14. Goodwill


2013
£000
Cost and net book value
At 1 May 201158,470
Effects of exchange rate changes1,123
At 30 April 201259,593
Disposal of subsidiaries(45,830)
Effects of exchange rate changes2,037
At 30 April 201315,800

The carrying value of goodwill, translated at year-end exchange rates, is made up of balances arising on acquisition of the following businesses, which comprise individual cash-generating units:


2013
£000
2012
£000
The Medical House plc15,80015,800
King Systems Corporation43,793

15,80059,593

Goodwill is not amortised but is tested for impairment annually. Value in use calculations are utilised to calculate recoverable amount. Value in use is calculated as the net present value of the projected risk-adjusted, post-tax cash flows of the cash generating unit in which the goodwill is contained. The discount rate applied comprises the Group's post-tax weighted average cost of capital adjusted for country-specific risks and is calculated at 11% (2012: between 9% and 11%). This approximates to applying a pre-tax discount to pre-tax cash flows.

The value in use calculation for the Medical House was prepared and approved by the Board based upon the first five years of the Group's strategic plan, which takes into account both past performance and expectations for future market development. Cash flows beyond this period are extrapolated using an annual growth rate of 2%, which does not exceed the long-term average growth rate for the sectors in which this cash generating unit operates. The assumptions include successful product launches for existing customers in 2013 and revenues from as yet unidentified customers from 2016. Cancellation or significant postponement of those launches would lead to an impairment of goodwill. The directors believe that no reasonably foreseeable changes to other key assumptions would result in an impairment of goodwill. The directors are confident that the amount of goodwill carried for the Medical House and the assumptions used in estimating its fair value are appropriate.

Critical judgements around goodwill impairment are disclosed in note 1.