Chrysler 2007 Annual Report Download - page 132

131Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes
In particular the vast majority of goodwill, representing approximately 94% of the total, is allocated to cash-generating units in the
Agricultural and Construction equipment, Ferrari and Comau Sectors. The cash-generating units considered for the testing of the
recoverability of the goodwill are generally product lines of the various Sectors. In particular, in the CNH – Case New Holland
Sector, the cash generating units to which goodwill has been allocated consist of the different brands (CaseIH and New Holland for
agricultural equipment, Case and New Holland Construction for construction equipment and financial services), while in Comau
goodwill has been allocated to the System, Pico and Service businesses. For Ferrari, the cash generating unit corresponds to the
Sector as a whole.
The recoverable amount of the cash-generating units to which goodwill and other intangible assets with an indefinite useful life
have been allocated is determined on the basis of their value in use, defined as the discounted value of the expected future
operating cash flows resulting from the estimates included in the most recent budgets and plans prepared by the Group for the
next three years, as extrapolated for later years on the basis of a medium- to long-term growth rates depending on the detailed
nature of the operations and the extent to which they are differentiated and on the forecasts made by the individual Sector to
which the cash-generating units belong.
The discount rates used reflect the current market assessments of the time value of money and take account of the risks inherent
in individual cash-generating units.
The principal assumptions used in determining the value in use of the above-mentioned cash-generating units were as follows:
2007 2006
Discount rate Discount rate
Growth rate before taxes Growth rate before taxes
Agricultural and Construction Equipment 2% 11%-14% 2% 13%-14%
Ferrari 2% 10% 2% 10%
Production Systems 2% 10% 2% 9%-10%
Management prepared budgeted data and plans for the determination of value in use on the basis of past performance and its
expectations of market developments.
This approach led to the recognition in 2007 and in 2006 of impairment losses of 1 million euros and 26 million euros, respectively,
for goodwill allocated to the System cash generating unit of the Comau Sector. This loss was recognised as Other unusual income
(expenses) in the income statement.
Goodwill of 22 million euros allocated to the Magnesium cash-generating unit of the Metallurgical Products Sector was written off
completely in 2006 when the assets and liabilities of Meridian Technologies Inc. were reclassified as Assets and Liabilities held for
sale, after considering its fair value less costs to sell.
Development costs
Amortisation of development costs and impairment losses are included in Research and Development Costs in the income
statement.
Development costs recognised as assets are attributed to cash generating units and are tested for impairment together with the
related tangible fixed assets, using the discounted cash flow method in determining their recoverable amount.