Goodwill obtained through business combination is allocated to the business areas.

The cash-generating units for impairment testing of goodwill were changed in 2006. Fishery became more closely integrated into the other activities at Kongsberg Maritime in 2006. Consequently, goodwill was reallocated to Kongsberg Maritime. Kongsberg Defence Communications AS was merged with Kongsberg Defence & Aerospace in 2006, and goodwill was therefore reallocated to this entity. Goodwill worth MNOK 184 from the acquisition of Sense Intellifield was allocated to Kongsberg Maritime, cf. Note 6 "Changes in corporate structure". See also Note 7 "Segmental information" for more detailed information about the business areas.

Carrying amount, goodwill
Amounts in MNOK	31 Dec 07	31 Dec 06
Kongsberg Maritime	1 231	1 034
Kongsberg Defence & Aerospace	133	133
Total recognised goodwill	1 364	1 167

Value in use and the most important assumptions

KONGSBERG uses the latest detailed calculations of recoverable amounts at 31 Dec. 2006 for the various cash-generating units, where goodwill is allocated as the basis for the year's impairment. This is because the assets and liabilities that constitute the cash flow-generating units have not changed significantly since the preceding calculations of recoverable amounts. Impairment testing in 2006 entailed that recoverable amounts exceeded the capitalised value significantly. Based on the view that KONGSBERG has a high backlog of orders and good results, it is unlikely that the recoverable amount estimated in 2006 will be less than the capitalised value of the cash flow-generating units at 31 Dec. 2007.

Impairment testing of goodwill is based on the utility value of the cash flow generating units. Value in use is determined using the present value of the projected cash flow. The projected cash flow is based on the unit's strategic plan document. The plan document is approved by the Board of Directors and corporate management, and covers a five-year period. The cash flow used for impairment testing of goodwill is usually adjusted somewhat lower than in the strategic planning document, as the accounting rules do not allow future improvements to products and new developments to be reflected in future cash flows. After those five years, a terminal value is calculated on the basis of a constant growth rate.

Kongsberg Maritime

Operating revenues are based on expected trends in the overall market in which Kongsberg Maritime operates and the company's expected share of the market. A constant market share is assumed initially, although the individual sub-markets can reflect increases or decreases. The overall market is based on external information, e.g. the number of planned newbuildings of vessels and rigs. The market is expected to grow by approximately 5 per cent per year. Operating revenues will depend on the accuracy of the assumptions, and changes in assumptions will also affect the future value of the unit. The backlog is record high, and a larger percentage of future revenues is covered by the backlog of orders now than before.

The gross margin is based on historical trends. All orders are hedged in NOK through the purchase of forward foreign exchange contracts so that future operating revenues and the gross margin for the cash flow are more predictable.

A discount rate of 10 per cent after tax has been used. The terminal value is estimated using the previous plan-year's cash flow as a normalised cash flow and assuming nominal growth of two per cent. Significant changes in the normalised net cash flow and growth rate will affect the overall value significantl.

Kongsberg Defence & Aerospace

Revenues are based on the individual countries' defence-related procurement plans and Kongsberg Defence & Aerospace's percentage of these plans is used as the basis for estimated operating revenues. The estimated market potential is an average growth rate of 12 per cent. The gross margin is based on historical trends. All orders are hedged in NOK through the purchase of forward foreign exchange contracts so that future operating revenues and the gross margin for the cash flow are more predictable.

A discount rate of 10 per cent after tax has been used. The terminal value is estimated using the previous plan-year's cash flow as a normalised cash flow and assuming nominal growth of one per cent. Significant changes in the normalised net cash flow and growth rate will affect the overall value significantly.

Sensitivity

Kongsberg Maritime

At 31 December 2007, the value in use of Kongsberg Maritime was significantly higher than the carrying amount. This shows that the calculations are not sensitive to the impairment of goodwill if significant changes are made in the assumptions.

Kongsberg Defence & Aerospace

At 31 December 2007, the value in use of Kongsberg Defence & Aerospace was significantly higher than the carrying amount. This shows that the calculations are not sensitive to impairment loss of goodwill if significant changes are made in the assumptions.