2568.11 kb - Compass Group

60 Compass Group PLC Annual Report 2007Notes to the consolidated financial statementsfor the year ended 30 September 200710 GoodwillDuring the year the Group acquired the remaining 5% of its Italian subsidiary Onama S.p.A. It also made a number of small acquisitions inNorth America and the Rest of the World. This is reflected in the £12 million addition to goodwill shown below.Goodwill £mCostAt 1 October 2005 4,327Additions arising from acquisitions 152Reclassified (6)Business disposals – discontinued activities (849)Currency adjustment (66)At 30 September 2006 3,558At 1 October 2006 3,558Additions arising from acquisitions 12Reclassified –Business disposals – discontinued activities (413)Currency adjustment (65)At 30 September 2007 3,092ImpairmentAt 1 October 2005 107Impairment charge recognised in the year –At 30 September 2006 107At 1 October 2006 107Impairment charge recognised in the year –At 30 September 2007 107Net book amountsAt 30 September 2006 3,451At 30 September 2007 2,985Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (‘CGUs’) that are expected to benefit from thatbusiness combination. A summary of goodwill allocation by business segment is shown below.After2007 Original Transfers Disposals disposalsGoodwill by business segment £m £m £m £m £mUSA 757 825 – – 825Rest of North America 87 83 – – 83Total North America 844 908 – – 908Continental Europe 161 500 2 (352) 150United Kingdom 1,733 1,798 – (65) 1,733Rest of the World 247 245 (2) – 243Continuing Business 2,985 3,451 – (417) 3,034Discontinued Business – – – 417 417Total 2,985 3,451 – – 3,451Russia and Turkey were transferred from the Rest of the World to the Continental Europe segment during the current reporting period to ensure alignment with the new management reporting structure.The transfers column adjusts prior year goodwill so that it is on a consistent basis.The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. The recoverableamount of a CGU has been determined from value in use calculations. The key assumptions for these calculations are long-term growth ratesand pre-tax discount rates and use cash flow forecasts derived from the most recent financial budgets and forecasts approved by managementcovering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates based on local expectedeconomic conditions and do not exceed the long-term average growth rate for that country. The pre-tax discount rates are based on the Group’sweighted average cost of capital adjusted for specific risks relating to the country in which the CGU operates.Growth and discount rates growth rates discount ratesUSA 2.8% 12.2%Rest of North America 2.2% 10.4%Continental Europe 0.6-2.7% 7.0-10.7%United Kingdom 2.5% 9.8%Rest of the World (0.3)-9.0% 6.5-17.6%Residual2006Pre-tax