Notes to the consolidated financial statements
Year ended 31 July 2009

14. Intangible assets – goodwill

	£m
Cost
At 1 August 2008	2,155
Exchange rate adjustment	250
Disposals and transfers	(356)
At 31 July 2009	2,049
Accumulated impairment losses
At 1 August 2008	160
Exchange rate adjustment	55
Impairment charge for the year	669
Disposals and transfers	(349)
At 31 July 2009	535
Net book amount at 31 July 2009	1,514

	£m
Cost
At 1 August 2007	1,892
Exchange rate adjustment	185
Additions	84
Disposals	(6)
At 31 July 2008	2,155
Accumulated impairment losses
At 1 August 2007	2
Exchange rate adjustment	5
Impairment charge for the year	153
At 31 July 2008	160
Net book amount at 31 July 2008	1,995

The carrying value of goodwill by segment is as follows:

	2009 £m	2008 £m
UK and Ireland	299	408
France	245	226
Nordic	475	760
Central and Eastern Europe	45	76
Europe	1,064	1,470
US plumbing and heating	365	305
Canada	85	79
North America plumbing and heating	450	384
North America loan services	–	–
North America	450	384
Discontinued operations	–	141
Group	1,514	1,995

All goodwill has arisen from business combinations. On transition to IFRS, the balance of goodwill as measured under UK GAAP was allocated to cash-generating units ("CGUs"). These are independent sources of income streams, and represent the lowest level within the Group at which the associated goodwill is monitored for management purposes, which may be at country, divisional, brand or regional level. Goodwill arising on business combinations after 1 August 2004 has been allocated to the CGUs that are 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. These calculations use cash flow projections based on five year financial forecasts approved by management. The key assumptions for these forecasts are those regarding revenue growth, net margin and the level of working capital required to support trading, which management estimates based on past experience and expectations of future changes in the market. To prepare value in use calculations, the cash flow forecasts are extrapolated after the five year period at an estimated average long-term nominal growth rate for each market (ranging from 1 per cent to 4 per cent), and discounted back to present value. The discount rate assumptions use an estimate of the Group’s weighted average cost of capital, based on the five year historic volatility of Wolseley shares and on benchmark interest rates, adjusted for the risk attributable to individual CGUs. The pre-tax discount rate ranges from 11 per cent to 14 per cent.

Impairment tests were performed for all CGUs during the year ended 31 July 2009. These impairment reviews have resulted in the recording of an impairment charge of £490 million in respect of continuing operations and £288 million in respect of discontinued operations relating to goodwill and acquired intangible assets held by the following businesses:

DT Group (Nordic)

DT Group has experienced a significant downturn in its markets and is forecasting this to continue over the short and medium terms, with a gradual recovery to levels of activity below those it experienced in recent years. As a result of reflecting these reduced expectations in its value in use calculations, the Group has recognised a goodwill impairment charge of £359 million
in respect of the Stark, Silvan and Starkki divisions of DT Group.

UK

Wolseley UK has experienced a significant deterioration in its markets in the year and is forecasting this to continue over the short and medium term. As a result of reflecting these reduced expectations in its value-in-use calculations, the Group has recognised a goodwill impairment charge of £109 million in respect of the Electric Center, Build Center, Brandon Hire and Encon divisions of UK and Ireland.

Benelux (Central and Eastern Europe)

The Group’s business in Benelux has performed below expectations at the time of the acquisition of the Centratec business in Belgium, and the Group has reappraised the likely levels of revenue and margin that can be achieved in the long term. An impairment loss of £22 million (goodwill £21 million and other intangible assets £1 million) has been calculated on a value-in-use basis.

Stock (discontinued operations)

Prior to its disposal, the Group announced its intention to exit the US Building Materials sector and performed an impairment review at that time. Accordingly, the Group regarded Stock as a single CGU and considered it appropriate to write off all the remaining goodwill and intangible assets of the business, resulting in an impairment charge of £288 million (goodwill £180 million and other intangible assets £108 million).

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