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13. Intangible assets

  2008 2007


US$ million
Licences
and other
intangibles

Goodwill(1)


Total
Licences
and other
intangibles

Goodwill(1)


Total
Cost
At 1 January 15 1,546 1,561 88 2,101 2,189
Acquired through business combinations 50 1,657 1,707 51 51
Additions 24 24 3 6 9
Transfer to assets held for sale (23) (23)
Disposal of assets (2) (2)
Disposal and demerger of businesses(2) (78) (633) (711)
Reclassifications 15 (15)
Currency movements (2) (250) (252) 2 23 25
At 31 December 102 2,915 3,017 15 1,546 1,561
Accumulated amortisation
At 1 January 5 5 55 55
Charge for the year(3) 4 4 5 5
Impairments 2 2
Disposal and demerger of businesses(2) (57) (57)
Currency movements 2 2
At 31 December 11 11 5 5
Net book value 91 2,915 3,006 10 1,546 1,556
(1)
The goodwill balances provided are net of cumulative impairment charges of $45 million as at 31December 2008 (2007: $45 million).
(2)
2007 includes cost of $711 million and accumulated amortisation of $57 million relating to the demerger of Mondi.
(3)
Includes amounts in respect of discontinued operations of nil (2007: $3 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 primary reporting segments set out below. Any goodwill associated with CGUs subsumed within these primary segments is not significant when compared to the goodwill of the Group, other than in Ferrous Metals and Industries where the material components of goodwill are split out below:

US$ million 2008 2007
Platinum 230 230
Base Metals 208 162
Ferrous Metals and Industries
   
Anglo Ferrous Brazil 1,556
Other Ferrous Metals and Industries 73 75
Coal 88 88
Industrial Minerals 760 991
  2,915 1,546

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 and assume constant long term real prices for sales revenue.

Cash flow projections are discounted using pre-tax discount rates equivalent to a real post tax discount rate of 6% (2007: 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, currency exchange rates, estimates of costs to produce reserves and future capital expenditure. Management believes that any reasonably possible change in the key assumptions 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 provisionally determined goodwill totalling $1.6 billion. The recoverable amount of this goodwill has been reviewed with reference to fair value (less costs to sell) as informed by the market price paid by the Group (underpinned by a discounted cash flow model which has been updated to reflect latest available information).

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