AstraZeneca Annual Report and Form 20-F Information 2008

Notes to the Financial Statements (Group)

• 6 Product revenue information
• 7 Property, plant and equipment
• 8 Goodwill
• 9 Intangible assets
• 10 Other investments

8 Goodwill

	2008  $m	2007  $m	2006  $m
Cost At 1 January	10,225	1,430	1,280
Additions through business combinations	–	8,757	116
Exchange adjustments	(14)	38	34
At 31 December	10,211	10,225	1,430
Amortisation and impairment losses At 1 January	341	333	327
Exchange adjustments	(4)	8	6
At 31 December	337	341	333
Net book value at 31 December	9,874	9,884	1,097

Significant assets

	Description	Carrying value  $m	Remaining amortisation  period
Goodwill arising from the acquisition of MedImmune	Goodwill	8,757	Not amortised
Goodwill in the US	Goodwill	707	Not amortised

For the purpose of impairment testing of goodwill, the Group is regarded as a single cash-generating unit.

The recoverable amount is based on value in use using discounted risk-adjusted projections of the Group’s pre-tax cash flows over 10 years, a period reflecting the average patent-protected lives of our current products. The projections include assumptions about product launches, competition from rival products and pricing policy as well as the possibility of generics entering the market. In setting these assumptions we consider our past experience, external sources of information (including information on expected increases and ageing of the populations in our established markets and the expanding patient population in newer markets), our knowledge of competitor activity and our assessment of future changes in the pharmaceutical industry. The 10 year period is covered by internal budgets and forecasts. Given that internal budgets and forecasts are prepared for all projections, no general growth rates are used to extrapolate internal budgets and forecasts for the purposes of determining value in use. No terminal value is included as the cash flows are more than sufficient to establish whether an impairment exists.

In arriving at value in use, we disaggregate our projected pre-tax cash flows into groups reflecting similar risks and tax effects. For each group of cash flows we use an appropriate discount rate reflecting those risks and tax effects. In arriving at the appropriate discount rate for each group of cash flows, we adjust AstraZeneca’s post-tax weighted average cost of capital (7.6% for 2008) to reflect the impact of risks and tax effects. The weighted average pre-tax discount rate we used was approximately 11%.

As a cross check, we compare our market capitalisation to the book value of our net assets and this indicates significant surplus at 31 December 2008.

No goodwill impairment was identified.

The Group has also performed sensitivity analysis calculations on the projections used and discount rate applied. The Directors have concluded that, given the significant headroom that exists, and the results of the sensitivity analysis performed, there is no significant risk that reasonable changes in any key assumptions would cause the carrying value of goodwill to exceed its value in use.

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