Mondi Limited

Notes to the financial statements and
consolidated financial statements
continued
for the year ended 31 December 2010
9 Intangible assets (continued)
Group 1
Licences and
2009/R million Goodwill other intangibles 2 Total
Cost
At 1 January 581 211 792
Disposal of businesses (see note 29) (1) – (1)
At 31 December 580 211 791
Accumulated amortisation and impairment
At 1 January – 60 60
Charge for the year – 42 42
At 31 December – 102 102
Net book value as at 31 December 580 109 689
Notes:
1
There are no intangible assets in the Company.
2
Licences and other intangibles mainly relate to software development costs, and customer relationships and contractual arrangements capitalised as a result of business
combinations.
Impairment tests for goodwill
Goodwill is allocated for impairment testing purposes to cash-generating units (CGUs) which reflect how it is monitored for internal
management purposes.
The recoverable amount of a CGU is determined based on value-in-use calculations. Value-in-use calculations use cash flow
projections based on financial budgets covering a three year period that are based on the latest forecasts for revenue and cost as
approved by the board. Cash flow projections beyond three years are based on internal management forecasts and assume a
growth rate not exceeding gross domestic product. Zero percent growth rates are assumed in perpetuity given the commodity
nature of the majority of the products (i.e. volume growth is assumed to be offset by real price declines). Post tax cash flow
projections are discounted using a post tax discount rate of 8.1% (2009: 10.3%), as adjusted for the economic and political risks
of South Africa that are not reflected in the underlying cash flows. Perpetuity maintenance capital expenditure has been assumed
at 60% of depreciation.
Expected future cash flows are inherently uncertain and could change materially over time. They are significantly affected by a
number of factors, including market and production estimates, together with economic factors such as prices, discount rates,
currency exchange rates, estimates of production costs and future capital expenditure. In respect of the CGUs that have not been
impaired, sensitivity analyses of a 1% increase in discount rate or a 1% decrease in cash flows were performed and these did not
give rise to an impairment.
No impairment in the CGUs have been recorded and management have applied prudent estimates in the value-in-use calculations,
which still reflect sufficient headroom above the capital employed of these CGUs.
42 Annual report and accounts 2010