15. Intangible Assets  |  continued Impairment testing methodology and results Key sources of estimation uncertainty Significant goodwill amounts Goodwill is subject to impairment testing on an annual basis. The recoverable amount of each of the 24 CGUs is determined based on a value-in-use  computation, which is the only methodology applied by the Group and which has been selected due to the impracticality of obtaining fair value less costs to sell  measurements for each reporting period. The cash flow forecasts are based on a five-year strategic plan document formally approved by senior management  and the Board of Directors and specifically exclude the impact of future development activity. These cash flows are projected forward for an additional five years  to determine the basis for an annuity-based terminal value, calculated on the same basis as the Group’s acquisition modelling methodology. As in prior years, the  terminal value is based on a 20-year annuity, with the exception of certain long-lived cement assets, where an assumption of a 40-year annuity has been used.  The projected cash flows assume zero growth in real cash flows beyond the initial evaluation period. The value-in-use represents the present value of the future  cash flows, including the terminal value, discounted at a rate appropriate to each CGU. The real pre-tax discount rates used range from 7.6% to 12.6% (2011:  7.0% to 11.8%); these rates are in line with the Group’s estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model. The cash flows have been arrived at taking account of the Group’s strong financial position, its established history of earnings and cash flow generation and the  nature of the building materials industry, where product obsolescence is very low. However, expected future cash flows are inherently uncertain and are therefore  liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are subjective  and include projected EBITDA (as defined)* margins, net cash flows, discount rates used and the duration of the discounted cash flow model. The goodwill allocated to the Europe Products, Europe Distribution and the Oldcastle Building Products (Americas Products segment) CGUs accounts for between  10% and 20% of the total carrying amount of €4,240 million. The goodwill allocated to each of the remaining CGUs is less than 10% of the total carrying value in  all other cases. The additional disclosures required for the 3 CGUs with significant goodwill are as follows: Europe Products Europe Distribution Oldcastle Building Products 2012 2011 2012 2011 2012 2011 Goodwill allocated to the cash-generating unit at balance sheet date €679m €615m €634m €641m €469m €465m Discount rate applied to the cash flow projections (real pre-tax) 9.1% 9.6% 9.7% 9.7% 11.6% 11.5% Average EBITDA (as defined)* margin over the initial 5-year period 9.4% 11.6% 6.9% 7.3% 10.4% 10.7% Value-in-use (present value of future cash flows) €1,847m €2,193m €2,242m €2,306m €1,674m €1,669m Excess of value-in-use over carrying amount €140m €506m €684m €646m €260m €150m The key assumptions and methodology used in respect of these three CGUs are consistent with those described above. The values applied to each of the key  estimates and assumptions are specific to the individual CGUs and were derived from a combination of internal and external factors based on historical experience  and took into account the cash flows specifically associated with these businesses. The cash flows and 20-year annuity-based terminal value were projected in line  with the methodology disclosed above. Europe Distribution and Oldcastle Building Products are not included in the CGUs referred to in the “Sensitivity analysis” section. Given the magnitude of the excess  of value-in-use over carrying amount, and our belief that the key assumptions are reasonable, management believe that it is not reasonably possible that there  would be a change in the key assumptions such that the carrying amount would exceed the value-in-use. Consequently no further disclosures relating to sensitivity  of the value-in-use computations for the Europe Distribution or Oldcastle Building Products CGUs are considered to be warranted. Sensitivity analysis for Europe  Products is presented below. Sensitivity analysis Sensitivity analysis has been performed and results in additional disclosures in respect of 4 of the 24 CGUs. The key assumptions, methodology used and values  applied to each of the key assumptions for these cash-generating units are in line with those outlined above. These 4 CGUs had aggregate goodwill of €1,142  million at the date of testing. The table below identifies the amounts by which each of the following assumptions may either decline or increase to arrive at a zero  excess of the present value of future cash flows over the book value of net assets in the 4 CGUs selected for sensitivity analysis disclosures: Europe Products Remaining  3 CGUs Reduction in EBITDA (as defined)* margin 0.5 percentage points 0.7 to 1.3 percentage points Reduction in profit before tax 9.5% 6.0% to 9.5% Reduction in net cash flow 8.0% 5.7% to 7.7% Increase in pre-tax discount rate 1.2 percentage points 0.8 to 1.1 percentage points The average EBITDA (as defined)* margin for the aggregate of these 4 CGUs over the initial 5-year period was 10%. The aggregate value-in-use (being the present  value of the future net cash flows) was €3,072 million and the aggregate carrying amount was €2,842 million, resulting in an aggregate excess of value-in-use over  carrying amount of €230 million. *  EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of associates’ profit after tax. CRH 95