Notes to the Consolidated Financial Statements
1. Basic information and principles of the report
2. Changes in Group structure
3. Summary of significant accounting policies
4. Risk assessment and management
5. Management of capital
6. Trade accounts receivable
7. Other current assets and current financial assets
8. Inventories
9. Property, plant and equipment
10. Other non-current assets and non-current financial assets
11. Goodwill and intangible assets
| Total | Goodwill | Patents and technology | Trademarks | Other intangible assets1 | |
|---|---|---|---|---|---|
| MCHF | MCHF | MCHF | MCHF | MCHF | |
| 2016 | |||||
| Cost at beginning of year | 2,256.4 | 1,508.0 | 260.9 | 381.5 | 106.0 |
| Changes in scope of consolidation | -32.9 | -31.3 | -1.6 | ||
| Additions | 11.2 | 11.2 | |||
| Disposals | -7.7 | -7.7 | |||
| Translation differences | -13.8 | -9.1 | -0.9 | -3.7 | -0.1 |
| Cost at end of year | 2,213.2 | 1,467.6 | 260.0 | 377.8 | 107.8 |
| Accumulated amortisation at beginning of year | 499.3 | 213.2 | 158.5 | 59.8 | 67.8 |
| Changes in scope of consolidation | -1.4 | -1.4 | |||
| Amortisation | 43.1 | 34.4 | 8.7 | ||
| Disposals | -7.5 | -7.5 | |||
| Transfer | 0.0 | 2.0 | -2.0 | ||
| Translation differences | -1.4 | -0.7 | -0.8 | 0.1 | |
| Accumulated amortisation at end of year | 532.1 | 212.5 | 192.1 | 61.8 | 65.7 |
| Carrying amounts at end of year | 1,681.1 | 1,255.1 | 67.9 | 316.0 | 42.1 |
| 2015 | |||||
| Cost at beginning of year | 1,086.5 | 765.8 | 127.2 | 144.4 | 49.1 |
| Changes in scope of consolidation | 1,302.8 | 900.3 | 129.2 | 229.1 | 44.2 |
| Additions | 14.0 | 14.0 | |||
| Disposals | -2.9 | -2.9 | |||
| Translation differences | -144.0 | -158.1 | 4.5 | 8.0 | 1.6 |
| Cost at end of year | 2,256.4 | 1,508.0 | 260.9 | 381.5 | 106.0 |
| Accumulated amortisation at beginning of year | 441.2 | 225.9 | 127.2 | 59.8 | 28.3 |
| Changes in scope of consolidation | 35.4 | 35.4 | |||
| Amortisation | 37.5 | 30.8 | 6.7 | ||
| Disposals | -2.5 | -2.5 | |||
| Transfer | 0.0 | 0.0 | |||
| Translation differences | -12.3 | -12.7 | 0.5 | -0.1 | |
| Accumulated amortisation at end of year | 499.3 | 213.2 | 158.5 | 59.8 | 67.8 |
| Carrying amounts at end of year | 1,757.1 | 1,294.8 | 102.4 | 321.7 | 38.2 |
| 1 Others: mainly software and capitalised product development costs (see Note 27: Research and development cost) | |||||
In 2016, the original cash generating units (CGU) were combined into a single CGU and only a single goodwill item is now tested for impairment. For further details see Note 1. The following table lists the carrying amounts and parameters of the items that are material for the Group.
| Carrying amount |
Carrying amount | Calculation of recoverable amount (PY numbers in brackets) | ||||||
|---|---|---|---|---|---|---|---|---|
| 31.12.2016 | 31.12.2015 | Value in use (U) or fair value less cost to sell (F) | Growth rate beyond planning period | Discount rate pre-tax | Discount rate post-tax | |||
| MCHF | MCHF | % | % | % | ||||
| Goodwill | 1,255.1 | 1,277.5 | U | 2.4 (2.1 - 2.5) | 7.3 (8.0 - 9.4) | 6.4 (7.1 - 7.3) | ||
| Geberit trademarks | 84.6 | 84.6 | U | 2.4 (2.1) | 7.4 (8.2) | 6.4 (7.1) | ||
| Various other trademarks | 231.4 | 237.1 | U | 2.4 (2.1) | 5.7 - 8.5 (6.1 - 9.3) | 5.6 - 7.2 (6.0 - 7.8) | ||
The discounted cashflow method is applied to test the goodwill for impairment. The Group bases the impairment test on the current business plan (for a four-year period) and its assumptions regarding price, market and market share developments. Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group's own assumptions based on past experience regarding price and market share trends. A discount rate based on the Group's weighted cost of capital is used to calculate the discounted future cashflows. Management regards the discount rate, growth rates and development of the operating margin as the key factors in calculating the recoverable amount.
Trademarks are tested using the relief from royalty method. The item “Various other trademarks” mainly includes the trademarks Ifö, Keramag, Kolo, IDO, Twyford, Allia and Sphinx. Impairment is tested against the Group’s estimated net sales attributable to the trademarks according to the current business plan (four-year period). Growth rates after the end of the planning period are based on Euroconstruct forecasts and the Group's own assumptions based on past experience regarding price and market share trends. Discounted future cashflows are calculated using discount rates based on the Group’s weighted cost of capital taking into account country- and currency-specific risks.
The sensitivity analysis shows that changes to the material assumptions (discount rate +0.5% and growth rate -1.0%) that are possible and realistic from today's perspective would not result in any need to impair the goodwill or the trademarks.