- Financial Statements
Notes to the Consolidated Financial Statements
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for the year to 31 December 2007
11. Goodwill
| £m | |
| Cost and carrying amount | |
| At 1 January 2006 | 363.9 |
| Changes in exchange rates | (0.8) |
| At 31 December 2006 | 363.1 |
| Changes in exchange rates | (0.1) |
| Acquired on acquisition of George Wimpey Plc | 336.8 |
| At 31 December 2007 | 699.8 |
The Group tests goodwill annually for impairment or more frequently if there are indicators that goodwill might be impaired.
Goodwill of £694.3m (2006: £357.5m) is allocated to the UK Housing business. Goodwill of £5.5m (2006: £5.6m) is allocated to the US Housing business. The recoverable amount in respect of UK Housing has been determined on the basis of the business' value in use. The value in use is the present value of the future cash flows expected to be derived from the cash-generating unit over the next 20 years. Key assumptions used in the calculation are:
- Gross margins are based upon past experience and latest forecasts which incorporate expectations of future changes in the market.
- Growth rate applied for the period beyond three years is 0 per cent.
- A pre-tax discount rate of 12 per cent based on the Group's weighted average cost of capital.
As a result of this review no impairment was recorded.