Amortization is allocated to the line in the income statement, which represents the function to which the intangible asset pertains.

In 2017 impairment losses were recognized which concerned site closures in China. In 2016 no impairments were recognized.

As per end of 2017, other intangible assets include costs in the amount of CHF 57 million (2016: CHF 49 million) capitalized in connection with the REACH regulation and CHF 59 million (2016: CHF 46 million) of capitalized internally generated intangibles.

Impairment test for goodwill. Goodwill is allocated to the Group’s cash generating units (CGU). Cash generating units consist of Business Units which are for external reporting purposes reported under the corresponding business areas (reportable segments, see note 1.23).

Goodwill is allocated to the following CGUs:

The recoverable amount for all CGUs is determined based on their value-in-use. The value-in-use calculations use cash flow projections based on financial budgets approved by the Board of Directors covering a five-year period. Beyond this five-year period growth in accordance with market growth (2.25%) is assumed. The main assumptions used for cash flow projections are EBITDA in percent of sales and sales growth. The assumptions regarding these two variables are based on Management’s past experience and future expectations of business performance. The pre-tax discount rates used are based on the Group’s weighted average cost of capital. The assumed pre-tax discount rate was 10.78% for all cash generating units (2016: 10.27%). As all CGUs operate in similar geographic areas, have the same source of funds and a similar risk pattern a uniform discount rate is applied to all of them.

For all CGUs it was assumed that they achieve sales growth in line with or higher than market growth, based on the specific strategic plans for the respective CGUs. It was also assumed that the EBITDA in percent of sales will improve over present performance as a result of the continuous improvement measures implemented. The conclusion was that the net present value of the expected cash flows exceeds the carrying amount of the net assets allocated on a value-in-use basis of all CGUs.

The estimated recoverable amount of the CGU Catalysts exceeds its carrying amount including goodwill by CHF 324 million (2016: CHF 247 million). The recoverable amount would be equal to the carrying amount if the assumed average annual sales growth rate during the planning period were reduced by 1.9% (2016: 2.0%), or alternatively, if the operating margin was reduced by 3.0% of sales (2016: 2.6%).