Ardagh Glass Finance plc - Irish Stock Exchange

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Goodwill and intangible assets (Continued)
Goodwill acquired through a business combination has been allocated to groups of cash-generating
units (CGUs) for the purpose of impairment testing based on the segment into which the business
combination is assimilated. The groupings represent the lowest level at which the related goodwill is
monitored for internal management purposes and are not larger than the primary and secondary
segments determined in accordance with IAS 14 Segment Reporting. A total of 7 groups, of cash
generating units have been identified in the current and previous year. A segment-level summary of the
goodwill allocation is presented below:
2008 2007
E’000 E’000
Eurozone—Glass Manufacturing ....................................... 14,860 14,860
United Kingdom—Glass Manufacturing .................................. 32,524 46,010
Other—Glass Manufacturing .......................................... 3,397 3,706
50,781 64,576
Impairment tests for goodwill
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash flow projections based on financial budgets approved by management covering a
five-year period. No growth rate has been assumed beyond the five-year period. The terminal value is
estimated based on capitalising the year 6 cashflows in perpetuity. The discount rate used was 15%.
This rate is pre-tax and reflects specific risks relating to the relevant segment. These assumptions have
been used for the analysis of each CGU within each business segment. Management determined
budgeted cash-flows based on past performance and its expectations for the market development.
Key assumptions include management’s estimates of future profitability, replacement capital
expenditure requirements, trade working capital investment needs, tax considerations and discount
rates. The values applied to each of the key assumptions are derived from a combination of internal
and external factors based on historical experience and take into account the stability of cash flows
typically associated with these groups of CGUs.
Of the total goodwill allocated to each of the groups of CGUs, 1 unit accounts for between 64%
of the total carrying amount of A50.8 million and is shown below. All other units account individually
for less than 15% of the total carrying amount and are not regarded as individually significant. The
additional disclosures required under IAS 36 Impairment of Assets in relation to significant goodwill
amounts arising in the 1 group of CGUs are as follows:
UK
Carrying amount of goodwill ............................................ 32,524
Basis of recoverable amount ............................................ Value in use
Discount rate applied ................................................. 15%
Excess of value-in-use ................................................. 154,262
Given the magnitude of the excess of value-in-use over the recoverable amount in the UK CGU
group detailed above and the absence of any reasonably possible changes in key assumptions employed,
the additional disclosures in IAS 36 pertaining to sensitivity of the value-in use computations are not
warranted.
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