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## SECTION 2.3 Impairment 

## 2.3.4  Sensitivity test 

Sensitivity tests have been performed to de ter- mine the lowest growth rates and/or highest dis- count rates that can occur in the cash-generating units and for trademarks with indefinite useful life without resulting in any impairment loss. 

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In 2013 several of the WACC rates in Western Europe increased but the region was still im- pacted by relatively low risk-free interest rates due to the current economic climate and associ- ated outlook. In addition to the impairment test and to ensure that a potential impairment is not overlooked, the Group prepares an additional impairment sensitivity calculation. This sensi- tivity calculation tests the impact of a higher interest rate, reflecting a reasonable assumption of a higher risk-free interest rate level. The ad- ditional sensitivity test did not identify potential impairments. 

## 2.3  SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 

## GOODWILL 

The impairment test of goodwill is per- formed for the cash-generating units to which goodwill is allocated. The cash- generating units are determined based on the management structure, linkage of the cash flows between entities and the individual entities’ integration in regions or sub-regions. The structure and cash- generating units are reassessed each year. 

The impairment test of goodwill for each cash-generating unit calculates the recoverable amount, corresponding to the discounted value of the expected future free cash flow (value in use) based on budgets and target plans for the next three years and projections for subsequent years (the terminal period). Key parameters include assumptions about revenue growth, operating margin, future capital expendi- ture and growth expectations beyond the next three years. Budgets and target plans do not incorporate the effect of future restructurings and non-contracted capacity increases. 

Budgets and target plans for the next three years are based on concrete commercial initiatives, and the risks associated with the key parameters are assessed and incorpo- rated in expected future free cash flows. The impairment test is based on scenarios for possible future cash flows. Potential upsides and downsides identified during the budget process and in the daily business are reflected in the future cash flow scenarios 

for each individual cash-generating unit. The scenarios reflect, among other things, different assumptions about combinations of market, price and input cost developments. Projections for the terminal period are based on general expectations and risks, taking into account the general growth expecta- tions for the brewing industry in the relevant segments. The growth rates applied are not expected to exceed the average long-term growth rate for the Group’s individual geo- graphical segments. 

In calculating the recoverable amounts, the Group uses pre-tax discount rates that reflect the risk-free borrowing rate in each particular geographical segment. 

## TRADEMARKS 

The impairment test of trademarks is performed using the relief from royalty method and is based on expected future free cash flows from the Group’s calcu- lated royalty income generated by the individual trademark for the next 20 years and projections for subsequent years. Key assumptions include revenue, royalty rate, expected useful life, growth rate and a theoretically calculated tax effect. A post- tax discount rate is used which reflects the risk-free interest rate with the addition of a risk premium associated with the individu- al trademark. 

Royalty income generated by the trade- mark is based on the Group’s total income and earned globally, i.e. the income is also 

earned outside the segment that owns the trademark. If external licence agreements for the individual trademark already exist, the market terms of such agreements are considered when assessing the royalty rate which the trademark is expected to generate in a transaction with independent parties. 

For each individual trademark a 20-year curve is projected, reflecting the expected future growth in revenue per year. Depend- ing on the expectations for the individual trademark, the growth in individual years is above, equal to or below the current inflation level in the countries where the individual trademark is sold. The curve for each individual trademark is determined with reference to its market position, the overall condition of the markets where the trademark is marketed, as well as regional and national macroeconomic trends etc. For some trademarks, national, regional and international potential has been linked to the value of the trademark, and investments in terms of product development and mar- keting strategy are expected to be made. For these trademarks the expected growth is generally higher than for comparable trademarks, especially at the beginning of the 20-year period. The growth rates de- termined for the terminal period are in line with the expected rate of inflation. 

Management assesses the market, market position and strength to determine the use- ful life of the trademarks. When the value of well-established trademarks is expected 

