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Notes to the financial statements

13. Intangible assets

  2009   2008
US$ million Licences
and other intangibles
Goodwill(1) Total   Licences
and other intangibles
Goodwill(1) Total
Cost              
At 1 January 102 2,915 3,017   15 1,546 1,561
Acquired through business combinations - 19 19   50 1,657 1,707
Additions 31 - 31   24 - 24
Transfer to assets held for sale (12) (8) (20)   - (23) (23)
Disposal of assets (6) - (6)   - - -
Impairments - (312) (312)   - - -
Reclassifications - - -   15 (15) -
Currency movements 24 80 104   (2) (250) (252)
At 31 December 139 2,694 2,833   102 2,915 3,017
Accumulated amortisation            
At 1 January 11 - 11   5 - 5
Charge for the year 14 - 14   4 - 4
Impairments 39 - 39   2 - 2
Transfer to assets held for sale (7) - (7)   - - -
Disposal of assets (2) - (2)   - - -
Currency movements 2 - 2   - - -
At 31 December 57 - 57   11 - 11
Net book value 82 2,694 2,776   91 2,915 3,006
(1)
The goodwill balances provided are net of cumulative impairment charges of $357 million at 31 December 2009 (2008: $45 million).

The increase in goodwill relating to acquisition of subsidiaries represents the excess of purchase price over the fair value of the net assets, including mining reserves, of businesses acquired. Further detail is given in note 32.

Impairment tests for goodwill

Goodwill is allocated for impairment testing purposes to cash generating units (CGUs) which reflect how it is monitored for internal management purposes. This allocation largely represents the Group's segments set out below. Any goodwill associated with CGUs subsumed within these segments is not significant when compared to the goodwill of the Group, other than in Iron Ore and Manganese and Other Mining and Industrial where the material components of goodwill are split out below:

US$ million 2009 2008(1)
Platinum 230 230
Copper 124 124
Iron Ore and Manganese    
Iron Ore Brazil 1,251 1,556
Thermal Coal 88 88
Other Mining and Industrial    
Tarmac 811 760
Other 190 157
  2,694 2,915
(1)
Due to the portfolio and management structure changes announced in October 2009, the segments have changed from those reported at 31 December 2008. Comparatives have been reclassified to align with current year presentation.

The recoverable amount of a CGU is determined based on a fair value or value in use calculation as appropriate. Value in use calculations use cash flow projections based on financial budgets and life of mine or non-mine production plans covering a five year period that are based on latest forecasts for commodity prices and exchange rates. Cash flow projections beyond five years are based on life of mine plans where applicable and internal management forecasts, assume constant long term real prices for sales revenue and are benchmarked on external sources of information for commodity prices and exchange rates.

Cash flow projections are discounted using pre-tax discount rates equivalent to a real post tax discount rate of 6% (2008: 6%), that have been adjusted for any risks that are not reflected in the underlying cash flows. Where the recoverability of goodwill allocated to a CGU is supported by fair value less costs to sell, market observable data (in the case of listed subsidiaries, market share price at 31 December of the respective listed entity) or detailed cash flow models are used.

Expected future cash flows are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as commodity prices, discount rates, exchange rates, estimates of costs to produce reserves and future capital expenditure. Management believes that any reasonably possible change in a key assumption on which the recoverable amount is based would not cause the carrying amounts to exceed their recoverable amounts.

The Group acquired a controlling interest in Anglo Ferrous Brazil SA on 5 August 2008 resulting in the recognition of $1.6 billion goodwill. Following the completion of a detailed study in 2009, goodwill attributable to the Amapá system, with a carrying value of $305 million has been impaired. The recoverable amount of this goodwill has been reviewed with reference to fair value (less costs to sell) determined using discounted cash flows.

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Annual Report 2009