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Impairment of ICI intangibles

Goodwill and other intangibles with indefinite useful lives are tested, per business unit (one level below segment level), for impairment in the fourth quarter or whenever an impairment trigger exists. As a consequence of the current market conditions and the continuing lack of visibility of future global demand, we have assessed the recoverable amount of our assets against lower growth rates which we now expect. This resulted in a non-cash impairment charge of €1.2 billion after tax, covering the value of ICI intangibles (mainly goodwill) related to the Decorative Paints (€0.8 billion) and National Starch businesses (€0.4 billion).

The impairment test is based on cash flow projections of the five-year operational plan as approved by the Board of Management. The key assumptions used in the projections are:

  • Revenue growth: based on actual experience, an analysis of market growth and the expected development of market share
  • Margin development: based on actual experience and management’s long-term projections.

Revenue growth and margin development projections are extrapolated beyond this five-year explicit forecast period for another five years with reduced growth rates, except for the emerging markets. The average of the revenue growth rates used for the explicit forecast period, respectively the subsequent five-year period amount to:

Average revenue growth rates
per forecast period per segment

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in %/year




2009 – 2013

2014 – 2018




Decorative Paints



Performance Coatings



Specialty Chemicals



For almost all business units, a terminal value was calculated using a long-term average market growth rate that did not exceed 2 percent.

The estimated post-tax cash flows are discounted to their present value using an adjusted post-tax weighted average cost of capital. The discount rates are determined for each business unit and range from 7.3 percent to 11.2 percent, with an average of 8.1 percent.

The outcome of a sensitivity analysis was that reasonably possible adverse changes in key assumptions of 100 basispoints (lower growth rates and higher discount rates respectively) would not result in significant other conclusions for the impairment test for businesses not affected by the current impairment charge.

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