The Company has two CGUs: Canada and the U.S. The Company has determined these CGUs as the smallest identifiable group of assets  that generate, or could generate, cash inflows that are largely independent of the cash inflows from the other assets. The Canadian and U.S.  CGUs used for impairment testing are based on geography and are also the Company’s operating and reportable segments  (note 19) . Goodwill acquired through business combinations and brands with indefinite lives have been allocated to the Canadian and U.S. CGUs for  impairment testing purposes. The recoverable amount of the CGUs has been determined based on the fair value less costs to sell (“FVLCS”). In determining the FVLCS of  each of the CGUs, a discounted cash flow methodology was utilized. The discounted cash flow technique provides the best assessment of  what each CGU could be exchanged for in an arm’s length transaction as fair value is represented by the present value of expected future  cash flows of the business together with the residual value of the business at the end of the forecast period. The discounted cash flow was  applied on an enterprise value basis, where the after-tax cash flows prior to interest expense are discounted using a weighted average cost  of capital (“WACC”). The cash flow projections, covering a five-year period, were based on financial projections approved by senior  management using assumptions that reflect the Company’s most likely planned courses of action, given Management’s judgment of the  most probable set of economic conditions, adjusted to reflect the perspective of the expectations of a market participant. The WACC (discount rate applied), terminal capitalization rate and growth rate applied to each CGU’s cash flow projection are outlined in  the following table: The discounted cash flow calculation used for the two CGUs is most sensitive to the following assumptions: The discount rate (WACC) reflects the current market assessment of the risk specific to comparable companies. The discount rate was  based on the weighted average cost of equity and cost of debt for comparable companies within the industry. The cost of equity was  calculated using the capital asset pricing model. The debt component of the WACC was determined by using an after-tax cost of debt. Gross margins are based on actual and estimated values in the first year of the projection period, budgeted values in the second year of the  projection period, and these are increased over the projection period for anticipated efficiency improvements. The projected gross margins  are then updated to reflect anticipated future changes in the cost of inputs (primarily raw materials and commodity products used in  processing, such as cooking oil, wheat, fuel and boxboard), which are obtained from published indices for the countries from which raw  materials are sourced, as well as forward-looking data relating to specific commodities. Forecast figures are used where data is publicly  available, otherwise past actual raw material cost movements have been used as an indicator of future price movements combined with  Management’s industry experience and analysis of the seafood and commodity markets. Estimates are obtained from published indices for the countries in which the CGUs operate. These assumptions are important because, as well as using industry data for growth rates, management assesses how the CGU’s position,  relative to its competitors, might change over the projection period. Management expects the Company’s share of the Canadian frozen  seafood market to be stable over the projection period, whereas Management expects the U.S. position, relative to its competitors, to  continue to strengthen. Discount rate Gross margins including raw material cost and currency fluctuations Inflation Market share during the projection period Summary of key assumptions used in determining the fair value less costs to sell • WACC (discount rate applied); • Gross margins and raw material cost; • Market share during the projection period;  • Growth rate used to extrapolate cash flows beyond the projection period; and • Costs to sell. ANNUAL REPORT 2013 73 Terminal Discount rate  capitalization  (WACC)  rate  Growth rate Canada September 29, 2013 valuation date 12% 2% 2% September 30, 2012 valuation date 12% 2% 2% U.S. September 29, 2013 valuation date 12% 2% 2% September 30, 2012 valuation date 12% 2% 2%