Annual Report 2008 in PDF - GKN

11 Goodwill and other intangible assets
Financial Statements
Notes to the Financial Statements
2008 2007
Goodwill £m £m
Cost
At 1 January 407 372
Subsidiaries acquired — 30
Currency variations 142 5
At 31 December
Accumulated impairment
549 407
At 1 January 127 127
Currency variations 55 —
At 31 December 182 127
Net book amount at 31 December 367 280
Comparative information regarding cost and accumulated impairment has been re-presented to reclassify amortisation and impairment charges
made under UK GAAP as cost. The net book amount is unchanged.
The carrying value of goodwill at 31 December comprised:
2008 2007
Business segment Business Geographical location £m £m
Driveline Driveshafts Americas 54 44
Powder Metallurgy Hoeganaes North America 24 17
OffHighway Wheels Italy 23 18
Aerospace Aerostructures North America 35 25
Propulsion Systems North America 93 67
Propulsion Systems North America 42 30
271 201
Other businesses not individually significant to the carrying value of goodwill 96 79
367 280
An impairment test is a comparison of the carrying value of the assets of a business or cash generating unit (CGU) to their recoverable amount.
Where the recoverable amount is less than the carrying value, an impairment results. During the year, all goodwill was tested for impairment,
with no impairment charges resulting.
For the purposes of carrying out impairment tests, the Group’s total goodwill has been allocated to a number of CGUs and each of these CGUs
has been separately assessed and tested. The size of a CGU varies but is never larger than a primary or secondary reportable segment. In some
cases, the CGU is an individual subsidiary or operation. The allocation of goodwill by business segment is set out in note 2.
All of the recoverable amounts were measured based on value in use. Detailed forecasts for the next five years have been used in the majority
of impairment tests except where a longer term more detailed forecast is available and appropriate. These forecasts are based on approved
annual budgets and represent a best estimate of future performance.
Key assumptions
In determining the recoverable amount of all CGUs it is necessary to make a series of assumptions to estimate future cash flows. In each
case, these key assumptions have been made by management reflecting past experience and are consistent with relevant external sources of
information.
Operating cash flows
The main assumptions within forecast operating cash flow include the achievement of future sales prices and volumes (including reference to
specific customer relationships, product lines and the use of industry relevant external forecasts of global vehicle production within Driveline
businesses and consideration of specific volumes on certain US military and civil programmes within Aerospace), raw material input costs, the
cost structure of each CGU and the ability to realise benefits from annual productivity improvements, the impact of foreign exchange rates upon
selling price and cost relationships and the levels of ongoing capital expenditure required to support forecast production.
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Restated