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Integrated Report 2016
ANNUAL FINANCIAL STATEMENTS
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11. INTANGIBLE ASSETS
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Rawmaterials price inflation
Estimates are obtained from published indices for the countries from which materials are sourced, as well as data relating to specific
commodities. Forecast figures are used if data is publicly available, otherwise past actual raw materials price movements of 5% has been
used as an indicator of the future price movements.
Market share assumptions
These assumptions are important because, as well as using industry data for growth rates, management assesses how the Group’s
position, relative to its competitors, might change over the budget period. Market share is considered separately for each asset to
determine the impact on the future cash flows.
Growth rate estimates
The growth rate used beyond the next 10-year period is management’s best estimate taking market conditions into account.
Sensitivity to change in assumptions
The implications of the key assumptions for the recoverable amount are discussed below:
Gross margin
A decreased demand and cost input inflation in excess of selling price increases can lead to a decline in the gross margin which could
result in a further impairment of intangibles.
Discount rates
A material increase in excess of 4% in the pre-tax discount rate would result in impairment.
Rawmaterials price inflation
Management has considered the possibility of greater than forecast increases in raw material price inflation. If prices of raw materials
increase greater than the forecast price inflation and the Group is unable to pass on, or absorb these increases through efficiency
improvements, then the Group will have a further impairment.
Market share assumptions
Although management expects the Group’s market share to be stable over the forecast period, a material decline in the market share
would result in a further impairment.
Growth rate estimates
Management acknowledges that new entrants into the market could have a significant impact on growth rate assumptions. This is not
expected to have a material adverse impact on forecasts, but could yield a reasonably possible alternative to the estimated long-term
growth rate which could result in impairment.