50 Orbit G arant 2012 annual rep O rt N OTES TO CONSOLIDATED FINANCIAL STATEMENTS continued For the years ended June 30 2012 and 2011 in thousands of Canadian dollars except for earnings per share and option data Canada The recoverable amount of the Canada CGU is determined on a valueinuse calculation which uses cash fow projections based on fnancial budgets and forward projections approved by Management covering a fveyear period and a net tax discount rate of 123 per annum Cash fows beyond that period have been extrapolated using a steady 2 per annum growth rate Management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carryi ng amount to exceed the aggregate recoverable amount of the CGU International The recoverable amount of the International CGU is determined on a valueinuse calculation which uses cash fow projections based on fnancial budgets and forward projections approved by Management covering a fveyear period and a net tax discount rate of 187 per annum Cash fows beyond that period have been extrapolated using a steady 2 per annum growth rate Management believes that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carryi ng amount to exceed the aggregate recoverable amount of the CGU Key assumptions The key assumptions in the valueinuse calculations for Canada and International CGUs are as follows Operating costs and capital expenditures Operating costs and capital expenditures are based on internal management forecasts Cost assumptions incorporate management experience and expertise current operating costs the nature and location of each operation and the risk associated with eac h operation Future capital expenditure is based on managements best estimate of required future capital requirements All commi tted and anticipated capital expenditures adjusted for future cost estimates have been included in the projected cash fows Gross margin Managements key assumptions include stable proft margin which has been determined based on past experience in the market Management expects that gross margin will remain in a range in line with historically achieved levels Discount rates Adjustments to the rate are made for any risks that are not refected in the underlying cash fows These rates are bas ed on the weighted average cost of capital for a mining industry group and were calculated based on management estimates The Company has performed its annual goodwill impairment testing and did not identity any impairment losses 11 INTANGI b LE ASSETS Changes in the intangible assets balance were as follows Customer Drilling Noncompete relationship technology a agreement Total Cost Balance as at July 1 2010 14024 2110 16134 Business acquisitions note 2 2940 2912 370 6222 Balance as at June 30 2011 16964 2912 2480 22356 Business acquisitions note 2 1050 1050 Balance as at June 30 2012 18014 2912 2480 23406