold in July 2013. See Note 3, Discontinued Operations on
pages F-15 through F-17 of our 2013 Annual Report for more information on Silpada.