Tiscali 2007 Annual Report Download - page 88

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18. Goodwill
The goodwill derives from the acquisitions made by Tiscali in pre-
vious years and the acquisition of Pipex.
The increase of EUR 212.9 million during 2007 is essentially
attributable to the acquisition of Pipex, while a more insignificant
amount concerns the adjustment of the opening balance of Video
Network Ltd’s goodwill.
The item other movements, EUR 11.1 million, is attributable to
the exchange delta on the opening value of the goodwill of Video
Network Ltd..
The decrease, amounting to EUR 3.4 million, is due to the
recording of losses reducing the consolidated residual good-
will of a few minor Italian assets.
As detailed in the section devoted to accounting standards,
the impairment test on goodwill is applied at least annually or
more frequently, if specific events or changes in circumstances
indicate that assets may have suffered impairment. The impair-
ment, if any, is identified by means of valuations referring to
the ability of each ‘unit’, identifiable in this case with the sub-
sidiary operating in a given geographic area, to generate cash
flows sufficient to recover the goodwill allocated to the unit.
The recoverable amount is the higher between the ‘fair value’
less sales costs and its utilisation value.
The expected future cash flows are discounted at a rate that
reflects the current market estimate of the cost of money, the
cost of capital and the risks specific to the unit. If the esti-
mated recoverable amount of the unit concerned is lower than
the relevant book value, it is decreased to the least recover-
able value. Impairments are booked to the income statement
under writedown costs and are not subsequently reversible.
In particular, the impairment test was developed by discount-
ing expected future cash flows taken from the Tiscali busi-
ness plan for the various business units over a limited peri-
od, also taking into account their presumed disposal value.
The results arising from the application of the stated method
(DCF – Discounted Cash Flow) did not highlight impairments
and therefore no impairment writedowns were performed.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
87
EUR (000) 31.12.2006 Increases Decreases Other Movements 31.12.2007
Italy 3,406 - (3,406) - -
United Kingdom 313,240 212,915 - (11,133) 515,022
316,646 212,915 (3,406) (11,133) 515,022