2.3  SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 2.3.4  Sensitivity test GOODWILL SECTION 2.3  Impairment 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. 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  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. Royalty income generated by the trade- mark is based on the Group’s total income  and earned globally, i.e. the income is also  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. In calculating the recoverable amounts,  the Group uses pre-tax discount rates that  reflect the risk-free borrowing rate in each  particular geographical segment. 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. 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  Consolidated financial statements SECTION 2: ASSET BASE AND RETURNS 78 Carlsberg Group Annual Report 2013 TRADEMARKS DKK million Growth  rate Discount rate, after tax 2013 Allowed decrease Allowed increase Goodwill 3.9 3.4 Trademarks 1.6 0.8 2012 Goodwill 3.7 3.2 Trademarks 0.6 0.3