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13. INTANGIBLE ASSETS
Goodwill
Telecommunication
licences and other
Brands, customer
lists, and
relationships
Computer
software
a
Total
£m £m £m £m £m
Cost
At 1 April 2004 202 9 – 713 924
Additions –––319 319
Disposals – (5) – (81) (86)
Exchange differences (3) 1 – 31
Acquisitions through business combinations 205 192 84 81 562
At 1 April 2005 404 197 84 1,035 1,720
Additions –––449 449
Disposals –––88
Exchange differences 18 8 – 834
Acquisitions through business combinations 121 1 22 16 160
At 31 March 2006 543 206 106 1,516 2,371
Amortisation
At 1 April 2004 7 – 289 296
Acquisitions 38 – 45 83
Disposals ––(65) (65)
Charge for the year 6 – 144 150
Exchange differences ––22
At 1 April 2005 51 – 415 466
Charge for the year 9 11 229 249
Acquisitions ––15 15
Disposals ––(8) (8)
Exchange differences 2 – 68
At 31 March 2006 62 11 657 730
Carrying amount
At 31 March 2006 543 144 95 859 1,641
At 31 March 2005 404 146 84 620 1,254
aIncludes additions in 2006 of £401 million (2005: £265 million) in respect of internally developed computer software.
Impairment tests of goodwill
Goodwill is not amortised but tested for impairment at least annually. For the purpose of impairment testing the group’s cash
generating units are considered to be the business segments. Goodwill has been allocated to cash generating units as follows:
2006 2005
£m £m
BT Global Services 488 360
BT Retail 55 44
543 404
The recoverable amount of each cash generating unit (CGU) is based on value in use calculations. These are determined using cash
flow projections derived from financial budgets approved by the board covering a five year period. They reflect management’s
expectation of revenue growth, operating costs and margin for each CGU based on past experience. Cash flows beyond the five
year period have been extrapolated using estimated terminal growth rates ranging from 0% to 2%. These rates have been
determined with regard to projected growth rates for the specific markets in which the CGU participates and are not considered to
exceed the long term average growth rates for those markets. Discount rates applied to the cash flow forecasts are derived from
the group’s pre-tax weighted average cost of capital for non-regulated products of 11.4%.
The forecasts are most sensitive to changes in projected revenue growth rates in the first five years of the forecast period.
However there is significant headroom and based on the sensitivity analysis performed we have concluded that no reasonably
possible changes in the base case assumptions would cause the carrying amount of the CGUs to exceed their recoverable amount.
BT Group plc Annual Report and Form 20-F 2006 Notes to the consolidated financial statements88