20. Goodwill
(a) Movements in goodwill
| 2022 US$m | 2021 US$m | |
| Cost | ||
| At 1 April | 5,314 | 4,543 |
| Differences on exchange | 40 | 114 |
| Additions through business combinations (note 41(a)) | 469 | 657 |
| Disposal of business (note 43) | (33) | — |
| At 31 March | 5,790 | 5,314 |
| Accumulated impairment | ||
| At 1 April | 53 | — |
| Impairment charge | — | 53 |
| At 31 March | 53 | 53 |
| Net book amount at 1 April | 5,261 | 4,543 |
| Net book amount at 31 March | 5,737 | 5,261 |
(b) Goodwill by CGU
| 2022 US$m | 2021 US$m | |
| North America | 3,546 | 3,133 |
| Latin America | 760 | 611 |
| UK and Ireland | 694 | 718 |
| EMEA | 649 | 711 |
| Asia Pacific | 88 | 88 |
| At 31 March | 5,737 | 5,261 |
(c) Key assumptions for value-in-use calculations by CGU
| 2022 | 2021 | ||||
| Discount rate % p.a. | Long-term growth rate % p.a. | Discount rate % p.a. | Long-term growth rate % p.a. | ||
| North America | 9.3 | 2.3 | 9.1 | 2.3 | |
| Latin America | 13.5 | 4.7 | 12.8 | 4.7 | |
| UK and Ireland | 9.1 | 2.3 | 8.9 | 2.3 | |
| EMEA | 10.6 | 3.9 | 10.4 | 3.9 | |
| Asia Pacific | 8.6 | 5.3 | 9.4 | 5.3 | |
As indicated in note 5(a), value-in-use calculations are underpinned by financial budgets looking forward up to five years, which continue to reflect our current assessment of the impact of climate change and associated commitments the Group has made. Management’s key assumptions in setting the financial budgets for the initial five-year period were as follows:
- forecast revenue growth rates were based on past experience, adjusted for the strategic opportunities within each CGU; the forecasts typically used average nominal growth rates of up to 14%;
- Benchmark EBIT was forecast based on historic margins. These were expected to improve modestly throughout the period in the mature CGUs, and improve annually by a low- to mid-single-digit amount in EMEA and Asia Pacific; and
- forecast Benchmark operating cash flow conversion rates were based on historical experience and performance expectations with rates of up to 90% unless a Benchmark EBIT loss was forecast. In these circumstances, cash outflows were forecast to exceed the Benchmark EBIT loss.
Further details of the principles used in determining the basis of allocation by CGU and annual impairment testing are given in note 5(a).
(d) Results of annual impairment review as at 31 March 2022
The review for the EMEA CGU indicated that the recoverable amount exceeded the carrying value by US$201m and that any decline in estimated value-in-use in excess of that amount would result in the recognition of an impairment charge. The sensitivities, which result in the recoverable amount being equal to the carrying value, can be summarised as follows:
- an absolute increase of 1.4 percentage points in the discount rate, from 10.6% to 12.0%; or
- an absolute reduction of 1.8 percentage points in the long-term growth rate, from growth of 3.9% to growth of 2.1%; or
- a reduction of 4.7 percentage points in the forecast terminal profit margin, from 22.9% to 18.2%. A reduction in the annual margin improvement of approximately 0.9 percentage points per year over the five-year forecast period would also reduce the recoverable amount to the carrying value.
The review for the Asia Pacific CGU indicated that the recoverable amount exceeded the carrying value by US$154m and that any decline in estimated value-in-use in excess of that amount would result in the recognition of an impairment charge. The sensitivities, which result in the recoverable amount being equal to the carrying value, can be summarised as follows:
- an absolute increase of 2.4 percentage points in the discount rate, from 8.6% to 11.0%; or
- an absolute reduction of 2.9 percentage points in the long-term growth rate, from growth of 5.3% to growth of 2.4%; or
- a reduction of 3.5 percentage points in the forecast terminal profit margin, from 8.9% to 5.4%. A reduction in the annual margin improvement of approximately 0.7 percentage points per year over the five-year forecast period would also reduce the recoverable amount to the carrying value.
The recoverable amount of all other CGUs exceeded their carrying value, on the basis of the assumptions set out in the table in note 20(c) and any reasonably possible changes thereof.