Notes to the financial statements

for the year ended 31 March 2012

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14 Goodwill

Consolidated £’000
Cost and carrying amount
At 1 April 2011 and at 31 March 2012 85,272

Goodwill acquired in a business combination is allocated at the date of acquisition to the CGU that is 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. The key assumptions for these value in use calculations are those regarding discount rates and growth rates . The Directors estimate discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the individual CGU.

The Group prepares cash flow forecasts using the current operating budget approved by the Directors which covers a five-year period and an appropriate extrapolation of cash flows beyond this.

The carrying amount of goodwill of £85,272,000 (2011: £85,272,000) has been allocated across multiple CGUs as follows:

CGUs £’000
Eclipse 7,862
Kcom 72,324
Smart421 5,086
At 31 March 2012 85,272

An impairment review was undertaken at the year end in accordance with IAS 36 and no impairment was required. Furthermore, this review indicates that a reasonable possible change in a key assumption would not remove any remaining headroom in the impairment calculation.

The discount rate and growth rate (in perpetuity) used for value in use calculations are as follows:

2012 2011
Discount rate (pre-tax) % 10.7 10.2
Growth rate (in perpetuity) % 1.0 1.0