Year ended 31 July 2006
11. Intangible assets: goodwill
| £m | |
|---|---|
| Cost and net book value | |
| At 1 August 2004 | 666 |
| Exchange rate adjustment | 31 |
| Additions | 120 |
| Disposals | (2) |
| At 31 July 2005 | 815 |
| Exchange rate adjustment | (29) |
| Additions | 387 |
| Disposals | - |
| At 31 July 2006 | 1,173 |
The carrying value of goodwill by segment is as follows:
| 2006
£m |
2005 £m |
|
|---|---|---|
| UK and Ireland | 410 | 219 |
| France | 153 | 135 |
| Central Europe | 61 | 50 |
| Europe | 624 | 404 |
| North America | 549 | 411 |
| Group | 1,173 | 815 |
All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash generating units (CGUs). These are independent sources of income streams and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes, which may be at country, divisional, brand or regional level. Goodwill arising on business combinations after 1 August 2004 has been allocated to the CGUs that are expected to benefit from that business combination.
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amounts of the CGUs are determined from value in use calculations. These calculations use cash flow projections based on five year financial forecasts approved by management. The key assumptions for these forecasts are those regarding revenue growth, net margin and the level of working capital required to support trading, which management estimates based on past experience and expectations of future changes in the market. To prepare value in use calculations, the cash flow forecasts are extrapolated after the five-year period at the estimated average long-term inflation rate for each market (ranging from 1% to 3%) and discounted back to present value. The key assumption is the discount rate, which uses an estimate of the Group's weighted average cost of capital, based on the three-month historic volatility of Wolseley shares and on benchmark interest rates, adjusted for the risk attributable to individual CGUs.
Impairment tests were performed for all CGUs during the year ended 31 July 2006. No impairments were identified.
