84 ANNUAL REPORT 2015 CONSOLIDATED FINANCIAL STATEMENTS/NOTES NOTE 3.2 IMPAIRMENT TESTS Accounting policies Impairment is indicated where the carrying amount of an asset is greater than its recoverable amount through either use or sale. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use (cash-generating unit) that are largely independent of the cash inflows of other assets or cash-generating units. The cash-generating units are determined based on the management structure and the internal financial reporting. The cash-generating units are reassessed each year. The carrying amount of goodwill is tested for impairment together with the other non-current assets in the cash-generating unit to which the goodwill is allocated. The recoverable amount of goodwill is recognised as the present value of the expected future net cash flows from the cash-generating unit to which the goodwill is linked, discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and risks specific to the asset or cash-generating unit. Impairment of goodwill is recognised on a separate line in the income statement and is not reversed. The carrying amount of other non-current assets is assessed annually to determine whether there is any indication of impairment. The assets are measured on the balance sheet at the lower value of the recoverable amount and the carrying amount. The recoverable amount of other non-current assets is the higher value of the asset’s value in use and the market value (fair value), less expected disposal costs. The value in use is calculated as the present value of the estimated future net cash flows from the use of the asset or the cash-generating unit of which the asset is part of. An impairment loss on other non-current assets is recognised in the income statement under production costs, sales and distribution costs or administration costs, respectively. Impairment made is reversed to the extent that the assumptions and estimates that led to the impairment have changed. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Uncertainties and estimates Due to the nature of the group, significant estimates are made of anticipated cash flows together with an assessment of the long-term growth rate and profitability. Additionally, an assessment of a reasonable discount rate is made, reflecting the risks inherent in the asset or cash-generating unit. This naturally results in a degree of uncertainty. Changes in the future cash flow or discount rate estimates used may result in materially different values. Anticipated cash flows The anticipated cash flows are based on current forecasts and the strategy goals for 2017. It has been ensured that anticipated cash flows are not impaired in the strategy goals for 2020. Growth and profitability Goodwill is allocated primarily to our core markets, which in general are characterised by slightly increasing or stable volumes. The focus of our business is continual optimisation of the cost structure, specific costs (conversion cost and scalability) and use of capital. The aim of improving profitability and in turn adding value to the milk price. Our commercial focus is to increase branded volumes through continued product innovation, and further development of global and local brands. This will support increasing sales volumes due to an expected increase in milk intake from our owners. Discount rate A discount rate (WACC) is applied for the specific business areas based on assumptions about interest rates, tax rates and risk premiums. Note 3.2.a Impairment tests (EURm) 2015 Consumer UK Consumer Finland Consumer Sweden Other Total carrying amount at 31 December 2014 Consumer UK Consumer Finland Consumer Sweden Other Total carrying amount at 31 December APPLIED KEY ASSUMPTIONS CARRYING AMOUNT, DISCOUNT RATE, DISCOUNT RATE, GOODWILL NET OF TAX BEFORE TAX 550 7.2% 9.1% 40 6.1% 7.8% 24 6.3% 8.3% 64 6.3% 6.9% 678 524 40 17 64 645 7.8% 6.7% 7.1% 6.9% 10.0% 8.5% 9.3% 7.6%
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