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Operating assets and liabilities
108 The Sage Group plc | Annual Report & Accounts 2013
5 Intangible assets
5.1 Goodwill
Note
2013
£m
2012
£m
Cost at 1 October 1,814.4 1,736.3
– Additions 16.7 11.8 150.0
– Disposals 16.7 (319.0) –
– Exchange movement 9.4 (71.9)
A
t 30 September 1,516.6 1,814.4
Impairment at 1 October ––
– Impairment in the year 1.4 –
A
t 30 September 1.4 –
Net book amount at 30 September 1,515.2 1,814.4
Details of acquisitions and disposals in the year are shown in note 16. During the year, goodwill was reviewed for impairment in accordance with
IAS 36. For the purposes of this impairment review, goodwill for continuing operations has been valued on the basis of discounted future cash flows
arising in each relevant CGU.
Goodwill impairment tests
The following table shows the allocation of the carrying value of goodwill at the end of the reporting period by CGU:
2013
£m
2012
£m
France 212.2 253.7
UK & Ireland 180.6 195.4
Spain 121.2 124.2
Sage Pay Europe 25.1 27.4
Germany 26.4 25.2
Switzerland 34.7 33.6
Poland 6.5 6.4
Portugal 4.1 4.7
North America
– Sage Business Solutions Division 533.2 765.2
– Sage Payment Solutions Division 156.1 156.6
Brazil 130.8 133.5
South Africa 40.6 44.0
A
ustralia 24.8 24.2
A
sia 18.9 20.3
1,515.2 1,814.4
The Group conducts annual impairment tests on the carrying value of goodwill, based on the recoverable amount of CGUs to which goodwill has been
allocated. The recoverable amounts of CGUs are determined from value-in-use calculations. The key assumptions in the value-in-use calculations are
the discount rate applied, the long-term operating margin (EBITA) and the long-term growth rate of net operating cash flows. In all cases, the approved
budget for the following financial year formed the basis for the cash flow projections for a CGU. The approved cash flow projections in the four financial
years following the budget year reflected management’s expectations of the medium-term operating performance of the CGU and growth prospects
in the CGU’s market.
–The discount rate applied to a CGU represents a pre-tax rate that reflects the market assessment of the time value of money at the end of the
reporting period and the risks specific to the CGU. The discount rates applied to CGUs were in the range of 4.4% (2012: 7.3%) to 13.65%
(2012: 22.7%).
–The long-term operating margin assumed for a CGU’s operations is primarily based on past performance. For some CGUs, those for
which management has strong reason to believe that past operating margins are not indicative of future operating margins, expected
future improvements are also included in management’s assessment of the long-term operating margin. The long-term operating margin applied
to CGUs was in the range of 20% (2012: 21%) to 47% (2012: 62%).
–Long-term growth rates of net operating cash flows are assumed equal to the long-term growth rate in the gross domestic product of the country
in which the CGU’s operations are undertaken and were in the range of 1.8% (2012: 1.8%) to 5.8% (2012: 5.5%).
112 The Sage Group plc | Annual Report & Accounts 2013