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OAO Severstal and subsidiariesOAO Severstal and subsidiariesNotes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)Notes to the consolidated financial statementsfor the years ended December 31, 2008, 2007 and 2006(Amounts expressed in thousands of US dollars, except as stated otherwise)ImpairmentFor the following cash generating units an impairment loss was identified:Mining segmentVorkutaugolAn impairment loss was recognised in the amount of US$ 128.8 million and was allocated to property, plant andequipment.The following specific assumptions were used in the impairment test:The above estimates are particularly sensitive in the following areas:• a 1% increase in discount rate increases an impairment loss by US$ 44.7 million;• a 10% decrease in future planned revenues increases an impairment loss by US$ 222.8 million.Russian SteelNeva MetallAn impairment loss was recognized in the amount of US$ 29 million and was allocated fully to goodwill.• the forecast extraction volumes grow on average at 5% p.a. during the five year period ending 2013 and remainconstant thereafter;• the forecast has the following growth rates for coking coal prices: average decline of 16% p.a. in 2009 to 2011;average growth of 29% p.a. during the next two years and constant at 80% of 2013 prices thereafter;• the forecast has the following growth rates for steam coal prices: average decline of 16% p.a. in 2009 to 2010;average growth of 10% p.a. during the next three years and constant at 89% of 2013 prices thereafter;• operating costs are forecast to decrease by 27% in 2009 compared to 2008 and then increase on average by 9%p.a. during the next four years; thereafter costs remain constant at 2013 level;• pre-tax discount rate of 18.5% (in US$ terms).The above estimates are particularly sensitive in the following areas:The carrying amount of goodwill allocated to the cash generating unit before impairment loss was US$ 40 million.The following specific assumptions were used in the impairment test:• cash flow projections are based on financial forecasts approved by management covering a four year period;• volumes are assumed to be constant during the forecast period and thereafter;• the forecast sales prices increase by 1% in 2009, increase by 7% p.a. in 2010 to 2012 and remain constant at2012 level thereafter;• operating costs are forecast to increase on average by 11% p.a. in 2009 to 2012 and remain constant at 2012level thereafter;• pre-tax discount rate of 22.1% (US$ terms).• a 1% increase in discount rate increases an impairment loss by US$ 21.3 million;• a 10% decrease in future planned revenues increases an impairment loss by US$ 341.8 million.PBS Coals LimitedAn impairment loss was recognised in the amount of US$ 361.1 million and was allocated fully to goodwill.The carrying amount of goodwill allocated to the cash generating unit before impairment loss was US$ 447.5 million.The following specific assumptions were used in the impairment test:• the forecast extraction volumes increase by 22% in 2009, increase by 10% in 2010 and remain constant at 2010level thereafter;• the forecast coking coal prices increase by 1.1% p.a. during the five year forecast period and remain constantthereafter;• the forecast steam coal prices increase on average by 2.5% p.a. during the five year forecast period and remainconstant at 2013 level thereafter;• operating costs are forecast to increase by 9% in 2009 and then increase on average by 1% p.a. during the nextfour years; thereafter costs are assumed to be constant at 2013 level;• pre-tax discount rate of 16.4%.The above estimates are particularly sensitive in the following areas:• a 1% increase in discount rate increases an impairment loss by US$ 3.0 million;• a 10% decrease in future planned revenues increases an impairment loss by US$ 17.0 million.Other unitsThe impairment loss related to other cash generating units within the segment was recognized in the amount of US$5.9 million and was allocated to specific items of property, plant and equipment.LucchiniThe impairment loss was recognised in the amount of US$ 3.8 million in relation to specific items of property, plantand equipment.Severstal North AmericaSeverstal Wheeling Holding CompanyAn impairment loss was recognised of US$ 621.8 million and was allocated to property, plant and equipment in theamount of US$ 557.4 million and to goodwill in the amount of US$ 64.4 million.The carrying amount of goodwill allocated to the cash generating unit before impairment loss was US$ 64.4 million.130131