Oxford Catalysts Group PLC Annual Report and Accounts 2010

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Annual Reportand Accounts2010Oxford CatalystsGroup PLCNotes to the Accounts (continued)Goodwill and ‘In process technology’ intangible assets that are not yet ready for use are subject to an annual impairmentreview.The impairment review for In process technology is performed for each ‘Cash Generating Unit’ (CGU) identified inaccordance with the Group’s accounting policy. It has been determined that there are six CGU’s, each representing aseparate technology stream for which distinct revenue streams are either being currently generated or are anticipated inthe future.Goodwill originates entirely from the acquisition of the Velocys Inc. subsidiary in 2008. It is not possible to allocate goodwillto each individual CGU. Goodwill is considered to relate to the synthetic fuel group of CGU’s as a whole. This grouprepresents an operating segment as described in further detail within the segmental disclosures in note 4. Five of the sixIn process technology CGU’s are included within this segment which represents over 95% of the total value of intangibleassets. No goodwill has been allocated to the emulsions segment which represents the remaining In Process technologyCGU.An impairment test is a comparison of the carrying value of the assets of the CGU (or group of CGU’s for goodwill) withtheir recoverable amount. Where the recoverable amount is less than the carrying value, an impairment results. The Grouphas carried out its annual impairment testing at 31 December each year. The recoverable amounts of the CGUs aredetermined based on the value in use (‘VIU’) calculations.The VIU calculation is based upon the estimated discounted future cash flows to be generated by the respective technologystream.Key assumptionsThe key assumptions in the VIU calculations are the discount rate applied and sales and gross margin forecasts for theperiod of the expected useful life of the technology.Sales and gross margin forecastsFuture sales forecasts are based upon the commercialisation of the Group’s technology in what is an emerging andnascent market. Forecast sales and gross margin levels are therefore dependent upon speed of uptake of the Group’stechnology, the size of the markets and the penetration achieved in those markets.In all cases the approved budget for the following financial year forms the initial basis for the forecasts. Growth rateassumptions have then been applied to revenue for periods of between 6 and 7 years for each CGU. Revenue growthbeyond this period has not been assumed in the VIU calculations as it is difficult at this stage to assess a long term growthrate. An expected useful life for each technology stream has been estimated, of 15 years in each case.Discount rateThe discount rate applied to each CGU represents a post tax rate that reflects market assessment of the time value ofmoney at the balance sheet date and the risks specific to each CGU. The discount rates applied to each CGU are between25% and 30% (2009: 25% to 30%).Summary of resultsDuring the year, goodwill and in process technology intangible assets were tested for impairment with no impairmentcharge resulting (2009: nil).The forecasts used in the impairment review as at 31 December 2011 indicate significant headroom when comparingrecoverable amount against carrying value. However, given the early stage of adoption there remains a significant level ofjudgment involved in making the assumptions for revenues and margins. A reduction of more than 75 % in revenuesforecast across all of the synthetic fuels CGU’s would be required before an impairment in the allocated goodwill istriggered.Amortisation of intangible assets is charged to other administrative expenses in the consolidated income statement.CompanyThe Company has no intangible assets (2009: nil).40
Oxford CatalystsGroup PLCAnnual Reportand Accounts201015 Property, Plant and EquipmentAssets under Plant andGroup construction machinery Total2010 £’000 £’000 £’000Cost or valuationAt 1 January 2010 38 4,491 4,529Transfer to intangible assets (9) – (9)Additions 199 419 618Disposals – (30) (30)Transfers to plant and machinery (178) 178 –Foreign exchange 1 139 140At 31 December 2010 51 5,197 5,248Accumulated depreciationAt 1 January 2010 – 1,340 1,340Charge for the year – 1,274 1,274Disposals – (29) (29)Foreign exchange – 73 73At 31 December 2010 – 2,658 2,658Net book amountAt 31 December 2010 51 2,539 2,590Assets under Plant andconstruction machinery Total2009 £’000 £’000 £’000Cost or valuationAt 1 January 2009 41 2,999 3,040Additions 1,393 209 1,602Transfers to plant and machinery (1,347) 1,347 –Foreign exchange (49) (64) (113)At 31 December 2009 38 4,491 4,529Accumulated depreciationAt 1 January 2009 – 547 547Charge for the year – 802 802Foreign exchange – (9) (9)At 31 December 2009 – 1,340 1,340Net book amountAt 31 December 2009 38 3,151 3,189At 1 January 2009 41 2,452 2,493The net book amount of leased assets included above is £63,000 (2009: £37,000). Depreciation is charged to otheradministrative expenses in the consolidated income statement.CompanyThe Company has no property, plant or equipment (2009: nil).As at 31 December 2010, the Group had entered into contractual commitments for the acquisition of property, plant andequipment amounting to £43,000 (2009: £165,000).41
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Oxford Catalysts Group PLC Annual Report and Accounts 2010

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