Unilever 2008 Annual Report Download - page 101

Notes to the consolidated accounts Unilever Group
98 Unilever Annual Report and Accounts 2008
Financial statements
9 Goodwill and intangible assets (continued)
€ million € million € million € million € million
Indefinite- Finite-
lived lived
intangible intangible
Movements during 2007 Goodwill assets assets Software Total
Cost
1 January 2007 13 454 4 409 642 392 18 897
Acquisitions of group companies 334–––334
Disposals of group companies (4) (1) – – (5)
Change in useful life assumptions – (2) 2 – –
Additions – – 3 133 136
Disposals – – – (16) (16)
Currency retranslation (602) (272) (26) (8) (908)
31 December 2007 13 182 4 134 621 501 18 438
Amortisation and impairment
1 January 2007 (1 029) (235) (299) (128) (1 691)
Amortisation for the year – – (64) (76) (140)
Disposals – – – 16 16
Currency retranslation 91 22 15 4 132
31 December 2007 (938) (213) (348) (184) (1 683)
Net book value 31 December 2007 12 244 3 921 273 317 16 755
There are no significant carrying amounts of goodwill and intangible assets that are allocated across multiple cash generating units (CGUs).
Impairments charge in the year
The impairments charged in 2008 principally related to a non-core savoury business in the Americas which was subsequently classified as held
for sale. There were no impairments in 2007.
Significant CGUs
The goodwill and indefinite-lived intangible assets (predominantly Knorr and Hellmann’s) held in the global savoury and dressings CGU,
comprising €10.6 billion (2007: €11.1 billion) and €3.1 billion (2007: €3.2 billion) respectively, are considered significant in comparison to
the total carrying amounts of goodwill and indefinite-lived intangible assets at 31 December 2008. No other CGUs are considered significant
in this respect.
During 2008, 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 6%; and
• average operating margins for the major product groups within the CGU ranging from 15% to 19%.
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.