Notes to the consolidatedfinancial statements continued12 Intangible assetsYear ended 28 February <strong>2013</strong>Customercontracts &relationships£’000Brand£’000Technology£’000Contracts£’000Goodwill£’000Developmentcosts£’000CostAt beginning of year 62,502 3,630 20,806 – 65,301 4,795 157,034Acquisitions throughbusiness combinations 4,007 – 1,628 2,840 12,008 – 20,483Eligible development costscapitalised – – – – – 2,056 2,056At end of year 66,509 3,630 22,434 2,840 77,309 6,851 179,573Total£’000AmortisationAt beginning of year 16,721 1,912 10,068 – – 1,368 30,069Charged in year 7,030 861 5,128 166 – 1,070 14,255At end of year 23,751 2,773 15,196 166 – 2,438 44,324Net book valueAt 28 February <strong>2013</strong> 42,758 857 7,238 2,674 77,309 4,413 135,249Net book valueAt 29 February 2012 45,781 1,718 10,738 – 65,301 3,427 126,965Expenditure on research and development in the year was £9.2m (2012: £8.5m) of which £2.1m (2012: £1.8m)relating to the development of new products was capitalised in accordance with IFRS.Year ended 29 February 2012Customercontracts &relationships£’000Brand£’000Technology£’000Goodwill£’000Developmentcosts£’000CostAt beginning of year 68,887 3,965 22,519 69,777 3,016 168,164Acquisitions through business combinations 707 – 164 1,123 – 1,994Eligible development costs capitalised – – – – 1,779 1,779Disposals (see note 11) (7,092) (335) (1,877) (5,599) – (14,903)At end of year 62,502 3,630 20,806 65,301 4,795 157,034Total£’000AmortisationAt beginning of year 10,500 1,174 5,936 – 710 18,320Charged in year 7,750 873 4,889 – 658 14,170Disposals (see note 11) (1,529) (135) (757) – – (2,421)At end of year 16,721 1,912 10,068 – 1,368 30,069Net book valueAt 29 February 2012 45,781 1,718 10,738 65,301 3,427 126,965Net book valueAt 28 February 2011 58,387 2,791 16,583 69,777 2,306 149,84456<strong>Advanced</strong> <strong>Computer</strong> <strong>Software</strong> <strong>Group</strong> <strong>plc</strong><strong>Annual</strong> Report <strong>2013</strong>
12 Intangible assets continuedImpairment tests for cash-generating units containing goodwill.The goodwill on the balance sheet relates to the acquisitions in the current and prior periods (Acquisition note 11)and is calculated as the total consideration paid less the fair value of the net assets acquired.This goodwill was tested for impairment as at 28 February <strong>2013</strong> following IAS36 criteria.Management compared the carrying value of each CGU to the value in use, to confirm that no impairment ofgoodwill is necessary. The value in use was calculated using the subsidiary’s Board approved <strong>2013</strong>-14 budget andthe 2014-15 and 2015-16 forecasts, with a 4% growth assumption, for the following four years. Terminal values werecalculated, based on the perpetuity of cash generated. Forecasts and terminal values were discounted using thefollowing discount rates:365 Managed Services 21.0%Business Solutions 13.0%Health & Care 13.0%The pre-tax discount rates are based on the <strong>Group</strong>’s weighted average cost of capital, beta values and rates ofsimilar companies in the same industry adjusted to reflect management’s assessment of specific risks relatedto the subsidiary.No impairment is deemed necessary as a result of the testing performed as shown in the table below:Overview Business review Governance FinancialsCGU listingGoodwill£’000Intangibles£’000Excess VIU£’000 Sensitivity365 Managed Services 9,446 1,851 3,342 14,639 25,102 10,463 71%Business Solutions 52,842 49,709 1,855 104,406 128,304 23,898 23%Health & Care 15,021 1,991 701 17,713 71,077 53,364 301%Fixedassets£’000Carryingvalue£’000Value inuse (VIU)£’000The sensitivity shows the sensitivity of the excess over VIU in relation to the carrying value of the CGU.The key assumptions used and the approach to determine their value are:AssumptionDiscounted future cashflowsPerpetuity cashflowsHow determinedThese have been based on the Board approved forecastsfor 2015 and 2016 with a 4% growth assumption for thefollowing two years.2.5% growthSimilar assumptions and discount rates were used in the previous year ended 29 February 2012. No impairment wasdeemed necessary as shown in the table below:CGU listingGoodwill£’000Intangibles£’000Excess VIU£’000 Sensitivity365 Managed Services 5,382 1,614 2,258 9,254 23,138 13,884 150%Business Solutions 45,489 53,428 1,942 100,859 121,424 20,565 20%Health & Care 12,831 3,107 355 16,293 64,488 28,195 296%Fixedassets£’000Carryingvalue£’000Value inuse (VIU)£’000<strong>Advanced</strong> <strong>Computer</strong> <strong>Software</strong> <strong>Group</strong> <strong>plc</strong><strong>Annual</strong> Report <strong>2013</strong>57