Note 8. Goodwill

Goodwill comprises the following:


(in millions)	Fuel Specialties			Active Chemicals			Octane Additives			Total
At January 1, 2010
Gross cost	$	117.8		$	30.4		$	526.1		$	674.3
Accumulated Octane Additives segment goodwill impairment losses		0.0			0.0			(229.8	)		(229.8	)

		117.8			30.4			296.3			444.5
Exchange effect		(0.2	)		0.0			0.0			(0.2	)
Impairment of Octane Additives segment goodwill		0.0			0.0			(2.2	)		(2.2	)

At December 31, 2010		117.6			30.4			294.1			442.1

Gross cost		117.6			30.4			526.1			674.1
Accumulated Octane Additives segment goodwill impairment losses		0.0			0.0			(232.0	)		(232.0	)

		117.6			30.4			294.1			442.1

Accumulated amortization – at January 1, 2010		(8.7	)		(0.3	)		(289.5	)		(298.5	)
Exchange effect		0.0			0.0			0.0			0.0

Accumulated amortization – at December 31, 2010		(8.7	)		(0.3	)		(289.5	)		(298.5	)

Net book amount – at December 31, 2010	$	108.9		$	30.1		$	4.6		$	143.6

At January 1, 2011
Gross cost	$	117.6		$	30.4		$	526.1		$	674.1
Accumulated Octane Additives segment goodwill impairment losses		0.0			0.0			(232.0	)		(232.0	)

		117.6			30.4			294.1			442.1
Exchange effect		(0.1	)		0.0			0.0			(0.1	)
Impairment of Octane Additives segment goodwill		0.0			0.0			(2.0	)		(2.0	)
At December 31, 2011		117.5			30.4			292.1			440.0

Gross cost		117.5			30.4			526.1			674.0

Accumulated Octane Additives segment goodwill impairment losses		0.0			0.0			(234.0	)		(234.0	)

		117.5			30.4			292.1			440.0

Accumulated amortization – at January 1, 2011		(8.7	)		(0.3	)		(289.5	)		(298.5	)
Exchange effect		0.0			0.0			0.0			0.0

Accumulated amortization – at December 31, 2011		(8.7	)		(0.3	)		(289.5	)		(298.5	)

Net book amount – at December 31, 2011	$	108.8		$	30.1		$	2.6		$	141.5

The Company's reporting units, the level at which goodwill is tested for impairment, are consistent with the reportable segments identified in Note 3: Fuel Specialties, Active Chemicals and Octane Additives. All of the components in each segment (including products, markets and competitors) have similar economic characteristics and therefore the segments reflect the lowest level at which operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.

The Company tests goodwill annually for impairment, or between years if events occur or circumstances change which suggest that an impairment may have occurred.

To determine the fair value of each of our segments we utilize a discounted cash flow methodology based on the forecasted future after-tax cash flows from operations for each since we believe this provides the best approximation of fair value. This methodology requires us to make assumptions and estimates including those in respect of future revenue growth and gross margins, which are based upon our long range plans, and the Company's weighted average cost of capital. Our long range plans are regularly updated as part of our planning processes and are reviewed and approved by management and our Board of Directors. We assume terminal values for the Fuel Specialties and Active Chemicals reporting units which are added to the present value of the relevant forecasted future cash flows. We assume no terminal value for the Octane Additives reporting unit beyond its estimated future life. The discounted cash flow methodology does not assume a control premium. We use a discount rate equivalent to the Company's weighted average cost of capital which is estimated by reference to the overall after-tax rate of return required by equity and debt market participants in the Company. We assign assets and liabilities, including deferred taxes and goodwill, to our reporting units if the asset or liability relates to the operations of that reporting unit and is included in determining the fair value of the reporting unit. Cash and debt obligations are excluded from the carrying value of our reporting units.

In 2011 some of the assumptions and estimates underpinning our discounted cash flows were revised as part of our planning processes although the methodology was unchanged. The most significant revisions were that the Company's weighted average cost of capital was changed to reflect the changing proportion of debt to equity funding of the Company and effective October 1, 2011, the Company extended its estimate for the future life of the Octane Additives segment from December 31, 2012 to December 31, 2013.

The Company elected to perform its annual tests in respect of Fuel Specialties and Active Chemicals goodwill as at December 31 each year. At December 31, 2011 we had $108.8 million and $30.1 million of goodwill relating to our Fuel Specialties and Active Chemicals segments, respectively. At this date we performed annual impairment tests and concluded that there had been no impairment of goodwill in respect of those reporting segments.

In light of the continuing decline in the Octane Additives market globally, as the Company makes sales of Octane Additives in each quarter, the remaining sales and corresponding cash flows that can be derived from the Octane Additives segment are reduced, and accordingly the fair value of the Octane Additives reporting unit is reduced. As a result, the Company determined that quarterly impairment tests be performed from January 1, 2004 and any impairment charge arising be recognized in the relevant quarter. As a result of the Octane Additives impairment tests performed during 2011, 2010 and 2009 impairment charges of $2.0 million, $2.2 million and $2.2 million, respectively, have been recognized. These charges are non-cash in nature and have no impact on taxation. There is $2.6 million of goodwill remaining at December 31, 2011 which relates to the Octane Additives segment. Given the quantum and predictability of the remaining future cash flows from the Octane Additives segment, the Company expects goodwill impairment charges to be recognized in the income statement on an approximate straight-line basis to December 31, 2013.

The table below presents the impact a change in the following significant assumptions would have had on our impairment charge recognized at December 31, 2011 (in respect of goodwill, other intangibles and property, plant and equipment) assuming all other assumptions and factors remained constant:


(in millions)				Approximate Increase/(Decrease) to Impairment Charge
	Change			Fuel Specialties		Active Chemicals		Octane Additives
Credit-adjusted risk-free rate		+10	%	$	0.0	$	0.0	$	0.5
Credit-adjusted risk-free rate		-10	%		0.0		0.0		(0.5	)
After-tax cash flows		+10	%		0.0		0.0		(4.7	)
After-tax cash flows		-10	%	$	0.0	$	0.0	$	4.7

We believe that the assumptions used in our annual and quarterly impairment tests are reasonable, but that they are judgmental, and variations in any of the assumptions may result in materially different calculations of impairment charges, if any.