AstraZeneca Annual Report and Form 20-F Information 2011

7 Property, plant and equipment continuedThere were no impairment charges in 2011.Impairment charges in 2010 were due to the termination of the Certriad co-promotion with Abbott and various productivity initiatives. These costswere recognised in cost of sales and research and development respectively.Impairment charges in 2009 were due to the productivity initiatives in the global supply chain in Italy and research and development in Canada.These costs were recognised in cost of sales and research and development respectively.2011$m2010$m2009$mThe net book value of land and buildings comprised:Freeholds 3,476 3,425 3,3698 Goodwill2011$m2010$m2009$mCostAt 1 January 10,206 10,228 10,211Exchange and other adjustments (20) (22) 17At 31 December 10,186 10,206 10,228Amortisation and impairment lossesAt 1 January 335 339 337Exchange and other adjustments (11) (4) 2At 31 December 324 335 339Net book value at 31 December 9,862 9,871 9,889For the purpose of impairment testing of goodwill, the Group is regarded as a single cash-generating unit.The recoverable amount is based on value in use using discounted risk-adjusted projections of the Group’s pre-tax cash flows over 10 years.The projections include assumptions about product launches, competition from rival products and pricing policy as well as the possibility ofgenerics entering the market. In setting these assumptions we consider our past experience, external sources of information (including informationon expected increases and ageing of the populations in our established markets and the expanding patient population in newer markets),our knowledge of competitor activity and our assessment of future changes in the pharmaceutical industry. The 10 year period is covered byinternal budgets and forecasts. Given that internal budgets and forecasts are prepared for all projections, no general growth rates are used toextrapolate internal budgets and forecasts for the purposes of determining value in use. No terminal value is included as these cash flows aremore than sufficient to establish that an impairment does not exist. The methods used to determine recoverable amounts have remainedconsistent with the prior year.In arriving at value in use, we disaggregate our projected pre-tax cash flows into groups reflecting similar risks and tax effects. For each group ofcash flows we use an appropriate discount rate reflecting those risks and tax effects. In arriving at the appropriate discount rate for each groupof cash flows, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.0% for 2011; 7.0% for 2010; 7.6% for 2009) to reflect theimpact of relevant industry risks, the time value of money and tax effects. The weighted average pre-tax discount rate we used was approximately10% (10% for 2010; 11% for 2009).As a further check, we compare our market capitalisation to the book value of our net assets and this indicates significant surplus at31 December 2011 (and 31 December 2010 and 31 December 2009).No goodwill impairment was identified.The Group has also performed sensitivity analysis calculations on the projections used and discount rate applied. The Directors have concludedthat, given the significant headroom that exists, and the results of the sensitivity analysis performed, there is no significant risk that reasonablechanges in any key assumptions would cause the carrying value of goodwill to exceed its value in use.Financial StatementsAstraZeneca Annual Report and Form 20-F Information 2011 Financial Statements 157