6. Goodwill and other intangible assets

The net book value of goodwill and other intangible assets as at 31 December 2014, 2013 was as follows:

Interest amounting to 161 and 105 was capitalized in intangible assets for the years ended 31 December 2014 and 2013 respectively.

Intangible assets with indefinite useful lives and goodwill

The owned number capacity with a carrying amount of 705 (2013: 709) is intangible assets with indefinite useful lives and is not amortized. These assets have no legal restrictions on the term of their use and the Group can derive economic benefits from their use indefinitely. These assets are tested for impairment annually or more frequently if there is an indication that the intangible assets may be impaired.

During 2014 the Group concluded contracts under the investment programme subject of which was research and development. Main area of research and development were software, hardware, clouds models, which may be used as a standard solution on promotion of the services provided by the Group to government and private customers.

The aggregate amount of research and development expenditure recognized as an expense is 0 (2013:0).

The Group, on an annual basis, performs testing for impairment of goodwill and intangible assets with indefinite lives.

At each reporting date the Group performs impairment testing of goodwill allocated to CGUs that were acquired upon business combinations.

Carrying amount of goodwill and intangible assets with indefinite useful lives are represented in the table below:

Key assumptions used by management in impairment testing are as follows (disclosed only for material CGUs*):

• discount rates are estimated in real terms as the weighted average cost of capital on pre tax basis is 19,75%;
• OIBDA margin is based on historical actual results and are 47.14% for MRF Moskva and 47,16% for MRF Severo-Zapad;
• Cash flow projections cover the period of five years, cash flows beyond five-year period are extrapolated using growth rate of 2%.

Future cash flows were adjusted using consistent assumptions about price increases attributable to general inflation.

2014 impairment testing

As a result of impairment testing of goodwill the Group recognized an impairment loss of 1,300 related to: Globus Telecom of 277, GNC Alfa of 459 and Macomnet of 564.

2013 impairment testing

As a result of impairment testing goodwill in respect of Globus Telecom was impaired by 359.

Impairment loss was recognized in the line Depreciation, amortisation and impairment losses in the statement of comprehensive income.

Discount rate and operating income before amortization and depreciation (OIBDA) margin are the key assumptions to which calculations of value in use of CGUs with goodwill and indefinite useful life intangible assets allocated to are the most sensitive. Management approach to gross margin projection is based on historical actual results and growth rate forecasts which correlates to industry growth rate.

The table below demonstrates the sensitivity analysis for impairment and the effect of a reasonably possible change in key assumptions as at 31 December 2014:

Impairment testing of other intangible assets

At each reporting date the Group performs impairment testing of intangible assets not yet available for use and intangible assets with indefinite useful lives.

2014 impairment testing

As at 31 December 2014 no impairment loss in respect of other intangible assets were recognised.

2013 impairment testing

As at 31 December 2013 no impairment loss in respect of other intangible assets were recognised.