Hydro Annual Report 2011b

Note 12 - Depreciation and amortization expense
Specification of depreciation and amortization by asset category
FINANCIAL STATEMENTS
Note 12 - Depreciation and amortization expense F33
Amounts in NOK million 2011 2010
Buildings 686 429
Machinery and equipment 4 077 2 393
Intangible assets 164 131
Depreciation and amortization expense 4 928 2 952
Note 13 - Impairment of non-current assets
Amounts in NOK million 2011 2010
Classification by asset category
Impairment losses
Property, plant and equipment 1 153 32
Intangible assets 78 ­
Total impairment of non­current assets 1 231 32
Classification by segment
Impairment losses
Primary Metal 970 3
Extruded Products 235 29
Energy 21 ­
Other activities 5 ­
Total impairment of non­current assets 1 231 32
All Cash Generating Units (CGUs) or fixed assets that are not part of a CGU are reviewed for impairment indicators at each
balance sheet date. Tests for impairment have been performed for the CGUs where impairment indicators have been identified.
The recoverable amount for these units have been determined estimating the Value in Use (VIU) of the asset and if appropriate
its fair value less cost to sell (FV), and comparing the highest of the two against the carrying value of the CGUs. The
calculation of VIU has been based on management's best estimate, reflecting the business planning process. Impairment losses
have been recognized where the recoverable amount is less than the carrying value.
In Primary Metal all plants have been assessed for impairment indicators following the decline in aluminium prices and lower
economic activity. Impairment indicators were identified for two CGUs in 2011. Key assumptions in testing for impairment
included aluminium prices, energy prices, fixed and variable costs and currency exchange rates. Prices were estimated based on
existing contracts, observed markets prices, together with Hydro's best estimate of future economic conditions covering the
remaining useful life of the assets. Test results are highly sensitive to these assumptions. The VIU for Hydro's Kurri Kurri plant
in Australia was estimated using a pre-tax discount rate of 11 percent. The plant was written down by NOK 970 million. The
recoverable amount of the other plant tested was above its carrying value.
Weak markets in particular in Building Systems in southern Europe were considered impairment indicators for five CGUs in
Extruded Products. Two CGUs, the building systems operations in Spain and Italy, were concluded to be impaired and written
down by in total NOK 235 million. The volumes and margins have declined significantly over the later years, and are now on
historic low levels. The impairment tests for these CGUs assume continued low levels for the first two years, then a slight
increase in volumes and margins, however, not reaching pre crisis levels.