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
9. Property, plant and equipment
10. Other non-current assets and non-current financial assets
11. Goodwill and intangible assets
1 Others: mainly software and capitalised product development costs (see Note 27)
|Cost at beginning of year||2,341.9||1,568.3||271.8||385.4||116.4|
|Cost at end of year||2,285.6||1,517.1||266.5||379.4||122.6|
|Accumulated amortisation at beginning of year||593.0||222.2||234.8||61.8||74.2|
|Accumulated amortisation at end of year||633.9||217.7||266.4||69.9||79.9|
|Carrying amounts at end of year||1,651.7||1,299.4||0.1||309.5||42.7|
|Cost at beginning of year||2,213.2||1,467.6||260.0||377.8||107.8|
|Changes in scope of consolidation||-11.8||-11.6||-0.2|
|Cost at end of year||2,341.9||1,568.3||271.8||385.4||116.4|
|Accumulated amortisation at beginning of year||532.1||212.5||192.1||61.8||65.7|
|Changes in scope of consolidation||-0.2||-0.2|
|Accumulated amortisation at end of year||593.0||222.2||234.8||61.8||74.2|
|Carrying amounts at end of year||1,748.9||1,346.1||37.0||323.6||42.2|
Goodwill and intangible assets from acquisitions with an indefinite useful life are tested for impairment on an annual basis. No impairment arose on 31 December 2018. 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)|
|31.12.2018||31.12.2017||Value in use (U)
or fair value less
cost to sell (F)
|Goodwill||1,299.4||1,346.1||U||2.8 (2.9)||6.3 (6.2)||5.6 (5.6)|
|Geberit trademark||84.6||84.6||U||2.8 (2.9)||6.2 (6.2)||5.6 (5.6)|
|Various other trademarks||224.9||239.0||U||2.8 (2.0 - 2.9)||5.9 -6.9 (5.9 - 7.2)||5.8 - 6.7 (5.8 - 6.8)|
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 item “Various other trademarks” includes the trademarks Ifö, Keramag, Kolo, IDO, Twyford, Allia and Sphinx.
The relief from royalty method is used to test the trademarks (Ifö, Kolo, IDO and Twyford) for impairment. 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 drawn from 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.
On 7 March 2018, the Board of Directors approved the new brand strategy. This strategy foresees that some of the Bath & Shower Systems brands will be gradually integrated into the Geberit brand in the respective markets. Consequently, the affected brands (Keramag, Allia and Sphinx) now have a finite useful life causing total annual amortisation of around MCHF 8.0 over their remaining useful life.
The sensitivity analysis shows that changes to the key assumptions (discount rate +1.0 percentage points or growth rate -1.0 percentage points) that are realistically possible from today’s perspective would not result in any need to impair the goodwill or the trademarks.