8 Intangible assets

  Goodwill
£m		 Certification
costs and
participation
fees
£m
Development
expenditure
£m
Recoverable
engine costs
£m		 Software
and other
£m		 Total
£m
Cost:            
At January 1, 2006 751 284 381 265 44 1,725
Exchange adjustments (23) — — — — (23)
Additions — 91 41 64 29 225
On acquisitions of businesses 7 — — — 3 10
Disposals — (1) — — (6) (7)
At January 1, 2007 735 374 422 329 70 1,930
Exchange adjustments 59 1 — — — 60
Additions — 129 91 37 39 296
On acquisitions of businesses 7 — 1 — 1 9
Disposals — — — — (1) (1)
At December 31, 2007 801 504 514 366 109 2,294
             
Accumulated amortisation and impairment:            
At January 1, 2006 — 138 116 146 10 410
Provided during the year (charged to cost of sales) — 5 16 30 9 60
At January 1, 2007 — 143 132 176 19 470
Provided during the year (charged to cost of sales) — 7 18 28 10 63
At December 31, 2007 — 150 150 204 29 533
Net book value at
December 31, 2007		 801 354 364 162 80 1,761
Net book value at
December 31, 2006		 735 231 290 153 51 1,460
Net book value at
January 1, 2006		 751 146 265 119 34 1,315

Goodwill

In accordance with the requirements of IAS 36 Impairment of Assets, goodwill is allocated to the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the business combination that gave rise to the goodwill as follows:

Cash-generating unit (CGU) or group of CGUs.
  Primary reporting segment 2007 £m 2006 £m
Rolls-Royce Deutschland Ltd & Co KG Civil aerospace 203 186
Commercial marine - arising from the acquisition of Vinters plc Marine 514 470
Energy - arising from the acquisition of Rolls-Royce Energy Systems Inc. Energy 54 55
Other Various 30 24
    801 735

Goodwill has been tested for impairment during 2007 on the following basis:

  • The carrying value of goodwill has been assessed by reference to value in use. Values in use have been estimated using cash flows from the most recent forecasts prepared by management. Given the long-term nature of the business in which the Group operates, these typically forecast the next ten years. Growth rates for the period not covered by the forecasts are based on a range of growth rates that reflect the products, industries and countries in which the relevant CGU or group of CGUs operate.
  • The key assumptions on which the cash flow projections for the most recent forecast are based are discount rates, growth rates and the impact of foreign exchange rates on the relationship between selling prices and costs.
  • The pre-tax cash flow projections have been discounted at 12.75 per cent, based on the Group's weighted average cost of capital.

Back to top