Financial statements - Mondi

Notes to the combined and
consolidated financial statements
continued
for the year ended 31 December 2010
11 Intangible assets (continued)
Licences and
2009/E million Goodwill 1 other intangibles 2 Total
Cost
At 1 January 611 84 695
Additions – 5 5
Disposal of assets (51) (2) (53)
Reclassification – 18 18
Currency movements (2) 4 2
At 31 December 558 109 667
Accumulated amortisation and impairment
At 1 January 328 44 372
Charge for the year – 10 10
Impairments 12 1 13
Disposal of assets (51) (2) (53)
Reclassification – 16 16
Currency movements – 1 1
At 31 December 289 70 359
Net book value as at 31 December 269 39 308
Notes:
1
For impairments of goodwill, see note 5.
2
Licences and other intangibles mainly relate to software development costs, 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.
With effect from 1 January 2011, the Coating & Release and Consumer Flexibles business units have been combined into a single
economic unit, Coatings & Consumer Packaging. As a result, the goodwill calculation is now based on the Coatings & Consumer
Packaging CGU and the impairment calculations, being forward-looking in nature, have been performed based on the new
reporting structure. There was no impact on the impairment of goodwill.
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 Boards. Cash flow projections beyond three years are based on internal management forecasts and assume a
growth rate not exceeding gross domestic product for the respective countries. Zero percent growth rates are assumed in
perpetuity for most of the businesses 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 6.62%
(2009: 8.83%), adjusted by 0%-3% reflecting the economic and political risks of the specific location that are not reflected in
the underlying cash flows specific to each CGU. 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.
106 Annual report and accounts 2010