Unilever 2007 Annual Report Download - page 89

Unilever Annual Report and Accounts 2007 87
Financial statements continued
Notes to the consolidated accounts Unilever Group
9 Goodwill and intangible assets (continued)
€ million € million € million € million € million
Indefinite- Finite-
lived lived
intangible intangible
Movements during 2006 Goodwill assets assets Software Total
Cost
1 January 2006 14 080 4 713 631 291 19 715
Acquisitions of group companies 60 8 1 – 69
Disposals of group companies (1) – – – (1)
Change in useful life assumptions – (32) 32 – –
Additions – – 3 110 113
Currency retranslation (685) (280) (25) (9) (999)
31 December 2006 13 454 4 409 642 392 18 897
Amortisation and impairment
1 January 2006 (1 117) (263) (215) (65) (1 660)
Amortisation for the year – – (94) (63) (157)
Impairment (12) – – (2) (14)
Currency retranslation 100 28 10 2 140
31 December 2006 (1 029) (235) (299) (128) (1 691)
Net book value 31 December 2006 12 425 4 174 343 264 17 206
There are no significant carrying amounts of goodwill and intangible assets that are allocated across multiple cash generating units (CGUs).
Impairments charges in the year
There were no impairments in 2007. The impairments charged in 2006 principally related to business disposals that were completed during
2007.
In 2006, Slim•Fast was fully integrated into The Americas business as part of the North American beverage operations. As a result of the
integration, Slim•Fast is no longer evaluated on a stand-alone basis but as part of the North American beverage CGU. The 2007 and 2006
impairment reviews on this basis did not result in any impairments (2005: €363 million).
Significant CGUs
The goodwill and indefinite-lived intangible assets (predominantly Knorr and Hellmann’s) held in the global savoury and dressings CGU,
comprising €11.1 billion (2006: €11.6 billion) and €3.2 billion (2006: €3.4 billion) respectively, are considered significant in comparison to
the total carrying amounts of goodwill and indefinite-lived intangible assets at 31 December 2007. No other CGUs are considered significant
in this respect.
During 2007, we conducted an impairment review of the carrying value of these assets. Value in use of the global savoury and dressings CGU
has been calculated as the present value of projected future cash flows. A pre-tax discount rate of 10% was used.
The following key assumptions were used in the discounted cash flow projections for the savoury and dressings CGU:
•a longer-term sustainable growth rate of 4%, adjusted for market fade, used to determine an appropriate terminal value multiple;
•average near-term nominal growth for the major product groups within the CGU of 4%; and
•average operating margins for the major product groups within the CGU ranging from 15% to 18%.
The growth rates and margins used to estimate future performance are based on past performance and our experience of growth rates and
margins achievable in our key markets as a guide. We believe that the assumptions used in estimating the future performance of the savoury
and dressings CGU are consistent with past performance.
The projections covered a period of ten years as we believe this to be a suitable timescale over which to review and consider annual
performance before applying a fixed terminal value multiple to the final year cash flows of the detailed projection. Stopping the detailed
projections after five years and applying a terminal value multiple thereafter would not result in a value in use that would cause impairment.
The growth rates used to estimate future performance beyond the periods covered by our annual planning and strategic planning processes do
not exceed the long-term average rates of growth for similar products.
We have performed sensitivity analysis around the base case assumptions and have concluded that no reasonably possible changes in key
assumptions would cause the recoverable amount of the global savoury and dressings CGU to be less than the carrying amount.