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FY 2009 FY 2010 FY 2011<br />
(£m)<br />
Steel ..................................................... 374.4 388.7 383.1<br />
Foundry ................................................... 211.1 219.2 216.0<br />
Total goodwill ............................................. 585.5 607.9 599.1<br />
17.4 Analysis of other intangible assets<br />
Other intangible assets arose in FY 2008 on the acquisition of Foseco <strong>plc</strong> and are being amortised on<br />
a straight-line basis over their estimated useful lives. The assets acquired and their remaining useful<br />
lives are shown below.<br />
Remaining<br />
useful life<br />
Net book value<br />
as at<br />
31 December 2011<br />
(Years) (£m)<br />
Foseco:<br />
– Customer relationships (useful life: 20 years) ................... 16.3 97.8<br />
– Trade name (useful life: 20 years) ............................ 16.3 58.8<br />
– Intellectual property rights (useful life: 10 years) ................ 6.3 50.2<br />
Total .................................................... 206.8<br />
18 Impairment of tangible and intangible assets<br />
18.1 Accounting policy<br />
At each balance sheet date, the Directors review the carrying value of <strong>Vesuvius</strong>’ tangible and other<br />
intangible assets to determine whether there is any indication that those assets have suffered an<br />
impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to<br />
determine the extent, if any, of the impairment loss. Where it is not feasible to estimate the<br />
recoverable amount of an individual asset, the Directors estimate the recoverable amount of the CGU<br />
to which the asset belongs.<br />
Goodwill acquired in a business combination is allocated to each of <strong>Vesuvius</strong>’ CGUs expected to<br />
benefit from the synergies of the combination and the Directors carry out annual impairment testing<br />
of the carrying value of its CGUs to assess the need for any impairment of the carrying value of<br />
goodwill and other intangible and tangible assets associated with these CGUs.<br />
For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of<br />
(i) its fair value less costs to sell and (ii) its value in use. If the recoverable amount of a CGU is less<br />
than the carrying amount of that CGU, the resulting impairment loss is allocated first to reduce the<br />
carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU pro<br />
rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for<br />
goodwill is not reversed in a subsequent period. An impairment loss recognised in a prior year for an<br />
asset other than goodwill may be reversed where there has been a change in the estimates used to<br />
measure the asset’s recoverable amount since the impairment loss was recognised. The value in use<br />
calculations of <strong>Vesuvius</strong>’ CGUs are based on detailed business plans covering a three year period<br />
from the balance sheet date, higher level assumptions covering a further two year period and<br />
perpetuity calculations beyond this five-year projection period. The cash flows in the calculations are<br />
discounted to their current value using pre-tax discount rates.<br />
18.2 Key assumptions<br />
The key assumptions used in determining value in use are return on sales, return on net sales value,<br />
growth rates and discount rates. Return on sales and return on net sales value assumptions are based<br />
on historical financial information, adjusted to factor in the anticipated impact of restructuring and<br />
rationalisation plans already announced at the balance sheet date.<br />
Growth rates are determined with reference to: current market conditions; external forecasts and<br />
historical trends for <strong>Vesuvius</strong>’ key end-markets of steel production and foundry castings; and<br />
expected growth in output within the industries in which each major <strong>Vesuvius</strong> business unit operates.<br />
A perpetuity growth rate of 2.5 per cent. (FY 2010 and FY 2009: 3 per cent.) has been applied based<br />
on the long-term growth rates experienced in <strong>Vesuvius</strong>’ end-markets and external forecasts.<br />
<strong>Vesuvius</strong>’ projections are based on historical trends and external forecasts.<br />
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