Notes to the Consolidated Financial Statements
1. Basic information
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
9. Property, plant and equipment
10. Other non-current assets and non-current financial assets
11. Goodwill and intangible assets
|Cost at beginning of year||2,065.1||1,468.6||84.2||375.6||136.7|
|Cost at end of year||2,065.3||1,466.1||84.2||376.1||138.9|
|Accumulated amortisation / impairment at beginning of year||468.4||213.3||84.1||77.9||93.1|
|Accumulated amortisation at end of year||488.4||212.8||84.1||93.2||98.3|
|Carrying amounts at end of year||1,576.9||1,253.3||0.1||282.9||40.6|
|Cost at beginning of year||2,285.6||1,517.1||266.5||379.4||122.6|
|Cost at end of year||2,065.1||1,468.6||84.2||375.6||136.7|
|Accumulated amortisation / impairment at beginning of year||633.9||217.7||266.4||69.9||79.9|
|Accumulated amortisation at end of year||468.4||213.3||84.1||77.9||93.1|
|Carrying amounts at end of year||1,596.7||1,255.3||0.1||297.7||43.6|
1 Other intangible assets: mainly software and capitalised product development costs (see Note 26)
Goodwill and intangible assets from acquisitions with an indefinite useful life are tested for impairment on an annual basis. The following table lists the carrying amounts and parameters of the items that are material for the Group.
|Calculation of recoverable amount (PY numbers in brackets)|
|31.12.2020||31.12.2019||Value in use (U)
or fair value less
cost to sell (F)
|Goodwill||1,253.3||1,255.3||U||2.0 (2.0)||6.8 (6.2)||5.9 (5.4)|
|Geberit trademark (indefinite useful life)||84.6||84.6||U||2.0 (2.0)||6.7 (6.1)||5.9 (5.4)|
|Various trademarks (indefinite useful life)||127.6||134.8||U||2.0 (1.9 - 2.0)||6.2 - 9.3 (5.6 - 6.4)||6.1 - 9.0 (5.5 - 6.2)|
|Various trademarks (definite useful life)||70.7||78.3|
The discounted cashflow method is applied to test the goodwill for impairment. The Group bases the impairment test on the results from the current business plan (for a four-year period) and the assumptions in this plan 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 drawn from 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.
The Geberit brand is an integral part of the Geberit business model and is assumed to have an indefinite useful life. Impairment is tested using the “relief from royalty” method. Impairment is tested against the Group’s estimated net sales attributable to the trademark 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 drawn from past experience regarding price and market share trends. A discount rate based on the Group’s weighted cost of capital is used to discount future cashflows. The annual impairment test did not produce any evidence of impairment.
The item “Various trademarks (indefinite useful life)” includes the trademarks Ifö, Kolo, IDO, Twyford and these trademarks are assumed to have an indefinite useful life. The “relief from royalty” method is used as well to test these trademarks and the test is based on the current business plan and the growth rates are defined in the same way as for the Geberit brand. 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 annual impairment tests did not produce evidence of any impairment with the exception of one brand, for which an impairment of MCHF 7.2 was recognised. The impairment was mainly due to lower sales expectations and an increased discount rate.
The item “Various trademarks (definite useful life)” includes the trademarks Keramag, Allia and Sphinx. These trademarks have been integrated within the Geberit brand in the last two years. For this reason, they are assumed to have a definite useful life. This means that each individual trademark is amortised over its remaining useful life. Total annual amortisation recognised on these trademarks amounts to MCHF 8.1.
The sensitivity analysis shows that changes to the key assumptions (discount rate +1.0 percentage points or growth rate -1.0 percentage points or operating margin -1.0 percentage points) that are realistically possible from today’s perspective would not result in any need to impair the goodwill. Regarding three trademarks, this would lead to an impairment loss of around MCHF 11.0.